I.R.S. Offers a Tougher Amnesty Deal for Offshore Accounts

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I.R.S. Offers a Tougher Amnesty Deal for Offshore Accounts

Post by ToddS on Sun Mar 27, 2011 1:01 pm

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I.R.S. Offers a Tougher Amnesty Deal for Offshore Accounts


By LYNNLEY BROWNING


Published: February 8, 2011


Offshore tax evaders received a new incentive on Tuesday to come forward and declare their hidden bank accounts to the Internal Revenue Service, with stiffer penalties than a previous offer but no risk of prosecution.


Under the initiative, Americans with hidden offshore accounts have until
Aug. 31 to come forward voluntarily and report the accounts to the
I.R.S. in exchange for penalties that, while below what they would
ordinarily pay, are still higher than those offered in an earlier
amnesty program.

The additional carrot in the new program is a continued promise by the
I.R.S. not to prosecute those who come forward for tax evasion.

“The risk to individuals hiding assets offshore is clearly increasing,”
Douglas H. Shulman, the I.R.S. commissioner, said during a conference
call.

The I.R.S. created the latest program amid a widening crackdown by
federal authorities on offshore accounts sold to wealthy Americans by
Swiss and Swiss-style banks. The crackdown, which began with the Swiss
giant UBS, has since spread to other banks, including HSBC, smaller Swiss cantonal banks and Swiss-style banks in Asia.

Mr. Shulman said that “we now have a number of other banks under
investigation based on information we received from our first round of
disclosures” in the earlier amnesty program, two years ago, “and from
other sources.” He added that the investigations “are at various stages,
but some are quite advanced.”

The previous program required extensive disclosures about the network of
banks, financial advisers, trust executives and other intermediaries
involved in helping to hide a client’s money offshore. The authorities
are “data-mining” those roadmaps to further root out tax cheats. While
it is legal for Americans to own foreign banks accounts, not declaring
their contents to the I.R.S. constitutes tax evasion.

The new program requires individuals to pay a penalty of 25 percent of
the amount in their foreign bank accounts in the year with the highest
aggregate account balance over eight years from 2003 through 2010.

Normally, a taxpayer would pay a 50 percent penalty on the highest
amount in each account for each year over six years — a level that can
easily leave the taxpayer owing more than is in the accounts — in
addition to the back taxes, interest and possible criminal penalties.
Under the new program, some taxpayers may be eligible for reduced
penalties of 5 percent or 12.5 percent. Anyone entering the program must
also pay back taxes and interest for up to eight years, as well as
delinquency and accuracy-related penalties.

The program is tougher than one created in 2009, which attracted 15,000
Americans with hidden accounts overseas and stunned I.R.S. officials,
who Mr. Shulman said had expected around 1,000 participants. Some 3,000
additional Americans had come forward since the October 2009 deadline of
the previous program.

Americans with smaller offshore accounts holding no more than $75,000 in
any year covered by the program are eligible for a penalty category of
12.5 percent. Mr. Shulman said that new penalty was aimed at people who
had inherited Swiss-style bank accounts. Under the previous program, taxpayers who came forward before Oct. 15,
2009, were subject to a reduced penalty of 5 percent or 20 percent,
depending in part on whether their wealth had been inherited. They were
also subject only to a single penalty, on the highest balance in their
affected accounts over the previous six years, instead of one for each
year.

Without the terms of either program, those who come forward can be left
owing the I.R.S. a multiple of what their accounts hold. Another twist
is that under the latest program, account holders must file all their
documents and tax returns before the Aug. 31 deadline and not just
indicate that they want to participate in the program. That “will create
a real problem for people who are unable to get information from their
foreign banks and then have it processed that quickly,” said Scott D.
Michel, a tax lawyer at Caplin & Drysdale in Washington.

Robert Katzberg, a white-collar criminal defense lawyer in New York with
private banking clients, called the new program “probably the last,
best chance to get out from under.”

“Ultimately,” he added, “there will be no place to hide. This is no
longer just about UBS. The investigation is not confined to the Alpine
region. Banks in the Mideast and Far East are under scrutiny.”








A version of this article appeared in print on February 9, 2011, on page B3 of the New York edition.











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