News from the IRS yesterday:
The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs. The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.
"Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers," said IRS Commissioner Doug Shulman. "We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system."
Published reports say that this is timed to coincide with new victories by the IRS in cracking Swiss banking secrecy. It's likely that this is a great deal for real tax evaders, who are likely to be caught and jailed if they don't come in on their own. But if history is a guide, it may do little for folks who have foot-faulted their way into non-compliance -- say by marrying offshore or moving out of the country as a child and proceeding to live a normal financial life.
The IRS administration of prior efforts was so abusive to people trying to come clean from minor technical violations -- an approach I call "shooting jaywalkers" -- that the Taxpayer Advocate invoked a rarely-used rule to attempt to make the IRS keep its own promises. Tax Analysts reports ($link):
A chief criticism levied at the predecessors to the 2012 program was that they adopted a one-size-fits-all approach to penalties. Less culpable taxpayers who entered the 2009 and 2011 programs encountered what they believed was an entrenched attitude that all participants were tax evaders. Using the same approach in the 2012 program "will continue to cause angst as the non-willful taxpayer is treated the same as the intentional wrongdoer," [attorney Jeffrey A.] Neiman said.
A sensible and humane approach would allow minor violators to come in from the cold by catching up on, say, three years of taxes without any penalties, while incurring more severe penalties on people who really have been hiding cash from the IRS. So far Commissioner Shulman has not tended towards the sensible and humane.
UPDATE: The TaxProf has a roundup.
UPDATE II: Not everyone is excited about the amnesty. From the comments:
I just want to call your attention to our press release on the IRS announcement yesterday. We think that Canadians (as well as US expats in other countries)should be warned not to enter this new program. (Link: press release from the Isaac Brock Society).So: who is Isaac Brock? From Wikipedia:
Sir Isaac Brock KB (6 October 1769 – 13 October 1812) was a British Army officer and administrator. Brock was assigned to Canada in 1802. Despite facing desertions and near-mutinies, he commanded his regiment in Upper Canada (present-day Ontario) successfully for many years. He was promoted to major general, and became responsible for defending Upper Canada against the United States. While many in Canada and Britain believed war could be averted, Brock began to ready the army and militia for what was to come. When the War of 1812 broke out, the populace was prepared, and quick victories at Fort Mackinac and Detroit crippled American invasion efforts.
Brock's actions, particularly his success at Detroit, earned him a knighthood, membership in the Order of the Bath, accolades and the sobriquet "The Hero of Upper Canada". His name is often linked with that of the Native American leader Tecumseh, although the two men collaborated in person only for a few days. Brock died at the Battle of Queenston Heights, which was nevertheless a British victory.
Sounds like somebody north of the border isn't taking Shulman's war on Canada lightly.
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