IRS is Fighting Serious Tax Evasion Seriously

Last updated on April 30, 2013

With the Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP) under its belt, the IRS is seriously battling tax evasion and using soft and aggressive tactics to increase tax compliance.

Tax evasion by hiding money in overseas accounts is widespread. It has been listed fourth in IRS’ 2013 Dirty Dozen Tax Scams list. Taxpayers hide income in overseas bank accounts, brokerage accounts, or nominee entities to evade paying taxes in the US. They use their debit cards, credit cards, or wire-to-wire transfers to access their funds, so the IRS finds it difficult to track these transactions because the bank accounts are in a foreign country.

FATCA is the answer to this problem. Under this act, foreign banks will be required to share certain information about the bank accounts of Americans. This makes it difficult for US taxpayers to hide income in overseas banks. It also gives the IRS access to the financial details of American in order to take enforcement actions against evaders.

The IRS also works with the Department of Justice (DOJ) to investigate and track taxpayers with undisclosed accounts overseas. The punishment for tax evasion is strict and includes heavy penalties with possible imprisonment.

Taxpayers who need to hold accounts in overseas banks are required to disclose all of their assets and income for tax filing purposes. If the accounts are legitimate and comply with tax laws, taxpayers can maintain their overseas accounts safely.