The IRS initially rolled out the Offshore Voluntary Disclosure Program (OVDP) in 2009.

Its purpose was intended to aid individuals who were hiding offshore acco unts to become compliant with their taxes. The toughest consequence for undisclo sed offshore account holders if found by an IRS audit used to be 50% of the high est aggregate balance in foreign accounts along with imprisonment. The Offshore Voluntary Disclosure Program reduced that penalty to 20% and waived imprisonment . In 2009 alone, the IRS announced collections of USD 3.4 billion on account of the OVDP. In 2011, the IRS rolled out a second Offshore Voluntary Disclosure Program. This time, the highest penalty was 25%, but included two other tiers a 5% penalty an d a 12.5% penalty if the taxpayer met certain criteria. Because these tiers were nt offered in 2009, the IRS decided to refund penalties to those individuals who, in 2009, would have been eligible for the lower penalty structures. We have had clients whove finished the process and received their rebates. These c lients were US persons but theyd not lived in the US for an exceedingly long time , asserts Chaya Kundra, a Maryland based tax lawyer and Principal at Kundra & Ass ociates. While the 2009 OVDP didnt see as much participation by Indian U.S. Citizens as th e 2011 OVDP, whats crucial here is the message the IRS is trying to send out. The IRS is essentially saying that its policy on tracking offshore revenue is rea dy. By abating the penalty, the IRS is spotting that it had been a little more r igorous than required and that it is willing to accept real circumstances. At th e exact same time, the IRS is saying that it is willing to work with you if youre willing to step forward and make disclosures on your offshore income and assets , Kundra adds. The penalty refunds are based primarily on precise circumstances which set the t one for IRS policy on this matter. Let us look at what these conditions are: Conditions for five percent penalty tiers A taxpayer may satisfy any one of these three conditions to have eligibility for the five percent penalty (that is, if you paid a 20% penalty, you may be eligib le to get a 15% refund) Condition One: The taxpayer had barely any use of the offshore account. So as to determine this, the taxpayer must meet all four of the following condit ions: (a) didnt open or cause the account to be opened; for instance the taxpayer inher ited offshore accounts (b) have exercised minimum, rare contact with the account , for instance, to request the account balance, or update accountholder informat ion such as a change in address, contact person, or email; (c) have, except for a withdrawal closing the account and transferring the funds to an account in the United States, not withdrawn more than $1,000 from the account in any year that the taxpayer was non-compliant; and (d) can establish that all appropriate US t axes have been paid on funds deposited to the account Condition Two: Taxpayers who are foreign residents and who were unaware they wer e United States citizens Condition Three: Taxpayer paid all taxes in foreign country To be eligible under this condition, taxpayers must be foreign residents and mus t meet all three of the following conditions for all the years of their voluntar

y disclosure: (a) taxpayer resides in another country; (b) taxpayer has made a good faith show ing that she or he has timely went along with all tax reporting and payment requ irements in the country of residency; and (c) taxpayer has $10,000 or less of US source income each year. For these taxpayers only, the offshore penalty wont apply to non-financial assets , such as real property, business interests, or art, acquired with funds that th e taxpayer can establish that all relevant taxes have been paid, either in the U .S. or in the country of residence. This exception only applies if the tax retur ns filed with the foreign tax authority included the offshore-related taxable in come that wasnt reported on the US taxation assessment. Conditions for 12.5% penalty tier Taxpayers whose highest total account balance (including the fair valuation of a ssets in undisclosed offshore entities and the fair market value of any foreign assets that were either purchased with wrongly untaxed funds or produced imprope rly untaxed income) in every one of the years covered by the 2011 OVDI is less t han $75,000 will qualify for a 12.5% offshore penalty. So if you paid a twenty p ercent penalty, you may be fit for a 7.5% refund. How to claim a reimbursement: If you took part in the 2009 OVDP and your case was closed with a Form 906 closi ng agreement, but you suspect that youd be eligible for a lower penalty as per co nditions above, you can make an application including all pertinent contact info rmation (name, address, SSN, home / cellphone numbers), the name of the Revenue Agent assigned to your case, and a copy of your agreement. You can send this inf ormation to the IRS.