Today was supposed to have been the drop-dead date for Americans with hidden offshore bank accounts. Just days before the Sept. 23 deadline, however, the IRS gave these account holders, some of whom have hidden their accounts for decades, until Oct. 15 to report them.
There are many reasons to grant the extension. Apparently, there are so many tax cheats coming forward that the tax lawyers are overwhelmed and are unable to handle the paperwork load before the deadline.
U.S. account holders have been given adequate time to report their holdings, and they have had plenty of time to learn the rules. On its Web site, the IRS provides all the information that offshore account holders need to know to comply with U.S. law.
Taxpayers must report the existence of any foreign account with an aggregate value of more than $10,000 at any time during the year. And, as everyone who earns income outside of the United States -- whether through employment abroad or through a mutual fund that owns foreign shares -- should know, the U.S. asserts its tax jurisdiction on all income, wherever earned.
Taxpayers must report the existence of any foreign account with an aggregate value of more than $10,000 at any time during the year. And, as everyone who earns income outside of the United States -- whether through employment abroad or through a mutual fund that owns foreign shares -- should know, the U.S. asserts its tax jurisdiction on all income, wherever earned.
Perhaps a bit of leniency is needed. IRS Commissioner Doug Shulman is intent to track down not only tax evaders but the tax promoters such as banks who help the affluent hide their wealth offshore.
In his March 31 testimony before the House, Shulman said, "It is outrageous that wealthy individuals are hiding assets overseas and unlawfully avoiding U.S. tax."
In his March 31 testimony before the House, Shulman said, "It is outrageous that wealthy individuals are hiding assets overseas and unlawfully avoiding U.S. tax."
To encourage compliance, Shulman made it clear that those who turn themselves in will be treated with greater leniency than those the IRS uncovers on its own. If a taxpayer comes to the IRS and admits to previous errors, he or she will pay back-taxes and interest for six years, plus either an accuracy or a delinquency penalty on all six years.
The taxpayer also will pay a penalty of 20 percent of the amount in the foreign bank accounts in the year with the highest aggregate account or asset value. Without the special voluntary compliance initiative, account holders could face a penalty of up to 50 percent of the highest annual balance in each account for each of the past three years.
The taxpayer also will pay a penalty of 20 percent of the amount in the foreign bank accounts in the year with the highest aggregate account or asset value. Without the special voluntary compliance initiative, account holders could face a penalty of up to 50 percent of the highest annual balance in each account for each of the past three years.
The IRS reduces to 5 percent the penalty for account holders who may have inherited these offshore accounts but never made additional deposits and paid all taxes due on the account.
The commissioner warned that those who continue to evade taxes will face the full civil and criminal penalties available. These include the maximum penalty for the willful failure to file the Report of Foreign Bank and Financial Account (known as an FBAR), and the fraud penalty. The penalties can include prison time.
There are clear benefits of voluntary compliance. The IRS shows on its Web site, a taxpayer who voluntarily reports the existence of a previously hidden account of $1 million that earned $50,000 interest each year, will pay a total penalty and fine of $380,000.
By contrast, if the IRS finds out about the account, the account holder faces $2,306,000 in various penalties and the possibility of criminal prosecution. The criminal penalties are not trivial. Failing to file an FBAR subjects a person to a prison term of up to 10 years and criminal penalties of up to $500,000.
By contrast, if the IRS finds out about the account, the account holder faces $2,306,000 in various penalties and the possibility of criminal prosecution. The criminal penalties are not trivial. Failing to file an FBAR subjects a person to a prison term of up to 10 years and criminal penalties of up to $500,000.
The IRS is to be commended for encouraging tax cheats to come forward. The program appears to be working, with more than 3,000 taxpayers coming forward so far this year, compared with fewer than 100 for all of 2008 when George W. Bush was president.
source: Politics Daily contributor Joan M Weiner http://www.politicsdaily.com/2009/09/23/irs-gives-suspected-ubs-tax-cheats-more-time-to-confess/Get 30 days of free traffic analysis simply by going to Web-Stat: http://www.web-stat.com/?id=2955
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