The IRS has reopened the offshore voluntary disclosure program (OVDP) to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs. The newest program is similar to the 2011 program in many ways, but with a few key differences. Unlike the 2011 program, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers or decide to end the program entirely at any point.

Under the 2011 Offshore Voluntary Disclosure Initiative (OVDI), the penalty framework required individuals to pay 25-percent of the amount in the foreign bank account in the year with the highest aggregate account balance covering the 2003 to 2010 period. The IRS also created a new penalty category of 12.5-percent for "small offshore accounts." Taxpayers whose offshore accounts or assets were less than $75,000 in any calendar year covered by the OVDI qualified for this lower rate. In addition, some taxpayers qualified for a 5-percent penalty, including taxpayers who did not open the foreign account, or cause the account to be opened, if additional requirements were met; and foreign residents who were unaware that they were U.S. citizens.

The overall penalty structure for the new program is the same as that for the 2011 program, except for taxpayers in the highest penalty category. For OVDP, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. Some taxpayers will be eligible for 5-percent or 12.5-percent penalties; these remain the same in the new program as in 2011. Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years, as well as pay accuracy-related and/or delinquency penalties. Taxpayers who have come forward to make voluntary disclosures since the 2011 program closed will be treated under the provisions of the new OVDP.

The OVDP can be a significant benefit to affected taxpayers. Penalties outside the program can be onerous and can include, among others: penalties for failing to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR); civil penalties; penalties for failing to file a return; and accuracy related penalties. In addition, criminal prosecution may be a risk.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations, including dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

WASHINGTON — The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.

Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

WASHINGTON – The Internal Revenue Service  launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.

This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.

“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.

To be eligible, an applicant must:

• • Consistently have treated the workers in the past as nonemployees,
• • Have filed all required Forms 1099 for the workers for the previous three years
• • Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers

Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

IRS Takes Next Steps in International Realignment; Bolsters Transfer Pricing Compliance Programs and International Coordination

WASHINGTON — IRS officials today announced they are taking additional steps in their continuing efforts to improve the agency’s international operations.

First, the IRS Advance Pricing Agreement (APA) Program, concerned exclusively with reaching pre-filing agreements with taxpayers on transfer pricing, will shift from the office of IRS Chief Counsel to an office under the Transfer Pricing Director in the Large Business &International division’s international operation. In addition, the IRS Mutual Agreement Program (MAP), concerned primarily with the bilateral resolution of transfer pricing disputes with U.S. treaty partners, will shift to the same office.

The resulting “Advance Pricing and Mutual Agreement program” will be under the direction of a single executive and the IRS will increase staffing available to the two program areas. The combined office will allow the IRS to reduce the time needed to complete advance pricing agreements and to resolve transfer pricing disputes with its treaty partners. The Office of Chief Counsel will remain a vital partner in the analysis and resolution of legal issues.

Second, to facilitate IRS coordination with treaty partners in an increasingly global environment, the IRS will adjust its competent authority and international coordination functions under an Assistant Deputy Commissioner (International) who will:

• coordinate international activities across all IRS operating divisions,
• oversee the IRS Exchange of Information program and IRS participation in the Joint International Tax Shelter Information Centre (JITSIC),
• manage the activities of the IRS Tax Attaches in the agency’s foreign posts of duty,
• coordinate IRS participation at the Organisation for Economic Cooperation and Development (OECD) and other non-governmental organizations,
• support the Department of the Treasury in its negotiations of tax treaties and tax information exchange agreements, and
• pursue competent authority agreements with treaty partners on issues other than transfer pricing.

“Improving how we manage transfer pricing compliance and continuing to develop our capacity to coordinate effectively with our treaty partners is ever more critical to our job,” said IRS Commissioner Doug Shulman. “These latest changes move forward to fulfilling one of my top priorities -- meeting the challenge of tax administration in a global economy.”

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Notice 2011-54 provides additional administrative relief to persons whose requirement to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), to report signature authority over foreign financial accounts held during calendar year 2009 or earlier calendar years was properly deferred under Notice 2009-62, 2009-35 I.R.B. 260, or Notice 2010-23, 2010-11 I.R.B. 441.

 On August 31, 2009, the Department of the Treasury and the Internal Revenue Service published Notice 2009-62, which, in part, extended the filing deadline for persons with no financial interest in a foreign financial account but with signature or other authority over that account (hereinafter referred to as “signature authority”) for the 2008 or earlier calendar years. In Notice 2010-23, the Department of the Treasury and the IRS further extended relief to persons whose filing deadline was properly deferred by Notice 2009-62 and provided a new filing deadline to June 30, 2011, to report signature authority over, but no financial interest in, foreign financial accounts for calendar year 2009 or earlier calendar years. The extensions were provided to allow the Treasury Department time to develop comprehensive FBAR guidance.

