IRS Steps Up Crackdown On Offshore Accounts

Vanessa Doctor

16 August 2010

The Internal Revenue Service is stepping up crackdown efforts on US citizens who try to escape taxes by placing their money into foreign bank accounts, the Buffalo News writes. "They should just come forward, get clean," Teia Bui, a Clarence lawyer who specializes in financial reporting cases, was quoted as having said.

Taypayers who have accounts in foreign banks are required to file a foreign bank account reports disclosure form with the IRS and pay the corresponding taxes on those holdings. The IRS is reportedly focusing its attention on taxpayers who have $10,000 or more on their international accounts. Penalties for violators, the regulator said, could reach $100,000 or half of the amount in the account for every year. Non-willful violations are not exempted and could lead to a $10,000 per year fine.

The more stringent hold over taxpayers' activities came after Swiss banking giant UBS admitted to criminal wrongdoing a few years ago involving offshore services sold to US citizens that consequently allowed them to evade taxes. UBS paid a painful $780 million fine in 2009 as settlement and the Swiss government had then agreed to open up information on up to 4,450 US accounts with its banks.

The US, along with other G20 major industrialised nations, is waging an increasingly vocal campaign against what it sees as damaging offshore financial jurisdictions, aiming to stem the outflow of revenues at a time when many of these governments are in heavy debt. Defenders of international financial jurisdictions, such as the Washington DC-based Cato Institute, have argued that so-called tax havens encourage governments to keep their taxes down and that the assault on offshore centres represents a form of protectionism.

The IRS' move had spurred increased disclosure activity among US citizens over the last year, which reportedly went up 60 per cent from 2008. There are those, however, that choose to remain obscure and the regulator says it is committed to bringing these out in the open. The deadline for this year's filing of reports was 30 June, the report added.