Thursday, January 29, 2015

Unreported Offshore Accounts Remains on IRS Dirty Dozen" List (1/29/15)

The IRS released IR-2015-09 (1/28/15), here, which I quote in full:
Hiding Money or Income Offshore Among the “Dirty Dozen” List of Tax Scams for the 2015 Filing Season 
IR-2015-09, Jan. 28, 2015 
WASHINGTON — The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season. 
"The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen. “Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order.”
Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 50,000 disclosures and we have collected more than $7 billion from this initiative alone.  The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions. 
The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs.  Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil. 
Through the years, offshore accounts have been used to lure taxpayers into scams and schemes. 
Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes. 
Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them. 
Hiding Income Offshore 
Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose. 
The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases. 
While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution. 
Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult. 
At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.


  1. The voluntary disclosure program is important-- I'm surprised they considered closing it once. A lot of tax mistakes are simply that: mistakes. Penalizing people for realizing a problem later isn't going to help, it's going to stop people from reporting their tax discrepancies. |

  2. "Hiding" means to take something where it is vicible and putting it where it is not seen. I learned that back when I first played hide and seek in Kindergarden.
    Now, if you had money in the country you lived in, earned there, then came to the US you didn't hide the money; you simply left it where it was.
    Yeah I know that the press release has a disclaimer that there are legitimate reasons for having money outside the USA, but the tone plays the same old broken record we've been hearing for years.
    About those 50,000 (more like 40,000 in the latest TAS report.) The vast majority, all except for about 3,000 UBS clients and 300 CS clients, were truly voluntary: people coming forward on their own and not due to any IRS investigative or treaty request action. In other words the IRS would have no clue about these accounts unless the people had come forward.
    Now, in addition to those 50,000 there have been maybe 500,000 quiet disclosures. I'm basing this on the jump in FBARs from around 200,000 per year back in 2002 (that figure also is from the latest TAS report) to 700,000 a couple of years ago (maybe more by now.)
    And ... with an estimated 6 million Americans residing abroad, if you take out 2 million (children, aging hippies and others with under $10K in bank and securities accounts) you're left with 4 million Americans overseas who should be filing FBARs. That doesn't even include US residents with foreign accounts.
    Not much to congrratulate the IRS for. And, I might add, after seeing how the early OVDP participants were treated (and still are) as guilty unless proven innocent, most terrified from opting out nd paying huge penalties, it's no surprise that there have been only 50,000 (or 40,000) OVDP disclosures.
    And you're right, hiding money and assets in the US carries far smaller penalties.

  3. Article about "OVDI for Swiss banks." Seems banks are experiencing the same as individuals in OVDI: huge legal fees, years of uncertainty.

  4. Switzerland Remains Offshore Wealth Magnet....

  5. Jack for some reason the IRS fails to include itself on its list of abusers, scammers, and cheats.

    there is an even more concerning “dirty dozen” list that the IRS wants the public to forget.

    been almost two years since the news broke that the IRS had been
    targeting Tea Party, pro-Israel, and other conservative groups — and a
    scandal erupted. Here are just a select few ways the IRS has mismanaged
    its problems and shown itself to be incompetent and untrustworthy:

    1. Internal emails show these groups were targeted because IRS employees thought them “icky.”

    2. Other emails showed that Lois Lerner was conspiring with the Department of Justice to prosecute conservative groups on trumped-up charges.

    3. Lerner herself refused to testify to investigating committees and was held in contempt.

    4. That didn’t stop her from defending herself to Politico magazine and complaining about being “harassed” for her role.

    5. Then, the IRS claimed it had lost the most crucial batch of Lerner’s emails.

    6. Oh yeah, and her Blackberry was destroyed too.

    7. Six months later, the Tax Inspector General may have found those lost emails. (Still no word yet on what was in them.)

    Scandal events aside, the IRS showed its general incompetence in many other ways.

    8. IRS workers campaigned for political candidates while on the job.

    9. The agency awarded bonuses to its own employees who owed taxes.

    10. Guess who was audited ten times more often than the average taxpayer? Supporters of the Tea Party.

    11. The IRS illegally shared confidential, protected information with the FBI, the White House, and more.

    12. And it has the nerve to constantly ask for a raise.

    It all adds up to an agency that doesn’t merit the trust of taxpayers.

    at least three years, the IRS has egregiously wronged this nation —
    including at least one person on a director level. Yet, it still hasn’t
    apologized or come clean.

    despite all the excuses and diversions offered by the IRS, the American
    people are still saying what Senator Ron Johnson expressed: “I smell a
    rat. I smell a number of rats, and that’s what we are going to get to the bottom of.”

