7,500 Give Offshore Tax Data to I.R.S.

By BLOOMBERG NEWS
Published: October 14, 2009

More than 7,500 American taxpayers have voluntarily disclosed secret offshore accounts to the Internal Revenue Service, which is cracking down on overseas tax evasion, the agency said on Wednesday.

Those who have come forward have provided information about accounts holding from $10,000 to $100 million since the I.R.S. extended a Sept. 23 deadline for participating in the voluntary disclosure program, said Doug Shulman, the I.R.S. commissioner.

People who come forward voluntarily can avoid criminal prosecution and their identities will remain a secret under federal law requiring tax records to be kept confidential.

The partial amnesty ends Thursday and will not be extended a second time, he said.

Americans with undeclared offshore accounts have been under growing pressure since Switzerland agreed Aug. 19 to hand over data to the authorities in the United States on as many as 4,450 UBS accounts. The move was to settle a lawsuit in which the United States had sought information on as many as 52,000 accounts.

“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers skirt their obligations, Mr. Shulman said in a conference call. “This entire effort is not just about UBS and a single country.”

It is not yet known how much overlap might exist between the names that UBS will eventually provide and the 7,500 people who have come forward to the I.R.S., Mr. Shulman said.

The I.R.S. will open offices in Beijing, Panama City and Sydney in connection with the investigation, which has revealed accounts held in 70 countries and on every continent except Antarctica, he said. The agency also intends to add about 800 employees in the next year and add staff to eight existing overseas offices, including Hong Kong and Barbados.

Congressional report focuses on international tax avoidance and evasion:

  The annual cost to the federal government of offshore tax abuses may reach as high as $100 billion per year, according to a Congressional Research Service (CRS) report released on Sept. 18. (R40623 - Tax Havens: International Tax Avoidance and Evasion) The government loses income tax revenue from individuals and corporations when profits and income are shifted into low-tax countries known as tax havens. Multinational firms are adept at artificially shifting profits from high-tax to low-tax jurisdictions, the report noted. One such method is to shift debt to high-tax jurisdictions. “Since tax on the income of foreign subsidiaries (except for certain passive income) is deferred until repatriated, this income can avoid current U.S. taxes and perhaps do so indefinitely,” CRS said. Individuals can evade taxes on passive income, such as interest, dividends, and capital gains, by not reporting income earned outside the U.S. There are several legislative proposals that address the problem of tax havens and associated evasion issues, including the Stop Tax Haven Abuse Act (S. 506, H.R. 1265; draft proposals by the Senate Finance Committee; two other related measures, S. 386 and S. 569; and an Obama administration proposal. “Most provisions to address profit shifting by multinational firms would involve changing the tax law by repealing or limiting deferral, limiting the ability of foreign tax credit to offset income, addressing check-the-box [a regulation introduced in the late '90s with provisions that were originally intended to simplify questions of whether a firm was a corporation or a partnership and that had unintended consequences for foreign firms], or even formula apportionment,” the report said. The administration's proposals include one to disallow overall deductions and foreign tax credits for deferred income and restrictions on the use of hybrid entities. Individual evasion could be reduced by proposals to increase information reporting and expand enforcement by shifting the burden of proof to the taxpayer and increasing penalties.

IR-2009-84 - IRS ANNOUNCES EXTENSION OF OFFSHORE VOLUNTARY DISCLOSURE PROGRAM DEADLINE TO 10/15/09

IR-2009-84, Sept. 21, 2009

WASHINGTON ─ The Internal Revenue Service today announced a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009.

 

Under special provisions issued in March, taxpayers with these hidden accounts originally had until Sept. 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.

IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

The IRS also announced that there will be no further extensions.

BLOOMBERG, AP AND NY TIMES CLAIM IRS HAS EXTENDED OFFSHORE VOLUNTARY DISCLOSURE PROGRAM UNTIL 10/15/09

Though not yet confirmed in writing by the IRS, Bloomberg, the NY Times and AP have all released stories that the IRS has extended the IRS Voluntary Offshore Disclosure Program deadline for apply to October 15, 2009. The final application date was previously September 23, 2009.  The IRS stated that it has already received 3,000 applications whereas in all of 2008 it only received 80 disclosure filings.

TAX AGENCIES TRACING TAX DODGERS ON LINE

It has been released that many State tax agencies are using social media and other on line social sites to successfully track down individuals who owe taxes and have failed to pay or file their returns.  Though the IRS may not be doing this yet (they are often slow), the success various States have had with this technique will no doubt result in the IRS doing the same in the future.  The Wall Street Journal Article on the techniques used can be found here.

Taxpayers Struggle to Come Clean After IRS To Get Secret accounts of UBS

Taxpayers are starting to pay attention to the existing IRS Offshore Voluntary Disclosure Program described in earlier postings on this blog. The program expires on 9/23/09. Click on title to this piece and go to the most current article on Yahoo. Even if your undisclosed accounts are not with UBS, it is predicted many other offshore and foreign banks will start revealing their US account holders to the IRS soon. Failure to disclose your offshore activities, accounts, etc. can result in huge monetary and criminal penalties. One individual on the list from Malibu California just pleaded guilty for a Swiss account he slowly built up over the years without showing it on his tax return for FBAR annual report of only $ 1 million.

Swiss Reach Deal with IRS - How Many Accounts will be Revealed is Unknown

The Swiss Government reached a deal today with the IRS to reveal an unknown number of the secret bank accounts with UBS AG which are owned by US Citizens. Click on the title to this article to read further information. It is said they have approximately 52,000 Americans with Secret accounts held in that Swiss Bank. The IRS Offshore Voluntary Disclosure Amnesty Program ends 9/23/09.

IRS ANNOUNCES FURTHER CHANGES IN TDF 90-22.1 FILING REQUIREMENTS

On August 7, 2009, the IRS announced as follows:

1. Persons (individuals and entities) with signature authority over, but no financial interest in, a foreign account will have until June 30, 2010, to file IRS Form TD F 90-22.1 for 2008, 2009, and earlier years, with respect to those accounts.

2. Persons (individuals and entities) with a financial interest in, or signature authority over, a foreign commingled fund (e.g. a mutual fund) will have until June 30, 2010, to file IRS Form TD F 90-22.1 for 2008, 2009, and earlier years, with respect to those accounts.

(See IRS Notice 2009-62).

For these two categories of persons, the June 30, 2010 filing deadline supplements the September 23, 2009 deadline for penalty free disclosure of foreign financial accounts established by the Internal Revenue Service for taxpayers who were unaware of the FBAR filing obligation and who did not have sufficient time to gather the information necessary to file by the annual June 30 deadline. All persons with an interest in a foreign financial account who are not covered by Notice 2009-62 must report such account by September 23, 2009.

The Treasury Department intends to issue regulations clarifying the FBAR filing requirements. The administrative relief granted by Notice 2009-62 provides time for the Treasury Department to consider comments, that are solicited in the Notice, on specific issues related to such filing requirements. Please access a copy of Notice 2009-62

OUR OBSERVATION: This would leave one to assume after that date if you have not filed your TDF forms for earlier years, the IRS may no longer accept a reasonable excuse and start imposing the $10,000 or more penalty per year for non-filing if they discover you have not filed. Therefore everyone has a short grace period to file all past unfiled TDF 90-22.1 forms.