With Offshore Tax Evasion an IRS Top Priority, Practitioners Seek Extension of Voluntary Disclosure Program

Dec 15, 2010   

As the IRS increases its efforts at combating tax evasion by taxpayers who hide their assets offshore in countries with favorable bank secrecy laws, practitioners at the annual ABA criminal tax institute lobbied for the IRS to extend its popular and effective voluntary disclosure program. Under the IRS voluntary disclosure program, which ended in October, over 15,000 taxpayers self disclosed offshore accounts without threat of criminal prosecution.

The calls for an extension to the voluntary disclosure program come as the IRS Criminal Investigation Unit is partnering with the Department of Justice (“DOJ”) and partners around the world to combat international tax fraud and evasion. As we have previously reported, the US has been active in negotiating with countries that are traditional havens for tax evasion in an effort to curb such practices. Most recently, the US and Panama entered into a tax information exchange agreement. Additionally, in August the US and Switzerland entered into an information exchange agreement that led to information on over 7,500 previously unreported accounts being turned over in the wake of the deferred prosecution agreement between the US and Swiss banking giant UBS.

As the IRS moves beyond UBS, it is focusing on regions where it can make the greatest strides in tax compliance. On November 24, 2010, the Treasury Inspector General for Tax Administration (“TIGTA”) released a report documenting the IRSs increased efforts. According to the report, the amount of civil examination closings involving the Report of Foreign Bank and Financial Accounts (“FBAR”) has increased by 145 percent since 2004 yielding penalty assessments of over $20 million.

The IRS has seen successes in combating international tax evasion as a result of the combination of voluntary disclosures and international enforcement. In fact, even after the formal voluntary disclosure program ended, the Service has received 3,000 voluntary disclosures from people with accounts around the world. Practitioners believe that if the program is brought back it will yield even greater results if the IRS gives disclosers advanced notice of the tax penalties that will be assessed.

If you are facing criminal tax prosecution or have questions about tax law provisions please contact our attorneys at contact@fidjlaw.com.