[Post updated 2019] “Reveal Secret Accounts or Go to Jail” – That’s pretty much the headline from a CNBC article on Friday. And it’s true.
In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn’t illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.
U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.
So what is a person to do? Taxpayers can do nothing and hope they don’t lose the “audit lottery” (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That’s right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.
Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms (“FBAR’s”), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.
Those that don’t comply face prison and loss of 50% of their highest account value.
So what is the risk of getting caught? We think it is quite high.
Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.
The U.S. has been issuing “John Doe” subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.
Still not convinced? The IRS paid its first award under the new whistleblower program – $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.
The world suddenly got much smaller.
IRS Whistleblower Program Pays Cash Rewards for Info on Offshore Accounts
Despite all the warnings, many people continue to believe they can hide from the IRS. Some will be successful. Knowing that, Congress revitalized the IRS Whistleblower Program in 2009 to give it real teeth. People with inside information about tax cheats can earn a cash reward.
To qualify for a reward you must have original source information about a U.S. taxpayer who is not properly reporting or paying federal taxes. The IRS is also interested in offshore banks, lawyers and intermediaries who assist taxpayers in tax evasion.
Under the IRS Whistleblower Program rules, the taxes, penalties and interest in dispute must exceed $2 million. If the case deals with an individual, his or her annual gross income must be more than $200,000. If you qualify for this program, the reward will be between 15% and 30% of whatever tax delinquencies are collected by the IRS.
A second IRS program is available for situations where the unpaid tax, interest and penalty does not exceed $2 million or the individual taxpayer has annual gross income that is less than $200,000. For these smaller whistleblower cases the reward is up to 15% and is capped at $10,000,000.00.
In most cases, IRS whistleblowers can remain anonymous. Only if the whistleblower becomes an “essential witness” in a judicial proceeding may his or her name be disclosed.
No one likes paying taxes. Most people dislike those that skip out on paying their fair share even less. We invite potential IRS whistleblowers to contact us. We can help determine whether you have a case.
Mahany Law is a national boutique law firm concentrating in whistleblowing cases including offshore IRS whistleblower cases. Founder Brian is the former tax commissioner for Maine and a tax prosecutor. We also have on board a former IRS Criminal Investigations Division special agent formerly assigned to the offshore fraud unit.
For more information, contact us online by email at or by phone 202-800-9791. All inquiries are kept in strict confidence. We handle cases worldwide, there is no requirement that whistleblowers be U.S. citizens in order to be eligible for a reward.