The U.S. Treasury has hinted that it may again offer an amnesty program for taxpayers hiding undeclared money in offshore accounts. Just before Christmas, IRS Commissioner Doug Shulman commented about the success of 2009’s amnesty.
Many tax professionals question just how successful the last amnesty was.
Shortly after the highly publicized legal action against Swiss bank UBS began, the IRS offered an amnesty to Americans with undeclared foreign bank accounts.
According to federal money laundering laws and IRS regulations, businesses and individuals holding more than $10,000 in offshore accounts are required to complete an annual Report of Foreign Bank and Financial Accounts (FBAR). Having offshore bank accounts and foreign hedge funds isn’t illegal but failure to disclose them is.
The UBS suit alone estimated that 52,000 Americans were holding offshore funds at UBS. Many, if not most, of those accounts were not properly reported. Enter the Obama administration and the IRS’ amnesty plan.
Under the old plan, American taxpayers with undeclared foreign accounts could come forward without fear of prison. The government says the plan was successful with some 7,500 taxpayers coming forward. One taxpayer reportedly came clean on over $100,000,000 in unreported foreign holdings.
As worldwide pressure continues and the number of tax havens that have not yet signed tax exchange agreements with Uncle Sam dwindles, the pressure is on.
Schulman says that he next amnesty will not have as favorable terms, although taxpayers can still avoid prosecution by coming forward first.
There is no word on when a new amnesty may begin or what the terms will be.
[Update: Since this post was first written, our firm no longer handles most offshore reporting cases. Over the last several years, specialty offshore reporting firms and CPAs now handle the bulk of this work.
Unless there is the possibility of a criminal prosecution, we recommend finding a good CPA with offshore reporting experience. We will gladly tell you who we use for our own reporting issues.
If you have criminal exposure, be aware that there is no meaningful accountant – client privilege. That means prosecutors can compel your accountant to testify against you! In those situations, we will still provide tax representation. Under a Supreme Court precedent called “Kovel,” we may be able to hire an accountant and place the accountant within our privilege.
If you think you may be at risk of prosecution, be careful what you say to your accountant. Give us a call first.
Whoever you may call, don’t delay. The IRS mostly operates on a first contact basis. If you contact them first and agree to come into compliance, criminal prosecution is rare. If the IRS contacts you first, however, all bets are off.
IRS Offshore Tax Fraud Whistleblower Program
While we rarely handle individual offshore tax cases anymore, our IRS whistleblower practice remains robust. Under the IRS Whistleblower Program, whistleblowers with inside information about tax fraud can receive an award of up to 30% of whatever the government collects from the wrongdoers. Visit our IRS offshore tax fraud whistleblower information page for more details.
For more information including a no fee, no obligation consultation, contact Brian Mahany today online, by email at brian@mahanylaw or by phone at 202-800-9791(414) 704-6731.