IRS’ Offshore Voluntary Disclosure Program Collects $5.5 billion

Last updated on April 3, 2014

Hiding income overseas is an all too common way some taxpayers and businesses evade taxes. The 2013 IRS Dirty Dozen Tax Scams lists ‘hiding income offshore’ as the four most common tax scam in the country.

Over the years, many taxpayers have been found guilty of hiding their income in undisclosed overseas banks. To assist taxpayers in complying with the tax laws, the IRS began the Offshore Voluntary Disclosure Program (OVDP) under which taxpayers with unaccounted money in overseas banks could disclose their assets without the danger of prosecution. However, a uniform penalty is charged for the non-compliance.

Since 2009, the IRS has collected $5.5 billion from around 38,000 taxpayers who participated in the program. Due to its success, at the beginning of 2012, the IRS reopened OVDP. The program reduces the work the IRS does with examining, discovering and penalizing taxpayers who hold undisclosed overseas accounts. The program is open for an indefinite period or until the IRS decides to close it.

It is becoming increasingly difficult for taxpayers to hide their income offshore because of the IRS’ recent initiatives. New foreign account reporting requirements make it hard to hide income overseas. The Foreign Account Tax Compliance Act (FATCA) has also contributed in taxpayers using OVDP to get back into compliance.

Tax evasion through holding overseas bank accounts is a crime that is punishable under law. The new initiatives by the IRS are expected to bring back millions of dollars in unpaid taxes.