by Brian Mahany
I feel like a broken record lately about the current IRS offshore tax amnesty (called the Offshore Voluntary Disclosure Initiative). I keep writing about it because people keep calling and writing to us. Invariably the question is, “will I get caught?” There is no easy answer to that. Surprisingly more than half the people I speak to ultimately choose to take that risk. Today’s news from Business Week may change your mind.
[Ed note – In the interest of full disclosure, I am a featured blogger on Business Week’s Business Exchange.]
So are there new developments in government’s war on unreported offshore assets? Apparently plenty. According to a story by David Voreacos in Businessweek, “more than 100 federal prosecutors are pressing the taxpayers to cough up details about who helped them set up their accounts, how they moved their money, and where they met their advisers, according to two people involved in the probe who aren’t authorized to speak about the matter. People who don’t cooperate could be prosecuted for their tax crimes. IRS spokesman Dean Patterson didn’t respond to questions about the investigation.”
If the reports are true, the current crackdown would be unprecedented. 100 Department of Justice trial attorneys and assistant United States Attorneys could put a big dent in the thousands of people who have not reported their foreign holdings. Armed with “John Doe” subpoenas and backed by tax exchange agreements with most nations, its just a matter of time before many or most get caught.
How many years back will the feds look? What will be the dollar threshold before the feds take action? Will the IRS give any relief to those who make quiet disclosures after amnesty closes on August 31st? Those are all unanswered questions.
I suspect the phones will be ringing again tomorrow.
For those who may be reading this blog for the first time, most offshore bank and financial accounts that hold or once held $10,000 or more need to reported annually on a Report of Foreign Bank and Financial Account (or FBAR). This is true even if you reported the income from those accounts on your tax return. The penalty for noncompliance is prison and loss of 50% of the highest historic account value. While the chances of criminal prosecution and prison are low, the IRS will take your money.
Offshore accounts are completely legal if properly reported. For those not in compliance, there is a special amnesty that runs through August 31st. Complete the process and you avoid jail and face reduced penalties of 5, 12.5 or 25%.
The process is time consuming so don’t wait until the last minute. Plan at least 30 days if not more. Do you need a lawyer? No but it is highly recommended. Unless you have other tax problems or complications, our legal fees are $10,000 for each amnesty application.
The IRS is serious about cracking down on unreported offshore accounts and income. Many of the people with foreign accounts are foreign born Americans or dual nationals. We have found that many such people do not even know they are required to disclose their offshore accounts. Even many accountants are confused.
For more information, call attorney Brian Mahany at (414) 704-6731 (direct dial) or Bethany Kroes at (262) 970-8500. All calls are held in strict confidence. You can also write us at
Mahany & Ertl, LLC – Milwaukee, Detroit & Portland. Services nationwide. Our lawyers are licensed in many jurisdictions and before the U.S. Tax Court