Matter & Substance
  July 10, 2014

Two Articles Highlighting 2014 Deadlines

This week my blog includes two articles written by Michael Deering, our Director of Taxes at Mowery & Schoenfeld. The articles cover information regarding two important deadlines in 2014. The first article covers the estate tax return extension to elect portability, and the second article discusses voluntary disclosure of foreign bank accounts and financial assets based on recent changes to the program. Both are very timely topics to understand this year.

Time to Take Advantage of Estate Tax Return Extension to Elect Portability

An estate tax return is required to be filed within nine months (unless extended) of a decedent's date of death in order to elect portability and preserve their lifetime exclusion for use by a surviving spouse. The Revenue Procedure 2014-18, effective Jan. 27, 2014, offers an automatic extension of time to file an estate tax return (Form 706) to elect portability to certain taxpayers.

This is good news for surviving spouses who may have missed the filing deadline. Electing portability allows the surviving spouse to apply the deceased spousal unused exclusion amount (DSUE), up to $5 million (indexed for inflation), to the surviving spouse's transfers during life or at death. The automatic extension portability election applies to estates of decedents dying after December 31, 2010, and on or before December 31, 2013, and must meet the following additional requirements:

  • The estate is not otherwise required to file an estate tax return, and,
  • The estate did not file a timely estate tax return.

To take advantage of the extension, the surviving spouse must elect portability of the DSUE amount on Form 706 (estate tax return) by Dec. 31, 2014. If the deadline is missed, the only option for an extension to file is requesting a private letter ruling with the IRS Commissioner.

The Time is NOW to Voluntarily Disclose Foreign Bank Accounts and Foreign Financial Assets

If for any reason you've delayed voluntary disclosure of foreign bank accounts and financial assets, the time to act is now.

The Internal Revenue Service (IRS) recently announced changes to the offshore voluntary disclosure program (OVDP) to encourage more participation and possibly reduce exposure for some noncompliant taxpayers. For example, penalties may be reduced from 27.5% to between 0% and 5%.

With the implementation of the Foreign Account Tax Compliance Act (FATCA) and continued offshore enforcement efforts to identify U.S. taxpayers with undisclosed foreign bank accounts, participation in the OVDP is critical. Non-disclosure may result in steep penalties, up to 50%, and possible criminal charges in certain situation.

One of the recent OVDP changes, effective on or after July 1, 2014, expands the streamlined filing procedures - making it easier for more people who may have failed to disclose foreign accounts, but didn't willfully evade taxes, to participate. Other OVDP changes include:

  • Extension of eligibility to U.S. taxpayers residing in the United States
  • Elimination of the $1,500 tax threshold

Please note: You may have amended returns, filed delinquent FBARS (Report of Foreign Bank and Financial Accounts), and paid related tax and interest for previously unreported income without participating in the voluntary disclosure program in the past ("quiet disclosure"); however, without following voluntary disclosure procedures you may still be subject to criminal prosecution and penalties. If applicable, we encourage you to take advantage of the revised OVDP program now as the IRS may change the terms of the revised program at any time.

For assistance with information in either article, please contact Michael Deering, CPA, Mowery & Schoenfeld, at or 847-247-8959.