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 Extends Amnesty Program for Tax Cheats

A few weeks ago, I posted a blog entry about the IRS amnesty program and the deadline for offshore tax evaders to turn themselves in. However, with the Wednesday deadline approaching, the Federal government has announced a 3-week extension. Check out the following article about the announcement courtesy of the Associated Press.

Procrastinating tax cheats will get a few extra weeks to apply for an amnesty program that has been flooded with applications from people who hid assets overseas.

The Internal Revenue Service said Monday it will extend the deadline, originally set for Wednesday, until Oct. 15.

More than 3,000 Americans have applied for the program, which promises no jail time and reduced penalties for tax dodgers who come forward, said a government official who spoke on condition of anonymity because the agency has not publicly released the size of the program.

The IRS is extending the deadline to give a rush of applicants more time to prepare their paperwork. The agency said there will be no additional extensions.

Tax advisers said the program, combined with a high-profile case against Swiss banking giant UBS AG, has generated a lot of calls from nervous tax dodgers.

"They're sitting in disbelief that this is going on," said Richard Boggs, chief executive of Nationwide Tax Relief, a Los-Angeles-based tax firm that specializes in clients with tax debts exceeding $100,000. "I ask people to ask of themselves, 'What is their peace of mind worth? What is a fresh start worth? What is a clear conscience worth?'"

The IRS long has had a policy that certain tax evaders who come forward before they are contacted by the agency usually can avoid jail time as long as they agree to pay back taxes, interest and hefty penalties. Drug dealers and money launderers need not apply. But if the money was earned legally, tax evaders can usually avoid criminal prosecution.

Tax Evaders Rush to Beat Amnesty Deadline

Now that the government has reached a settlement with UBS, American tax evaders have until September 23 to reveal their overseas holdings or risk serious legal troubles if their names appear on the list UBS is preparing to turn over to the IRS. If taxpayers do decide to turn themselves into the amnesty program, they will still need to pay a fine but will not face criminal prosecution.

The IRS expects to find some tax evaders soon. UBS AG, the Swiss banking giant, agreed to hand over to the IRS the names of about 4,450 secret accounts as part of a court settlement reached last month.

"This is sort of their last, best chance if they are going to get off with lenient treatment," said Evan Stewart, a regulatory lawyer at the firm Zuckerman Spaeder.

"If you're sitting there and you've sheltered $50 million from the U.S. government, are you willing to gamble with the (list of) 4,500 (names) and live in terror for a year?" Stewart said.

The IRS said that, in one week of July, about 400 individuals turned themselves in under the amnesty program. That was four times higher than the number of tax evaders who stepped forward in all of 2008, according to the agency.

Continue reading at Reuters.com…

IRS Amnesty Would Stimulate Economy, Give Struggling Taxpayers a Fresh Start

One writer from the Cincinnati News recently posted an article urging Congress to offer amnesty to taxpayers that have not filed because of unpaid taxes. The author suggests that by doing so, the IRS would stimulate the economy. A portion of the article can be found below, but the full text can be read here:

Congress is looking for ways to raise money as well as stimulate the economy. Many hard-working Americans, despite good intentions, have fallen behind on their taxes - it could be divorce, medical problems, or the challenges of a business during hard times. These life situations often lead to an unfortunate dropping out of the tax system. If the taxes cannot be paid, the returns are often not filed.

I urge Congress and the Secretary of the Treasury to offer amnesty to the 6.1 million IRS non-filers if they come forward and pay the taxes they owe.

The non-filing is usually accompanied by a feeling of helplessness. Once behind, interest and penalties escalate to the point that a taxpayer can never catch up.

The failure to act is magnified by the fact that interest and penalties double the original tax liability every five years. Someone paying $100 monthly on a $20,000 IRS debt will find that the amount owed actually increases, not decreases, because of the interest and penalties.

For honest taxpayers that come forward with their taxes, provide relief from the interest and penalties if the tax is paid when the returns are filed. To ensure future compliance, implement a five-year probationary period to stay current on all future obligations. Those suspected of tax crimes would not be eligible.