Ah, I am reminded of the wealth manager telling a prospective client that it was okay to park his cash offshore and bring it home to avoid tax's. At the time my wife and I questioned if this was wise as our observations elsewhere in the world especially in Aussie was that the IRS would start to look at this type of activity very closely. Sure enough they did.
Aivars Lode
By Richard Rubin - Sep 15, 2011 3:29 PM ET
IRS Gets $2.7 Billion From Offshore Accounts
Ariel Jerozolimski/Bloomberg
The voluntary program allowed U.S. taxpayers with offshore accounts to come forward and pay back taxes and penalties to likely avoid prosecution.
The voluntary program allowed U.S. taxpayers with offshore accounts to come forward and pay back taxes and penalties to likely avoid prosecution. Photographer: Ariel Jerozolimski/Bloomberg
IRS Commissioner Douglas Shulman said today that the agency’s emphasis on international tax enforcement prompted more people than anticipated to accept penalties and reveal their accounts.
“The results we’re seeing today were unthinkable just a few short years ago,” he said on a conference call with reporters. “The world has clearly changed.”
The results mark the continuation of the IRS’s beefed-up enforcement efforts, which include the voluntary programs as well as prosecutions with the Department of Justice.
“You’d have to be living in a hole not to know that the U.S. government is really focused on offshore tax evasion, getting better at it,” Shulman said.
He declined to comment about U.S. efforts to obtain account information from Swiss banks, other than to confirm that the U.S. and Swiss governments are discussing the issue.
‘Never About Switzerland’
“This effort was never about Switzerland,” Shulman said. “I think a lot of Swiss banks aren’t taking these kinds of accounts anymore and they’re really trying hard to move forward.”
In 2009, the U.S. and UBS AG (UBSN) reached a deferred-prosecution agreement under which the bank paid $780 million. Since then, the U.S. has been prosecuting clients of UBS, HSBC Holdings Plc and other banks around the world.
The voluntary program allowed U.S. taxpayers with offshore accounts to come forward and pay back taxes and penalties to likely avoid prosecution.
The program’s initial round in 2009 yielded $2.2 billion in taxes, interest and penalties from 15,000 taxpayers, Shulman announced today.
An additional 3,000 taxpayers came forward after that program ended, and 12,000 more declared accounts this year under the 2011 program, which had a deadline of Sept. 9 and less generous terms for taxpayers than the previous version. Shulman said the 2011 program has yielded $500 million so far, and he expects that to increase because the total so far doesn’t include many penalties.
“That’s more than I expected in the second round,” said Mark Matthews, a Washington-based tax attorney at Morgan Lewis & Bockius LLP. Overall, “a lot of practitioners think this was one of the most successful tax compliance actions in history,” said Matthews, a former IRS deputy commissioner.
What Now?
Matthews said he’d like the IRS to issue guidance now that the disclosure initiative has ended.
“What do we do now?” Matthews asked. Those who have come forward, he said, are “still only a fraction of the people who have these accounts.”
Some people didn’t come forward because they were comparing the risk of getting caught with the penalties they would owe under the program.
Richard Sapinski, a lawyer at Sills, Cummis & Gross P.C. in Newark, New Jersey, said he doubts the IRS will offer another partial amnesty because that would undermine tax compliance.
“I think they probably would be very hesitant to have a third program,” Sapinski said. “It would be like catching a bus. You miss one and you wait for the next one.”
To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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