Prosecutions of tax evaders up 25%

By Kevin McCoy, USA TODAY

Criminal tax prosecutions by the federal government hit a 10-year high in 2010, powered in part by a continuing crackdown on offshore tax evasion by wealthy Americans.

Federal prosecutors filed charges in 1,250 tax cases last year, a 25.3% jump from 2001, IRS data show. Prosecution recommendations by the IRS also reached a high of 1,507, up 50.4% from the 1,002 the data show for 2001.

USA TODAY confirmed the trend by analyzing tax prosecution referrals in court records compiled by the Transactional Records Access Clearinghouse, a data research and distribution organization at Syracuse University.

“The time that we’re spending on tax investigations has gone up,” even though IRS staffing has remained relatively flat, said Steven Miller, the tax agency’s deputy commissioner of Services and Enforcement, in an interview as today’s federal tax filing deadline approached. “That’s resulted in a lot more prosecutions in that area.”

Part of the rise last year came from criminal charges or guilty pleas in cases involving at least 25 Americans who were accused of ducking taxes on profits stashed in secret accounts with Swiss banking giant UBS.

The bank agreed last year to give U.S. authorities account data for 4,450 American clients, settling an international legal fight that shattered Switzerland’s historic reputation for tax secrecy.

The IRS also expanded its focus on suspected offshore tax evasion to include HSBC, a major London-based international bank. In one early result, the Justice Department last week announced a New York woman’s guilty plea to filing a false 2008 tax return that did not disclose she owned HSBC India accounts that held $8.3 million.

“We are focusing more and more on offshore (tax evasion), there is no question about that,” said Miller, who added that the IRS in the past two years has opened new criminal investigation offices in at least 10 international locations, including Australia, China and Panama.

Additionally, Miller said, the IRS has increased enforcement efforts against fraud by tax preparers.

For instance, Lester Morrison, the leader of a New York and New Jersey group of preparers, pleaded guilty in August to his role in a scheme that prosecutors said generated $28 million in fraudulent tax refunds.

However, the recent battles over the federal budget by the White House and Congress could make it difficult to maintain the enforcement trend.

Though the tax agency’s funding remained relatively intact this year, Miller said it’s not yet clear whether cuts will come in the 2012 federal fiscal year, which begins Oct. 1.

“I don’t know what the future’s going to bring,” Miller said. “If it brings a reduction to the Internal Revenue Service, I think that we will have to look across all of our programs, and I would expect that (criminal investigation) would be a part of that discussion.”