TAX ALERT – New IRS Amnesty for Offshore Accounts

Insights December 22, 2010

In his speech before the 23RD Annual Institute on Current Issues in International Taxation in Washington, DC on December 9, 2010, IRS Commissioner Douglas Shulman said that the IRS is “seriously considering” a new partial amnesty program for taxpayers who report secret offshore bank accounts.

Shulman said that the IRS may repeat a voluntary disclosure program such as the one that drew nearly 15,000 taxpayers in 2009. Since then, another 3,000 voluntary disclosures  were received from individuals with bank accounts from around the world

According to Shulman, “Collecting additional revenue for past misdeeds – as important as that may be – is not the only important consideration here. It is equally important that we are bringing 18,000 U.S. taxpayers, and counting, back into the system…back into compliance… so they properly report and pay their taxes for years to come.”

“Given its success, we are seriously considering another special offshore voluntary disclosure program.

Commissioner Shulman made clear that there will be fundamental differences in any subsequent amnesty program: “To be fair to those who came in before the deadline, the penalty – and thus the financial cost to participate – will increase”.

It is  expected that the IRS will make the terms of the new program available to those who have already come forward after October 2009 when the first offshore voluntary disclosure program expired.

Shulman said that details regarding the second amnesty program would be published soon.

The IRS’ recent actions with regard to international tax evasion has had wide ramifications worldwide. For example, the U.S. Justice Department started an investigation of U.S. taxpayers with accounts at HSBC in Singapore and India, while one of Israel’s largest banks is demanding that its clients either declare that they are not U.S. citizens or if they are U.S. citizens that they disclose their accounts to the IRS.

If you or your client are considering participating in the voluntary disclosure procedure regarding foreign bank accounts, you or your client should consult experienced tax counsel to understand the benefits and risks of the voluntary disclosure process. Rimon Law Group has significant experience regarding the IRS voluntary disclosure practice, and can assist you or your client in navigating the voluntary disclosure process.

The content of this tax alert is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.