The Internal Revenue Service today said avoiding taxes by hiding money or
assets in unreported offshore accounts remains on its 2017 list of tax scams
known as the “Dirty Dozen.”
Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009,
there have been more than 55,800 disclosures and the IRS has collected more than
$9.9 billion from this initiative alone.
In addition, another 48,000 taxpayers have made use of separate streamlined
procedures to correct prior non-willful omissions and meet their federal tax
obligations, paying approximately $450 million in taxes, interest and
penalties. The IRS conducted thousands of offshore-related civil audits that
resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS
has also pursued criminal charges leading to billions of dollars in criminal
fines and restitutions.
"Offshore compliance remains a top IRS priority. We've collected $10
billion in back taxes in recent years with 100,000 taxpayers making use of our
voluntary disclosure programs," said IRS Commissioner John Koskinen.
"The IRS receives more foreign account information each year, making it
harder to hide income offshore. I urge taxpayers with international tax issues
to come forward and get right with the system."
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 tax returns or hire people to help with their
taxes.
Illegal scams can lead to significant penalties as well as interest and
possible criminal prosecution. The IRS Criminal Investigation Division works
closely with the Department of Justice 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 attempting to hide income in offshore banks, brokerage accounts or
nominee entities. Then access the funds using debit cards, credit cards or wire
transfers. 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 bankers and others suspected of helping
clients hide their assets overseas.
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 fines, as well as
the possibility of criminal prosecution.
Since 2009, tens of thousands of individuals have come forward to
voluntarily 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 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.
Third-Party Reporting
Under the Foreign
Account Tax Compliance Act (FATCA) and the network of intergovernmental
agreements between the U.S. and partner jurisdictions, automatic
third-party account reporting has entered its second year. The IRS
continues to receive more information regarding potential non-compliance by
U.S. persons because of the Department of Justice’s Swiss Bank Program. This
information makes it less likely that offshore financial accounts will go
unnoticed by the IRS.
Potential civil penalties increase substantially
if U.S. taxpayers associated with participating banks wait to apply to OVDP to
resolve their tax obligations.
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