IRS Retrieving Billions from Voluntary Disclosure Program
Last updated on April 29, 2022
Since 2009, the Internal Revenue Service has retrieved more than $5.5 billion from more than 39,000 taxpayers who held undisclosed bank accounts overseas. According to a report by the Government Accountability Office, the number of people reporting their assets in foreign banks almost doubled from 2007 to 2010. Since 2009, 38,000 accounts have been undisclosed by taxpayers to take advantage of the IRS’ offer of less penalties and punishment for tax evasion under the Offshore Voluntary Disclosure Program (OVDP).
More taxpayers are now in compliance with the IRS through the OVDP as the IRS has consistently been making it difficult for taxpayers to hide their assets overseas. Various laws, including Foreign Bank and Financial Accounts (FBAR), have been used to make it tougher for taxpayer to hide assets in tax havens.
The Huffington Post explains how some taxpayers have been quietly disclosing their hidden assets overseas, “Some taxpayers try to avoid penalties through a technique the IRS calls a quiet disclosure, in which they file amended tax returns that report offshore income from prior years. Others simply declare existing offshore accounts for the first time with their current year’s tax return. If successful, these techniques result in lost revenue for the Treasury and undermine the offshore programs’ fairness and effectiveness.”
Peter Zeidenberg, a partner at the law firm DLA Piper in Washington, said it’s pretty obvious that people are starting to report foreign accounts that probably existed for years.
“I don’t think you get an increase like that from people just all of a sudden getting the idea I’m going to open an account in Switzerland,” Zeidenberg said.
Acting IRS Commissioner Steven Miller said that catching overseas tax dodgers is a top priority of the agency. In a written response to the report, he said, “the agency is working to improve the way it identifies people who are still trying to get around the agency’s disclosure programs.”
The IRS has paused and restarted its Voluntary Disclosure program. To make it more difficult for American taxpayers to hide income overseas, the IRS is also making it mandatory for foreign institutions to disclose certain information about the accounts of American citizens under the Foreign Account Tax Compliance Act.
The Huffington Post quotes an example of UBS AG, “The agency stepped up its efforts in 2009, when Swiss banking giant UBS AG agreed to pay a $780 million fine and turn over details on thousands of accounts suspected of holding undeclared assets from American customers.
The GAO’s report looked at data from the 2009 program. More than 10,000 cases from that program have been closed so far. The median account balance: $570,000.
U.S. taxpayers can hold offshore accounts for a number of legitimate reasons, the report says. They may want to diversify their investments, facilitate international business transactions or get easier access to money while living or working overseas.”
Legitimate account holders need to disclose their assets and pay the taxes on all earned income. With the IRS pursuing tax evaders, the country is sure to benefit more from OVDP in the coming years.
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