Today the IRS released IR-2015-9, “Hiding Money or Income Offshore Among the “Dirty Dozen” List of Tax Scams for the 2015 Filing Season” which provides verbatim:

WASHINGTON — The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

“The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen. “Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order.”

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 50,000 disclosures and we have collected more than $7 billion from this initiative alone.  The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs.  Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.

Through the years, offshore accounts have been used to lure taxpayers into scams and schemes.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

RSS Comments:

1. The IRS is not relenting in its search for those who still have unreported offshore bank accounts and income.
2. It has expanded its field of view from Switzerland to other regions including the Middle East (Israel), Asia (India and Singapore) and the Bahamas (John Doe Summons issued to CIBC).
3. IRS tentacles will continue to reach into more jurisdictions that in the past have harbored unreported accounts of U.S. citizens or residents.
4. The likelihood of being discovered is growing as the IRS data-base grows and IRS is able to link up people and will grow yet faster as FATCA and tax-information sharing arrangements between countries are implemented.
5. More can expect to receive letters from their offshore banks that names will be disclosed unless the account holders certify U.S. tax reporting compliance or entry into the OVDP.
6. The penalties presently imposed in the OVDP (27.5 or 50% [for banks on the IRS published list of bad-actor banks] of highest aggregate balance during OVDP period) or outside of the OVDP (as high as 300% of account balance) are not likely to lessen as time goes by and the OVDP miscellaneous offshore penalty may increase yet again at some juncture.
7. For all of the above reasons, those still out in the cold should contact a tax attorney experienced in OVDP submissions about how to come into compliance with the least risk of criminal sanctions and lowest possible financial pain.

Comments © 2015 by Robert S. Steinberg, Esquire All rights reserved