Shulman Declares IRS Offshore Amnesty An Early Success

by Leroy Baker, Tax-News.com, New York

17 April 2009

The US government's new 'amnesty' on undisclosed offshore bank accounts is yielding promising results for the Internal Revenue Service, according to the agency's chief, Doug Shulman.

IRS Commissioner Shulman revealed during a speech to the National Press Club in Washington recently that a new program designed to encourage offshore account holders to come forward of their own volition in return for a more lenient penalty regime has resulted in a "real increase in voluntary compliance."

Shulman announced to reporters on March 26 that a partial amnesty program being launched by the agency will see account holders avoid heavy penalties and possible criminal prosecution.

Under the new scheme, the IRS will impose a penalty of 20% on the highest single account balance held over the past six years, and will agree not to initiate criminal proceedings against taxpayers if they volunteer information on their offshore accounts and earnings before they are audited.

The program will run for the next six months, and will also help the IRS to develop useful 'intelligence' not only on taxpayers with offshore accounts and other assets, but also on the banks and institutions that help manage their offshore financial affairs. The IRS undertook a similar initiative in 2003 when it collected USD170m in unpaid tax and penalties.

However, Shulman told the Press Club audience that the IRS will step up criminal proceedings against those who refuse to come clean about their financial affairs with the government.

Currently, if IRS investigators discover during the course of an audit that a taxpayer has not declared money held in offshore accounts or income accruing from offshore assets, they can impose penalties of up to 50% of the balance of an undeclared account for each year that it remained undisclosed, in addition to interest.

Shulman informed the Senate Permanent Subcommittee on Investigations on March 4 that he had already increased the number of audits in this area over the preceding five months, and that he intended to hire more investigators with international expertise.

The UBS affair, which erupted last year, has elevated the subject of wealthy individuals' offshore tax arrangements in the public consciousness, and the Obama administration has made the closing off of offshore tax planning avenues a key tax policy goal since coming to office in January.

"It is of paramount importance to our system of voluntary compliance with the tax law that citizens of this country have confidence that the system is fair," Shulman told Senators. "We cannot allow an environment to develop where wealthy individuals can go offshore and avoid paying taxes with impunity."

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