by Brian Mahany
The IRS’ 2011 offshore tax amnesty program is off and running. This is a repeat of the amnesty held in 2009; an amnesty that then only received 15,000 applications. Since then, the IRS has truly ramped up its audit and enforcement efforts designed to detect U.S. taxpayers with both unreported offshore accounts and unreported income.
Generally, tax agencies never hold two amnesty programs within the same decade. Holding them just two years apart is remarkable.
Why not have them more often? If an amnesty becomes too routine, taxpayers expect it and may decide to simply take their chances until the next amnesty is announced.In other words, having back-to-back amnesty programs can actually decrease compliance. The IRS program is a bit different (of course, the IRS has decided to call their 2nd amnesty an “offshore voluntary disclosure initiative.”)
Although the IRS calls the 2009 program a success, many view it as a failure. Tens of thousands of U.S. taxpayers with unreported income or accounts simply decided to sit on the fence and wait to see what happened.
In this case, the IRS brought high profile actions against UBS Bank in Switzerland to force the Swiss banking giant to disclose the names of their U.S. account holder. Congress also got in the act by passing enhanced bank disclosure mandates. Even the President jumped on the bandwagon and in several speeches blasted offshore “tax havens.”
The result is that many more people now know that offshore accounts and offshore income must be reported. Even if a foreign account pays no interest (thus no income), the account must still be reported. Failure to report can result in penalties that equal 50% or more of the account value (not the value of the interest earnings.) Failure to report can also land you in the federal pen for up to 10 years.
Having a second amnesty makes sense. Now that awareness is much greater, the initiative gives taxpayers a second chance to come clean. The terms are not as great as the first but still offer a “get out of jail free” card and greatly reduced penalties.
As with any IRS program, there are a myriad of exceptions and rules. If you want to get the break on the penalties and avoid possible prosecution you must act before August 31st.In most cases a lawyer can handle the process and provide the peace of mind for a few thousand dollars in legal fees.
If you aren’t familiar with the filing requirements, speak with a tax attorney or CPA well versed in foreign bank account reporting requirements. Not every CPA is familiar with the rules.
Mahany & Ertl is a boutique law firm concentrating in tax matters, fraud recovery (asset recovery) and white-collar criminal defense. We help our tax clients avoid jail, defend audits, reduce tax debts and fight for their rights in U.S. Tax Court.We can help taxpayers with a wide variety of foreign reporting and tax amnesty (voluntary disclosure initiative) matters.
For more information, contact Brian Mahany for a no obligation, no nonsense consultation. We accept clients anywhere in the U.S. and beyond. Brian can be reached at (414) 704-6731 (direct) or through the website, https://www.mahanyertl.com