On October 16, 2015, right after the 2014 tax filing season had completed, the Internal Revenue Service issued a report on the Offshore Voluntary Disclosure Procedures, urging the taxpayers with still undisclosed foreign accounts to come forward, or face serious consequences. The report also provided latest statistics on the Offshore Disclosure Program.
Since 2009, when the IRS rolled out its first offshore disclosure program, almost 85,000 taxpayers have come through the IRS disclosure process, bringing into compliance reporting of their foreign accounts and offshore assets. More than 54,000 taxpayers have participated in the Offshore Voluntary Disclosure Program (OVDP), the formal IRS amnesty program, which provides protection from criminal prosecution and fraud penalties. The government collected more than $8 billion in taxes, penalties, and interest under the OVDP. In addition, more than 30,000 taxpayers have used the Streamlined Filing Compliance Procedures (since June 2014), which is designed for “non-willful” taxpayers.
IRS Commissioner John Koskinen said that the government has a number of tools, which assist them in fighting offshore tax evasion. Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and partner countries, automatic third-party account reporting has began this year, making it less likely that offshore financial accounts will go unnoticed by the IRS. In addition, the U.S. government received information on potential non-compliance by U.S. taxpayers from a number of Swiss banks, which participate in the Department of Justice’s Swiss Bank Program. Those taxpayers who are associated with the participating Swiss banks face higher penalties.
The IRS announcement emphasized that the IRS remains committed to stopping offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the agency continues to pursue cases in all parts of the world. Based on information obtained from investigations and under the terms of settlements with foreign financial institutions, the IRS has 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.
U.S. taxpayers with undisclosed offshore accounts or assets should consider availing themselves to the available disclosure programs. With the new tools, like FATCA, Intergovernmental Agreements, and the Swiss Bank Program, the IRS has access to a lot of information about the offshore activities of U.S. taxpayers. Based on the IRS announcement that offshore tax evasion remains its top priority, non-compliant taxpayers who fail to take voluntary actions to come into compliance, may face severe criminal and civil consequences.