I.R.S. Offers a Tougher Amnesty Deal for Offshore Accounts
Offshore tax evaders received a new incentive on Tuesday to come forward and declare their hidden bank accounts to the Internal Revenue Service, with stiffer penalties than a previous offer but no risk of prosecution.
Under the initiative, Americans with hidden offshore accounts have until Aug. 31 to come forward voluntarily and report the accounts to the I.R.S. in exchange for penalties that, while below what they would ordinarily pay, are still higher than those offered in an earlier amnesty program.
The additional carrot in the new program is a continued promise by the I.R.S. not to prosecute those who come forward for tax evasion.
“The risk to individuals hiding assets offshore is clearly increasing,” Douglas H. Shulman, the I.R.S. commissioner, said during a conference call.
The I.R.S. created the latest program amid a widening crackdown by federal authorities on offshore accounts sold to wealthy Americans by Swiss and Swiss-style banks. The crackdown, which began with the Swiss giant UBS, has since spread to other banks, including HSBC, smaller Swiss cantonal banks and Swiss-style banks in Asia.
Mr. Shulman said that “we now have a number of other banks under investigation based on information we received from our first round of disclosures” in the earlier amnesty program, two years ago, “and from other sources.” He added that the investigations “are at various stages, but some are quite advanced.”
The previous program required extensive disclosures about the network of banks, financial advisers, trust executives and other intermediaries involved in helping to hide a client’s money offshore. The authorities are “data-mining” those roadmaps to further root out tax cheats. While it is legal for Americans to own foreign banks accounts, not declaring their contents to the I.R.S. constitutes tax evasion.
The new program requires individuals to pay a penalty of 25 percent of the amount in their foreign bank accounts in the year with the highest aggregate account balance over eight years from 2003 through 2010.
Normally, a taxpayer would pay a 50 percent penalty on the highest amount in each account for each year over six years — a level that can easily leave the taxpayer owing more than is in the accounts — in addition to the back taxes, interest and possible criminal penalties.
Under the new program, some taxpayers may be eligible for reduced penalties of 5 percent or 12.5 percent. Anyone entering the program must also pay back taxes and interest for up to eight years, as well as delinquency and accuracy-related penalties.
The program is tougher than one created in 2009, which attracted 15,000 Americans with hidden accounts overseas and stunned I.R.S. officials, who Mr. Shulman said had expected around 1,000 participants. Some 3,000 additional Americans had come forward since the October 2009 deadline of the previous program.
Americans with smaller offshore accounts holding no more than $75,000 in any year covered by the program are eligible for a penalty category of 12.5 percent. Mr. Shulman said that new penalty was aimed at people who had inherited Swiss-style bank accounts.
Under the previous program, taxpayers who came forward before Oct. 15, 2009, were subject to a reduced penalty of 5 percent or 20 percent, depending in part on whether their wealth had been inherited. They were also subject only to a single penalty, on the highest balance in their affected accounts over the previous six years, instead of one for each year.
Without the terms of either program, those who come forward can be left owing the I.R.S. a multiple of what their accounts hold. Another twist is that under the latest program, account holders must file all their documents and tax returns before the Aug. 31 deadline and not just indicate that they want to participate in the program. That “will create a real problem for people who are unable to get information from their foreign banks and then have it processed that quickly,” said Scott D. Michel, a tax lawyer at Caplin & Drysdale in Washington.
Robert Katzberg, a white-collar criminal defense lawyer in New York with private banking clients, called the new program “probably the last, best chance to get out from under.”
“Ultimately,” he added, “there will be no place to hide. This is no longer just about UBS. The investigation is not confined to the Alpine region. Banks in the Mideast and Far East are under scrutiny.”