  6. Guest,

    I think this is an imagined problem. At the end of the day, there is no scandal there. The millions of dollars that the House Republicans have spent trying to find one has not succeeded. Since they could not find one, they imagined one and based solely on imaginations claimed a scandal. Well, this is the old McCarthy list of communiists in the State Department.

    Since this is a tax crimes blog,it is helpful to note that the Republicans could have gotten to the truth at the beginning simply by giving Lois Lerner immunity. If there were the real possibility of a scandal, the responsible thing to do would have been to give her immunity, so that the country could know the truth. The problem, of course, is that the Republicans know there is no scandal. Giving her immunity would have proven no scandal. So, given that they know there was no scandal, by not giving her immunity and skewing the evidence, the Republicans can claim there was a scandal.

    But, of course, the Republicans also claim that,if they were to give Lois Lerner immunity, Obama would have her murdered so that she could not spill the beans on the scandal. So, in their fervid imaginations, they are keeping her alive by not giving her immunity. Thanks, guys.

    Jack Townsend

  7. If there was no scandal then Lois Lerner would not have done anything wrong. So, why would she need immunity?
    Also, the many computers that crashed seems very improbable. It sounds like a "dog ate my homework" defense.
    It seems to be the tactic of US law enforcement to give one criminal immunity if they are willing to give evidence to convict other criminals. One, of many, problems with this approach is the question of whether the first criminal can be believed. They have a serious motivation to provide testimony that would please the prosecution in order to secure their immunity. Plus, given that they are admitted criminals, their honest is questionable.
    This kind of testimony is not admissible in the courts of many other countries.

  8. Andre, your question as to why she would need immunity if she were innocent is a good question and one often asked by persons unfamiliar with our system. Given the politically charged atmosphere, the forum in which she invoked the Fifth was more an inquisition than a search for truth. The truth would have been distorted and made innocent acts look criminal. And then, again in a politically charged atmosphere, the distortions may have led to criminal prosecution where ultimately, in our imaginations, the jury would separate the distortions from the truth we hope but we are never sure. Hence, she had a valid Fifth Amendment to claim wholly apart from her innocence. As our courts have said many times, the Fifth Amendment protects the innocent as well as the guilty. So, I would dare say that most seasoned attorneys advising someone in Ms. Lerner in that environment would have advised her to take the Fifth Amendment wholly apart from innocence or guitt.

    The tougher question for most attorneys is whether, in an environment where the questioner is truly just seeking the truth (rather than promoting an agenda), the attorney would still advise the innocent to take the Fifth. That is a tougher case and many attorneys might still advice from an abundance of caution. But, that is not the case we have here.

    Now as to immunity, the Committee's goal (driven by its Republican leadership) was to get to higher ups and the President. If indeed higher ups and the President were implicated, Ms. Lerner would know that. It is far more important to the public that that "truth" come out than that Ms. Lerner be convicted. Indeed, I would argue that, given the charges that were bantered about by Republicans, it is far more important that the public know if higher ups and the President were not involved. Either way, that is the important truth here -- not whether Ms. Lerner goes to jail and we never know the whole truth. The way that is done in our system is to grant the fairly low level person (Ms. Lerner did not have that high a position) immunity and the truth then comes out. So, if the Republicans are interested in delivering the truth to the public, they just could have given her immunity. They chose not to. I believe that the reason they chose not to was that their investigation (much of it in the public domain because they leaked it and disclosed some of it) showed that, at the end of the day, the original narrative -- misguided bureaucrats at worst -- was the truth. That truth did not further their political agenda, whereas their political agenda was served by years of pillorying Ms. Lerner and hinting that she and the President and all in between were guitly but successfully hiding their guilt.

    Jack Townsend

  9. Most of those who have come forward (and whom we know something about) did NOT have "nominee entities and then using debit cards, credit cards or wire
    transfers to access the funds. Others have employed foreign trusts,
    employee-leasing schemes, private annuities or insurance plans."

    Nor were many "hiding" money or income, just failed to report it.

    And over 90% of OVDI participants (and, by definition, 100% of QD/GF) came forward on thir own and not due to any IRS investigation.

    Furthermore, many of the nonwillful in OVDI learned the hard way how they were rewarded for coming forward, i.e, scared into paying 27.5%.

  10. Jack, I have no comment as whether "there is a there," in this investigation, but would be interested in your thoughts (since this is a tax crimes blog) as to whether the fact that the treasury inspector's general confirming that they are looking into potential criminal activity into this means anything, is a new development or is simply reporting on an obvious step in a TIGTA investigation.


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