of Foreign Bank and Financial Accounts (FBAR) and taxrelated penalties. Under the 2011 OVDI, a single 25 percent FBAR penalty will generally be imposed based on the highest value in the account over an eight-year period instead of a penalty which could be as high as 50 percent of the value of the account in each year. Taxpayers that wish to participate in the 2011 OVDI must not wait since the initiative terminates on August 31, 2011, and taxpayers must complete all requirements under the 2011 OVDI by the deadline.

The offered 25 percent FBAR penalty is only slightly higher than the 20 percent penalty that was offered in the IRS’s first offshore voluntary disclosure initiative in 2009 (“2009 OVDI”). Under the 2009 OVDI, taxpayers that disclosed before October15, 2009, received the 20 percent penalty on the highest balance in their offshore accounts during the period from 2003 through 2008. (For more information regarding the 2009 OVDI, see April 2009 GT Alert and May 2009 GT Alert.) The IRS estimates that since the closure of the 2009 OVDI approximately 3000 taxpayers have made a voluntary disclosure involving offshore accounts. These taxpayers, whose cases were held up in processing while the IRS determined how to treat them, are eligible to participate in the 2011 OVDI.

The 2011 OVDI covers the tax years 2003 through 2010. (The 2009 OVDI was limited to 2003 through 2008.) In order to participate, taxpayers will be required to file or amend all tax returns, including information returns and FBARs, and pay all of