Voluntary Disclosure Renewed for Offshore Cheats

by Linda Beale

Voluntary Disclosure Renewed for Offshore Cheats
crossposted with Ataxingmatter

In 2009, the IRS provided a generous voluntary disclosure program for people who had money socked into offshore accounts.  See 2009 Voluntary Disclosure Program, IRS. Ordinarily, the taxes, interest (at 20%), accuracy-related penalty (at 20% of the tax liability) and FBAR penalties –at 50% of the account amount over several years–could add up to considerably more than the amount in the account.  The 75% penalty for fraud is a definitepotential, and criminal prosecution (for tax evasion, failure to file a return, filing a false return, etc.) is a possibility too.   The 2009 voluntary disclosure program required taxpayers to reveal all previously undisclosed foreign accounts, amend their returns, and pay all taxes due.  but the penalty charged was much less than the maximum–20% of the tax liability and 20% of the maximum amount in the account during the relevant period.  See Q & A document.

When the ABA tax section met in Boca Raton Florida in late January, IRS officials announced that there will be a second voluntary compliance program for those persons who still have not come forward.  Many practitioners with clients who may decide to participate in this second program had hoped that another would be offered even after the first program ended.  To maintain credibility for future such programs, of course, the IRS will have to be sure that the penalties for disclosure at this later stage will be higher than the penalties for the earlier disclosure program.  Nonetheless, paying the taxes due and a steep but still lesser penalthy while avoiding criminal prosecution should lead a number of the holdouts to disclose.

Someday we will have sufficent information exchange programs that will make hiding assets offshore close to impossible.  But not yet.  So let’s just hope that the IRS gets enough new information from these additional disclosures that it can pull the lid off even more of the banking secrecy in jurisdictions that have assisted US taxpayers in evading taxes for years.  Each time there are significant new accounts revealed, it should be the case that the IRS will get numbers of leads on key bankers and mechanisms being used to hide assets offshore.  You taxpayers who are gambling that they can get away with tax evasion through their offshore accounts should take notice. This will be your second chance. Now might be a good time to ‘fess up.