IRS Gives Last Chance to Come Clean (from Haaretz.com)

2 Sep

IRS gives ‘last chance’ to disclose offshore accounts

By Raphael Ahren  

Published 05:14 11.02.11

The U.S. Internal Revenue Service is launching a second round of its voluntary disclosure program, which offers reduced penalties for American citizens who have previously failed to report offshore accounts, the agency announced this week.

The new initiative – the “last chance” to come clean, according to the IRS – will be available through August 31, 2011.

“This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all. And it gives people a chance to come in before we find them,” said IRS Commissioner Doug Shulman Tuesday in a statement published on the agency’s website. Taxpayers taking advantage of the program “can avoid criminal prosecution,” he added.

Local tax professionals estimate that several hundreds of Americans living in Israel participated in the first round of the so-called Offshore Voluntary Disclosure Program, which ended on October 15, 2009. While opinions differed on the program – with some saying it was “not as good a deal as it sounds” most tax professionals advise customers to participate if they have never declared their Israeli accounts, as U.S. authorities are expected to increasingly toughen their stance against potential tax evaders. “This new disclosure initiative is the last, best chance for people to get back into the system,” Shulman said. “The IRS is repeating the program because they felt the first round was huge success,” Eli Clark, a Tel Aviv-based lawyer focusing on international, U.S. and Israeli tax issues, venture capital and international transactions law, told Anglo File yesterday. “Every taxpayer has to individually decide whether it makes sense for him to participate or not. Many people did participate the first time around, some were happy they did and some regretted it. [because they were subsequently subject to tough audits and still pay to pay heavy fines.] For many taxpayers, it was the right decision.”

In 2009, the IRS initiated the program, which promised lower penalties and no criminal charges to citizens who voluntarily came forward to report offshore accounts. Some 15,000 American taxpayers around the world took advantage the first time around. Since then, the IRS received another 3,000 voluntary disclosures.

Don’t forget the FBAR

Many overseas Americans have never filed any tax returns, while many did file income taxes and even mentioned they have offshore accounts, but failed to send in an additional separate form required for every American who has a foreign bank account, called FBAR.

The new initiative has higher penalties than the previous program, in order not to reward taxpayers for having waited to come clean. Participants in the 2009 program had to pay back up to 20 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering up to a six-year period. This year, participants must expect penalties of up to 25 percent. However, people whose offshore assets did not surpass $75,000 in any calendar year will only have to pay 12.5 percent in penalties, according to the IRS.

“Tax secrecy continues to erode,” Shulman said. “We are not letting up on international tax issues, and more is in the works. For those hiding cash or assets offshore, the time to come in is now. The risk of being caught will only increase.”

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