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Wisconsin Department of Revenue

Voluntary Disclosure Program Regarding Offshore Accounts

  1. Is it legal for a U.S. resident to hold a foreign bank account?
  2. How do I know if I'm involved in a tax shelter?
  3. Who should complete Form WI-VCP Wisconsin Tax Shelters Voluntary Compliance Program Participation and Agreement?
  4. Can I participate in the voluntary disclosure program if the department has contacted me regarding my foreign bank accounts?
  5. What benefits do I receive if I complete Form WI-VCP to report income received from foreign accounts?
  6. What are the reporting requirements?
  7. Will I waive my appeal rights if I voluntarily provide the department with a Form WI-VCP and file Wisconsin amended or original tax returns within the required time to report income from foreign accounts?
  1. Is it legal for a U.S. resident to hold a foreign bank account?

    Yes, it is legal for a U.S. resident to hold a foreign bank account. However, some U.S. residents use foreign bank accounts as tax shelters in order to avoid having the income generated from the accounts taxed on their federal and state income tax returns.

  2. How do I know if I'm involved in a tax shelter?

    The following is a list of questions taxpayers may ask themselves to determine if they've used a tax avoidance transaction:

    • Is the tax loss, deduction, or credit a significant amount compared to your investment, and is it used to offset income from unrelated transactions?
    • Is your economic and out-of-pocket loss minimal compared to the tax benefits realized?
    • Does the transaction lack a business purpose other than reduction of taxes?
    • Does the transaction lack a reasonable possibility of making a profit?
    • Are multiple entities involved to unnecessarily complicate the transaction?
    • Does the tax position ignore the true intent of relevant statutes and regulations?
    • Does the transaction produce a tax result that seems too good to be true?

    If you answered "yes" to any of the above questions, you are potentially involved in a tax shelter and may be required to file amended or original income or franchise tax returns.

  3. Who should complete Form WI-VCP Wisconsin Tax Shelters Voluntary Compliance Program Participation and Agreement?

    Any individual, corporation, S corporation, LLC, partnership, or trust which used a tax shelter to:

    • Reduce the taxpayer's Wisconsin income or franchise tax liability.
    • Increase the taxpayer's Wisconsin loss or credit carry forward.
    • Cause the taxpayer not to file Wisconsin income or franchise tax returns.

    In regard to pass-through entities, the above items apply with respect to partners, members, shareholders, or beneficiaries of the pass-through entity.

  4. Can I participate in the voluntary disclosure program if the department has contacted me regarding my foreign bank accounts?

    No. Any entity who has been contacted by the department regarding a foreign account will not be eligible to participate in the voluntary disclosure program.

  5. What benefits do I receive if I complete Form WI-VCP to report income received from foreign accounts?

    The benefits of submitting a completed Form WI-VCP to the department by January 15, 2010 and filing Wisconsin amended income or franchise tax returns within the required time include the following:

    • Criminal penalties provided for in sec. 71.83(2), Wis. Stats. (2007-08) (fines of up to $10,000 per violation or imprisonment), will be waived.
    • Penalties provided for in sec. 71.81(5)(a), Wis. Stats. (2007-08), of either 50% or 100% of the interest assessed under sec. 71.82, Wis. Stats. (2007-08), will be waived.
    • Penalties for negligence (25%) and fraud (100%) provided for in sec. 71.83(1)(a) & (b), Wis. Stats. (2007-08), will be waived.

    The following penalties and interest apply to taxpayers who voluntarily contact the department regarding income from foreign bank accounts:

    • Interest at 12% per year on the additional tax owed as provided for in sec. 71.82(1)(a), Wis. Stats. (2007-08).
    • An understatement penalty equal to 20% of the reportable transaction understatement, or, in the case of a reportable transaction that is not disclosed as provided for in sec. 71.81(2), Wis. Stats. (2007-08), 30% of the reportable transaction understatement as set forth in sec. 71.81(4)(a), Wis. Stats. (2007-08).
    • A penalty of the lesser of $15,000 or 10% of the tax benefit obtained from the reportable transaction provided for in sec. 71.81(3)(a)(1), Wis. Stats. (2007-08).
    • Late filing fees for nonfilers as provided for in sec. 71.83(3), Wis. Stats. (2007-08).
    • Underpayment interest (if applicable) as provided for in sec. 71.84(1) & (2), Wis. Stats. (2007-08).

    The reduced penalties included in this voluntary disclosure program will not be offered to taxpayers with a Wisconsin filing requirement who do not file a Form WI-VCP with the department by January 15, 2010.

    All applicable penalties and fines will be imposed on those taxpayers who do not participate in the voluntary disclosure program.

  6. What are the reporting requirements?

    Form WI-VCP Wisconsin Tax Shelters Voluntary Compliance Program Participation and Agreement must be completed and filed with the department by January 15, 2010.

    Taxpayers will be required to file amended or original Wisconsin income or franchise tax returns, for the years 2003 through 2008, to report previously unreported income from foreign accounts within 90 days of a final determination by the IRS regarding the foreign income. A copy of Form WI-VCP (that was previously filed with the department by the January 15, 2010 deadline) must be attached to the amended and/or original Wisconsin returns. In addition, taxpayers must attach complete copies of all amended or original tax returns filed with the IRS, including copies of all paperwork provided to the IRS as a result of the disclosure. Taxpayers must provide an explanation for any differences between the Wisconsin and federal returns regarding the amount of unreported or underreported income or incorrectly claimed deductions or credits related to the foreign accounts.

    Use Form 1X to amend individual income tax returns. For corporation franchise or income tax returns (Form 4 or Form 5), fiduciary income tax returns (Form 2), and partnership returns (Form 3), the appropriate box on the form should be checked identifying the return as an amended return.

    Wisconsin income tax forms are available at www.revenue.wi.gov/html/formpub.html.

    Form WI-VCP and the amended or original returns and related documents should be mailed to:

    Wisconsin Department of Revenue
    Tax shelters Program
    P.O. Box 8958
    Madison, WI 53708-8958

  7. Will I waive my appeal rights if I voluntarily provide the department with a Form WI-VCP and file Wisconsin amended or original tax returns within the required time to report income from foreign accounts?

    Yes, you will waive your appeal rights regarding income from foreign accounts if you participate in the voluntary disclosure program.

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Tax Shelters Program
P.O. Box 8958
Madison, WI 53708-8958
Phone: (608) 266-1235
Fax: (608) 267-0834
Email address: wivoldis@revenue.wi.gov

Last updated November 3, 2009