Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

OFFSHORE CREDIT CARD SORT-OF AMNESTY

January 28, 2003

Mom and Dad are death on the offshore credit card industry. Over the last year the IRS has enforced summonses on the major credit card companies to get the names and records of holders of credit cards issued through offshore banks. It has subpoenaed retailers whose names show up on the records. Now, it is preparing to go after the holders of the cards and promoters who push the cards for tax-avoidance.

Credit card use is not tax evasion. The attraction of offshore cards to those inclined to tax evasion is that they provide a way to tap funds stashed offshore without creating a U.S. paper trail. Unfortunately for this subset of the tax evasion market, the IRS has demonstrated that the paper trail can be brought back to the U.S.

The IRS has offered a sort-of amnesty to holders of offshore credit cards that want to get right with the tax law. The proposal, set forth in Rev. Proc. 2003-11, applies to users of offshore credit cards and any other "offshore financial arrangements." Taxpayers who own up to these arrangements will be subject to penalties for negligence and substantial understatement of taxes, but not to civil fraud or criminal penalties. In exchange, they will have to rat out the bigger fish by turning over information on the promoters of the arrangements.

Mom and Dad warn that "A taxpayer who does not come forward now, however, will be subject to payment of taxes, interest, penalties and potential criminal prosecution."

      Bookmark: del.icio.us • Digg • reddit