New IRS Amnesty Offer for Offshore Accounts

March 24, 2011 (Press-News.org) Americans who have not disclosed large sums of money in foreign offshore accounts have a second chance at tax amnesty.

The Internal Revenue Service is giving taxpayers with foreign bank accounts until August 31 to voluntarily report the accounts and income and avoid tax evasion charges. In exchange, these taxpayers would pay penalties that are lower than what the IRS would usually charge. Although these penalties are higher than those offered during a previous tax amnesty in 2009, the avoidance of prosecution remains a major incentive for a taxpayer to take the deal.

The IRS offered this amnesty program after a previous effort proved to be so successful. The earlier amnesty drew responses from roughly 15,000 people -- far more than the agency's original estimate of 1,000 -- and earned more than $400 million. After that program ended, another 3,000 people came forward, prompting the IRS to offer the second program.

Legality of Offshore Accounts

Americans are allowed to own foreign accounts. The accounts must be reported to the IRS, however, or a taxpayer can face potential prosecution for income tax evasion. Information obtained from taxpayers during the first amnesty program, which targeted Americans who opened offshore accounts provided by Swiss banks, led to numerous prosecutions of those who failed to report their accounts.

What Is Different About This Amnesty Offer

There are significant differences between this amnesty program and the earlier one, particularly in the extent of the penalties that must be paid. In the initial program, participants paid a penalty of five to 20 percent of their aggregate amounts. By contrast, the new program provides for a 25-percent penalty.

This is still below the typical penalty of 50 percent, but substantially more than the penalty in the earlier amnesty. Taxpayers who enter the current amnesty program must pay back taxes and interest going back up to eight years, plus the penalties for delinquency.

The size of the account makes a difference in this amnesty. Those with accounts of less than $75,000 are subjected to a lower 12.5-percent tax. Though the IRS is focusing on taxpayers with Swiss bank accounts, the agency is also targeting accounts held in the Mideast and the Far East.

In the first program, taxpayers had until a certain date to declare their intentions to report their accounts. This time, it's not merely a matter of declaring an intention. Instead, the IRS is requiring voluntary participants to submit all their paperwork by the August 31 deadline. Taxpayers who don't voluntarily participate not only could face criminal prosecution, but also increased penalties and fines.

How a Skilled Tax Lawyer Can Help

Anxiety about whether to come forward under the new amnesty initiative is understandable. The penalties are significant and considerable documentation must be gathered before the August 31 deadline. But it is important to understand that the IRS investigations are continuing, driven by information gained in the first amnesty and the government's pressing need for additional revenue. In short, disclosure is the order of the day.

That is why anyone who has not paid taxes on an offshore account should contact an experienced tax attorney. A tax lawyer with knowledge of the issues can help you put your best foot forward and resolve the issues in a way that enables you to move forward.

Article provided by Law Offices of Jeffrey S. Freeman
Visit us at www.freemantaxlaw.com