On February 24, 2011, the Financial Crimes Enforcement Network (FinCEN) published final regulations (76 FR 10234) amending the Bank Secrecy Act implementing regulations regarding FBARs, found at 31 CFR 1010.350 (formerly 31CFR 103.24). The regulations became effective on March 28, 2011, and apply to FBARs required to be filed by June 30, 2011, with respect to foreign financial accounts maintained in calendar year 2010, as well as to FBARs for subsequent calendar years.

The final regulations also provide that individuals who properly deferred their FBAR filing obligations pursuant to Notice 2010-23 may apply the provisions of the final regulations in determining their FBAR filing requirements for reports due June 30, 2011, with respect to foreign financial accounts maintained in calendar years beginning before 2010. In March 2011, the IRS released a revised FBAR form with accompanying  instructions that reflect the amendments made by the final FBAR regulations.

The IRS and FinCEN recently have been informed that individuals with signature authority over, but no financial interest in, foreign financial accounts are having difficulty compiling the information needed to file complete and accurate FBARs with respect to the 2009 or earlier calendar years by the June 30, 2011 deadline, as previously extended by Notice 2009-62 or Notice 2010-23. Accordingly, the IRS and FinCEN provide the following additional administrative relief:

• Persons having signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years for which the reporting deadline was extended by Notice 2009-62 or Notice 2010-23 will now have until November 1, 2011, to file FBARs with respect to those accounts.

• The deadline for reporting signature authority over, or a financial interest in, foreign financial accounts for the 2010 calendar year remains June 30, 2011.

The administrative relief provided in the Notice does not limit the relief provided in FinCEN’s Notice 2011-1, which was released on May 31, 2011, and revised on June 6, 2011. A copy of revised FinCEN Notice 2011-1 may be found at www.fincen.gov.

Additionally, the administrative relief provided in this Notice does not affect the requirements to provide information or file FBARs in connection with the IRS’s 2009 Offshore Voluntary Disclosure Program or the 2011 Offshore Voluntary Disclosure Initiative. Nor does this Notice alter the deadlines for electing to participate in, or fulfilling the submission requirements of, the Offshore Voluntary Disclosure Program or the Offshore Voluntary Disclosure Initiative.

 EFFECT ON OTHER DOCUMENTS

Notice 2010-23 is modified and supplemented.

 The principal author of the notice is Emily M. Lesniak of the Office of Associate

Chief Counsel (Procedure and Administration). For further information regarding the

Notice, you can contact Emily M. Lesniak at (202) 622-4570 (not a toll-free call).

WASHINGTON — The Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) today announced that a small subset of individuals with only signature authority required to file the Report of Foreign Bank and Financial Accounts (FBARs) will receive a one-year extension beyond the upcoming filing date of June 30, 2011.

FinCen today issued Notice 2011-1 that extends the deadline until June 30, 2012, for the following individuals:

• An employee or officer of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”).
• An employee or officer of a controlled person of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.

All other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011, filing date. Unlike with federal income tax returns, extensions of time to file are not available.

Today’s notice was issued to facilitate more accurate compliance of FBAR filings in the wake of recent finalization of regulations. The FBAR filing requirements, authorized under one of the original provisions of the Bank Secrecy Act, have been in place since 1972.

On Feb. 24, 2011, FinCEN published a final rule that amended the Bank Secrecy Act regarding FBARs.

The FBAR form is used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries.

U.S. persons are required to file FBARs Form TD F 90-22.1 annually if they have a financial interest in or signature authority over financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.

WASHINGTON — The Internal Revenue Service today issued interim guidance to employers on informational reporting on each employee's annual Form W-2 of the cost of the health insurance coverage they sponsor for employees. The IRS is also requesting comments on this interim guidance. The IRS emphasized that this new reporting to employees is for their information only, to inform them of the cost of their health coverage, and does not cause excludable employer-provided health coverage to become taxable; employer-provided health coverage continues to be excludable from an employee's income, and is not taxable.

The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). In today's guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued. 
 
Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.

The 2011 Form W-2, prior IRS Notice 2010-69 deferring the reporting requirement for 2011, and Notice 2011-28 containing the new guidance are available on IRS.gov.