by Brian Mahany
The last tax amnesty program for U.S taxpayers with unreported foreign accounts has ended. The IRS calls it a success, although fewer people came forward this year than in 2009, the year of the previous amnesty program. According to preliminary numbers, 12,000 people took advantage of the amnesty program this year. When added to the 15,000 that came forward in 2009 and the several thousand people that made disclosures in the intervening years, the total is roughly 30,000.
Thirty thousand taxpayers reporting their offshore holdings. Estimates range from 500,000 to 1 million or more that still have unreported accounts. Does 12,000 make the program a success? Does a half million or more taxpayers still with unreported accounts make it a failure? Policy wonks will debate this one for years.
Certainly, the programs have brought in money to the U.S. Treasury. The 2009 Offshore Voluntary Disclosure Program (“OVDP”) brought in $2.2 billion according to the IRS. It will be a months before the figures from the 2011 Offshore Voluntary Disclosure Initiative (“OVDI”) are complete but already $500 million is been received by the IRS.
Having talked to several practitioners and looking at our own cases, the 2009 program brought in many of the larger offenders who knew they were violating the offshore reporting laws but were afraid to come forward because of fear of prosecution or the onerous 50% tax penalty. This year’s program reached many of the “accidental Americans” and dual nationals who simply had no idea that sending money “home” to a foreign account was illegal if not reported.
Unfortunately, our telephone continues to ring with folks who are still learning of the law.
The government has not done an effective job of educating taxpayers about their responsibility to report foreign accounts. Unfortunately the tax preparer community has not done a good job either. Many of the clients we have helped told their accountants of their foreign accounts or provided statements. Those accountants never filled out the proper paperwork or even recognized the reporting issue and referred the taxpayers to someone who knew what to do. Two of our clients are now suing their tax preparer to recover the huge penalties they received from the IRS.
The IRS says it is not backing down in its search for unreported accounts. “By any measure, we are in the middle of an unprecedented period for our global international tax enforcement efforts. We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion,” said IRS Commissioner Doug Shulman. The IRS may call these undisclosed bank and brokerage accounts “offshore tax evasion” but for many Americans and foreigners who live and work here, it’s simply not knowing the law.
Although the OVDI program has officially ended, the IRS can and will continue taking voluntary disclosures. Each one is decided on a case by case basis. Those with truly good reasons for not reporting should fair well but no one knows for sure. One thing is certain, don’t try to handle a disclosure on your own. The potential penalties could leave you broke.
The tax attorneys at Mahany & Ertl concentrate in tax and fraud recovery matters. We have helped many people with foreign reporting issues. If you have failed to file a Report of Foreign Banking and Financial Account (FBAR) or don’t even know what an FBAR is, call us. If you were penalized by the IRS but told your accountant or tax preparer of the offshore accounts, we may be able to help you get back those penalties. The call is completely confidential. For more information contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl, LLC – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and San Francisco, California. Services nationwide.