Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Skip to main content
Tags: IRS | Undeclared | Assets

IRS Revives Program Seeking Offshore Tax Cheats

Tuesday, 10 January 2012 09:17 AM

The Internal Revenue Service is giving U.S. citizens who have shielded assets offshore a third opportunity to come clean, pay a penalty and avoid criminal prosecution.

After collecting $4.4 billion in two so-called voluntary disclosure programs for offshore accounts, the IRS announced plans yesterday to revive the program. Participants will pay as much as 27.5 percent of their most valuable offshore assets or their biggest overseas bank account. They also must disclose the banks and advisers that helped them escape U.S. tax laws.

The program’s revival is part of the U.S. government’s efforts to track down and prevent tax evasion around the world. Since 2009, the U.S. has prosecuted clients of UBS AG and HSBC Holdings Plc. Switzerland’s Weglin & Co. said on Jan. 4 that three of its bankers have been charged with conspiring to help U.S. clients hide more than $1.2 billion from the IRS.

“We’re gaining momentum in our international efforts and the word is spreading across the globe,” IRS Commissioner Doug Shulman told reporters on a conference call yesterday.

He wouldn’t comment on legal cases the U.S. is pursuing.

Shulman said 33,000 disclosures were made in the two previous versions of the voluntary program. An effort that began in 2009 resulted in $3.4 billion in collections. The second program in 2011 yielded about $1 billion for the IRS, and Shulman said he expects that amount to rise.

‘Enormous’ Problem

Senator Carl Levin, a Michigan Democrat who heads the Permanent Subcommittee on Investigations, said the statistics demonstrate “how enormous the offshore tax evasion problem is.”

“Taxpayers are turning themselves in because federal prosecutors have finally begun to go after the individual tax- haven banks, bankers and other financial professionals helping them chat on their taxes,” Levin said in a press release.

Taxpayers with undeclared assets might be more willing to work with the IRS amid fewer options to protect themselves offshore, said Kevin Packman, the chairman of the offshore tax compliance team at Holland & Knight LLP in Miami.

Meanwhile, some banks aren’t taking U.S. clients because they don’t want to comply with a rule being developed that would require overseas financial institutions to report the identities of such customers to the IRS.

“You have a whole host of banks throughout Europe who are kicking out taxpayers,” Packman said in a telephone interview. “You have nowhere to hide. Even people in compliance outside the U.S. are having trouble keeping their accounts open.”

Complex Rule

Toronto-Dominion Bank of Canada, Allianz SE of Germany and Aegon NV of the Netherlands have criticized the reporting rule as too complex.

The IRS doesn’t have an estimate of assets U.S. citizens hold offshore, Shulman said. Still, the $4.4 billion in penalties amassed under the programs so far is unlikely to plug the gap between the amount of taxes owed by U.S. citizens and the amount the IRS collects. The agency said Jan. 6 that U.S. companies and individuals didn’t pay $385 billion in taxes owed in 2006, an increase from $290 billion five years earlier.

Unlike in the previous programs, the IRS this time isn’t specifying a deadline for disclosing assets. It said the program will remain open “for an indefinite period.”

The agency raised the penalty to 27.5 percent from 25 percent in 2011 and 20 percent in 2009. Taxpayers disclosing smaller accounts could pay reduced penalties of either 5 percent or 12.5 percent.

In an attempt to encourage taxpayers to come forward soon, Shulman said the penalties might be increased further or the program ended at any point.

“It makes a lot more sense for them to come in now and get the protection of not being prosecuted criminally,” Shulman said. “If we catch them involuntarily, it’s going to be much worse for the taxpayer.”

© Copyright 2022 Bloomberg News. All rights reserved.

Tuesday, 10 January 2012 09:17 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
© Newsmax Media, Inc.
All Rights Reserved
Download the NewsmaxTV App
America's News Page
© Newsmax Media, Inc.
All Rights Reserved