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IRS Offshore Disclosure Processes Should Improve: TIGTA

by Mike Godfrey,, Washington

22 June 2016

The Internal Revenue Service (IRS) needs to improve its efforts to address the noncompliance of US taxpayers who are denied access to or withdraw from its Offshore Voluntary Disclosure Program (OVDP), according to a report released by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA pointed out that those noncompliant taxpayers who use offshore accounts to hide assets and income outside the United States in an effort to evade their federal tax obligations, and who could face significant penalties and possible criminal prosecution if discovered by the IRS, are allowed, through the OVDP, to disclose those undeclared offshore accounts and related income, while mitigating penalties.

The audit was initiated by TIGTA to assess how well the IRS is managing the OVDP to improve taxpayer compliance. It found that a significant number of taxpayers, who were either denied or withdrawn from the OVDP, were not assessed by the IRS for potential Reports of Foreign Bank and Financial Accounts (FBAR) delinquent penalties.

The report also identified internal control weaknesses that led to delayed or incorrect processing of OVDP requests through poor communication among IRS functions involved in the OVDP. These weaknesses included the use of separate inventory controls and two separate IRS addresses to which taxpayers send correspondence, which contributed to the incorrect processing of some taxpayer disclosure requests.

"In an increasingly global economy, it is important that the IRS ensure that taxpayers with foreign-derived income comply with their US tax obligations," said Russell George, the TIGTA.

TAGS: individuals | compliance | Offshore | tax | tax compliance | Internal Revenue Service (IRS) | tax authority | offshore | United States | penalties | Tax

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