Should the IRS prosecute confessed evaders of offshore accounts?

In September 2009 the IRS has called attention to its voluntary disclosure program to encourage taxpayers to come forward on foreign bank accounts. The IRS published the Voluntary Disclosure: Questions and Answers which describes the extension of the Sept. 23, 2009 deadline for the special voluntary disclosure related to offshore accounts. It explains those who voluntary disclosed their offshore accounts would generally suffer a less harsh penalty than what could be applied under the law. According to one tax blog and a Wall Street Journal article of May 5, 2010, about 15,000 US taxpayers did “voluntary disclose” their offshore accounts prior to the end of the deadline for such disclosures.

However, if the IRS is already examining the taxpayer (even on another matter) then the taxpayer is not eligible. Also, the disclosure has to come before the IRS has the information from another source, of course.

A blog in TaxingMatter raises a great question: Should their confession even under the circumstances that the IRS already has information on them, provide a "get out of jail free" card and not prosecution?

Do you agree with the people that seem to “rank” tax evaders as a non-serious crime? Activity tax evasion as though it really is not a serious crime. The harm to ordinary Americans is not trivial-- there is the loss of revenues, not to mention the burden borne by "good" taxpayers who have to make up one way or another for the gap in revenues. Are we sending the message that some people are above the law?

Or do we agree with the criminal tax lawyers that are criticizing the IRS for its decision to prosecute some people who confessed they used foreign bank accounts to evade taxes, calling the IRS actions “trickery” because some people confessed to their undeclared Swiss bank accounts shortly before the IRS declared a special amnesty program?

Read more in the Wall Street Journal here.

Over 14,700 Americans Admit Foreign Bank Accounts to IRS

From ABCNews.com:

Under an IRS voluntary disclosure program that allows U.S. taxpayers to come clean about secret foreign bank accounts and avoid possible prosecution, over 14,700 Americans have now admitted to hiding assets overseas, the IRS and the Justice Department announced today.

The number nearly doubles the more than 7,500 Americans who reported such accounts to the IRS before the Oct. 15 deadline, following a settlement with Swiss banking giant UBS.

"The message to American taxpayers is clear: the era of bank secrecy and hidden assets is over," U.S. Deputy Attorney General David W. Ogden said in a statement.

The once-secretive Swiss bank sent letters to thousands of its American customers in early October, informing them "your account with UBS appears to be within the scope of the IRS Treaty Request" and that under a new agreement between the U.S. and Switzerland, UBS would provide names and account information to U.S. authorities.

In August, the two countries signed a historic agreement to obtain information from UBS to identify information on up to 4,450 accounts. U.S. officials believe the accounts could hold up to $18 billion, and they applauded the move as a major step in lifting the shroud of Swiss banking secrecy and uncovering potentially billions of dollars stored in accounts there by wealthy U.S. account holders who could be dodging U.S. taxes.

"We'll be receiving an unprecedented amount of information on taxpayers who have evaded their tax obligation by hiding money offshore at UBS," IRS Commissioner Dan Shulman said after the agreement was signed.

While significant, the list of 4,450 names was considerably less than the IRS and Justice Department initially sought.

Deadline Looms for Americans to Disclose Accounts in Foreign Tax Havens

From LATimes.com:

Wealthy U.S. taxpayers, concerned about an Internal Revenue Service crackdown on the use of secret overseas bank accounts as tax havens, are rushing to meet a Thursday deadline to disclose those accounts or face possible criminal prosecution.

The concern was triggered this summer when Switzerland's largest bank, caught up in an international tax evasion dispute, said it would disclose the names of more than 4,000 of its U.S. account holders.

The decision shattered a long-held belief that Swiss banks would guard the identities of its American customers as carefully as they did their money, and it raised concern that other international tax havens might be next.

Under an amnesty program, the IRS is allowing taxpayers to avoid prosecution for having failed to report their overseas accounts. As a result, tax attorneys across the nation have been besieged by wealthy clients who are lining up to apply even though they will still face big financial penalties.

Tax lawyers in Southern California say they've encountered an array of clients concerned about international bank accounts: Hollywood producers, immigrants who left behind foreign accounts and business owners who have stashed money overseas to avoid taxation.

"It's crazy busy," said Pasadena tax attorney Phil Hodgen, who for a brief period in September stopped accepting new clients because he was overwhelmed with amnesty requests. "These people are calling, saying, 'I can't sleep at night.' "

Some 3,000 U.S. residents have voluntarily disclosed their foreign bank accounts to the IRS this year, compared to fewer than 100 in 2008, said one U.S. government official who asked not to be identified.

IRS Reminds Taxpayers to Report Certain Foreign Bank Accounts

Earlier in the week the IRS published a news release reminding taxpayers to report certain foreign bank and financial accounts by June 30, 2008. According to the release, thousands of taxpayers in the U.S. have foreign financial accounts, and there is nothing wrong with setting up or maintaining a foreign account. However, the IRS is concerned that U.S. taxpayers may overlook the fact that their accounts are large enough require them to report it to the IRS.

“There are responsibilities that go along with owning such foreign bank and financial accounts,” notes IRS Commissioner Doug Shulman. “Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.”