Tax Law Center Blog

The Internal Revenue Service’s four amnesty programs for those who have undeclared offshore accounts have resulted in more than 39,000 disclosures by taxpayers and more than $5.5 billion in revenues as of December 2012.

A report Friday by the Government Accountability Office (GAO) also reveals that the IRS could draw more voluntary disclosures from these tax evaders, if the agency increases “education and outreach.” Based on a review of cases for the 2009 Offshore Voluntary Disclosure Program (OVDP), the GAO found examples of immigrants who stated that they were unaware of offshore account declarations required under U.S. tax laws.  Numerous immigrant groups have long complained that immigrants are totally unaware of offshore account declarations required under U.S. tax laws and that the IRS should do more increase awareness.

Of the 10,439 closed 2009 OVDP cases, the GAO estimates that the bottom 10 percent of the participants had account balances of less than $79,000 and the top 10 percent had balances over $4 million. The median account balance was $570,000.

IRS officials from the Offshore Compliance Initiative office said they have not targeted outreach efforts to new immigrants, the GAO’s report said.  “Obtaining information on how taxpayers found out about IRS’s offshore voluntary disclosure programs could help IRS better identify populations that could benefit from additional taxpayer education and outreach and potentially improve voluntary compliance by taxpayers with new offshore accounts,” the GAO said.

The offshore amnesty programs attract taxpayers by offering a reduced risk of criminal prosecution and lower penalties than if the unreported income was discovered by one of IRS’s other enforcement programs.

Those with offshore penalties greater than $1 million represented about 6 percent of all 2009 OVDP cases, but accounted for almost half of all offshore penalties. Taxpayers from these cases disclosed a variety of reasons for having offshore accounts, and more than half of them had accounts at Swiss bank UBS.

Tax evasion by individuals with unreported offshore financial accounts was estimated by one IRS commissioner to be several tens of billions of dollars, but no precise figure exists.  IRS has operated four offshore programs since 2003 that offered incentives for taxpayers to disclose their offshore accounts and pay delinquent taxes, interest, and penalties.  The U.S. government should use some of the $5.5 billion in revenues collected to increase education of the offshore account declarations required under U.S. tax laws.

Patel Law Offices has consulted with hundreds of clients, many of which are unaware immigrants, regarding their offshore asset compliance issues. Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.