IT 2009-02 - Announcement of Ohio Offshore Voluntary
Disclosure Program - Issued December 2009
The purpose of this information release is to announce the
Ohio Offshore Voluntary Disclosure Program, under which
certain Ohio taxpayers may resolve income tax issues with
limited penalties.
The Internal Revenue Service (IRS) announced in IR-2009-75
(Aug. 19, 2009) that it is receiving from certain Swiss banks
information concerning U.S. taxpayers which may or may not
lead to adjustments of their prior years’ federal income tax
returns. Earlier in 2009 the IRS announced a program under
which taxpayers who had improperly used offshore bank
accounts to hide income could voluntary settle their tax
liabilities with reduced penalties. As IRS Commissioner Doug
Shulman has stated, “Many of these accounts were held by U.S.
people who had complied with the law and paid their taxes.”
Neither the IRS nor the Ohio Department of Taxation has any
interest in obtaining or using information regarding
taxpayers who have complied with applicable income tax laws.
However, the agreements between the IRS and the Swiss banks
is expected to show deposits of U.S.-source income made by
taxpayers who failed to report to the IRS and to state
and municipal taxing authorities all of their income on which
income tax was due. Ohio and federal statutes, as well as
information sharing agreements, permit the sharing of tax
information between the IRS and the Ohio Department of
Taxation. The Ohio Department of Taxation will act on
information received from the IRS relating to examination
results based on offshore bank accounts held by taxpayers for
the purpose of improperly hiding income. Ohio Revised Code
Section 5747.15(A)(6) imposes a penalty of up to 100 percent
of the tax due in situations such as this.
The Tax Commissioner has announced that he will consider
requests for partial penalty abatement for any taxpayer who
underreported his/her income in prior years, provided that by
March 1, 2010 the taxpayer or his/her representative contact
the Ohio Department of Taxation at the below email address
and provide the following:
- A cover letter stating an intention to enter the Ohio
Offshore Voluntary Disclosure Program;
- A description of the source of funds or other assets in
each account;
- The date the initial deposit was made or the date on
which the taxpayer took control or ownership of each account;
- Documentation indicating whether the principal (which
includes initial deposits and all subsequent contributions)
has been taxed or untaxed and the tax years involved;
- The amount of potential tax liability; and
- Whether the taxpayer participated in the IRS Offshore
Voluntary Disclosure Program.
Taxpayers will have sixty days after initial contact to
submit all documents and payments necessary to resolve the
liabilities.
The email address to be used for purposes of making these
voluntary disclosures is:
Tax_Disclosure@tax.state.oh.us
Frequently
Asked Questions Regarding the Ohio Offshore Voluntary
Disclosure Program
1. What is
the Ohio Offshore Voluntary Disclosure
Program?
The Ohio Voluntary Disclosure Program is an opportunity for
taxpayers that have used undisclosed foreign accounts and/or
undisclosed foreign entities to avoid or evade tax to come
into compliance with Ohio’s tax laws.
2. Why
should I make a voluntary disclosure?
Taxpayers with undisclosed foreign accounts or entities
should make a voluntary disclosure because it provides them
with the opportunity to become compliant with Ohio’s tax
laws. Simply put, it is an opportunity for these taxpayers to
make arrangements to clear their tax records. In exchange for
making a voluntary disclosure, taxpayers can eliminate the
risk of criminal prosecution and avoid substantial civil
penalties.
Taxpayers who do not submit a voluntary disclosure run the
risk of detection by the Ohio Department of Taxation (ODT).
The Internal Revenue Service (IRS) has recently entered into
an agreement with the Swiss Confederation/government to
release the names of 4,450 United States residents suspected
of using foreign bank accounts held by UBS to avoid and evade
taxes. Since the IRS and the department have information
sharing agreements, the Ohio Department of Taxation will
ultimately obtain the names of those individuals. Assessments
outside of the voluntary disclosure procedure will include
penalties of 50 percent of the tax.
3. How do I
make a voluntary disclosure and where should it be
submitted?
To make a voluntary disclosure, taxpayers should submit the
information listed below. To remain anonymous when making a
voluntary disclosure, taxpayers may engage a representative
such as a tax preparer, accountant or attorney.
A voluntary disclosure must contain the following
information:
- A cover letter stating an intention to enter the Ohio
Offshore Voluntary Disclosure Program;
- A description of the source of funds or other assets in
each account;
- The date the initial deposit was made or the date on
which the taxpayer took control or ownership of each account;
- Documentation indicating whether the principal (which
includes initial deposits and all subsequent contributions)
has been taxed or untaxed and the tax years involved;
- The amount of potential tax liability; and
- Whether the taxpayer participated in the IRS Offshore
Voluntary Disclosure Program.
Information should be emailed to: Tax_Disclosure@tax.state.oh.us
4. Will the
Ohio Department of Taxation contact me if I have been
accepted into the Ohio Offshore Voluntary Disclosure
Program?
Yes, the department will review all voluntary disclosures and
will notify either the taxpayer or the taxpayer’s
representative whether the request was accepted or denied.
5. Will I
be subject to criminal prosecution if I make a voluntary
disclosure?
In exchange for making a voluntary disclosure, taxpayers will
eliminate the risk of criminal prosecution by the Ohio
Department of Taxation.
6. Will I
be subject to full civil penalties if I make a voluntary
disclosure?
In exchange for making a voluntary disclosure, the department
will impose a penalty of only 15 percent of the tax due.
7. Will I
be subject to interest on any unpaid taxes that I owe if I
make a voluntary disclosure?
Yes.
8. Can I
make a voluntary disclosure if I am presently under
examination by the Ohio Department of
Taxation?
Yes.
9. Are
entities such as corporations, partnerships, limited
liability companies and trusts eligible to make voluntary
disclosures?
Yes. Entities such as corporations, partnerships, limited
liability companies and trusts are eligible to participate in
the Ohio Offshore Voluntary Disclosure Program.
10. Do I
fill out a form to participate in the Ohio Offshore Voluntary
Disclosure Program?
No. Please see Question 3 for information on how to make a
voluntary disclosure.
11. Am I
required to pay the full amount of tax and interest I owe if
I am accepted into the Ohio Offshore Voluntary Disclosure
Program?
Yes.
12. Will I
receive a limited look-back period if I make a voluntary
disclosure?
The department will generally use the same 6-year look-back
period which the IRS is using.
13. When
does the Ohio Offshore Voluntary Disclosure Program
end?
The program will end March 1, 2010.
14. Who
should I contact if I have questions about the Ohio Offshore
Voluntary Disclosure Program?
For information regarding the Ohio Offshore Voluntary
Disclosure Program use the email address given in Answer #3,
above, or contact Vaughn Lombardo at (614) 995-0726 or Peter
Angus at (614) 387-1752.