$380 Million Spent By The IRS Yields Limited Results While Fighting Offshore Tax DodgersOffshore Account Update
Posted on August 31, 2018 | Share
The Internal Revenue Service has been trying a number of tactics in recent years to identify U.S. affiliated taxpayers who keep funds offshore in an effort to avoid their responsibilities to pay taxes on income earned. Because of the aggressive crackdown by the IRS on offshore investments, any Americans with undeclared accounts offshore should consult with a New Jersey international tax attorney in order to obtain help protecting their assets and exploring options to reduce the risk of IRS prosecution.
While the IRS has been working hard to attempt to find investors with undeclared foreign accounts, a new report from the Inspector General has found that one program may not have worked very well. The new report suggests that the IRS make changes to the techniques they are using, and these changes could result in more effective enforcement of tax laws going forward – which means more offshore investors could be at risk.
The IRS Has Spent Millions with Limited Success
The report from the Inspector General was specifically focused on how effective certain provisions of the Foreign Account Tax Compliance Act (FATCA) had been in helping the IRS to identify accountholders with undeclared foreign accounts.
FATCA was passed in 2010 and it imposed new reporting requirements on offshore financial institutions who do business with U.S. customers. Under FATCA, banks would need to provide information on most offshore accounts to the IRS so that the IRS would be aware of funds in these accounts even if taxpayers did not declare them as required.
The hope when FATCA was passed was that taxpayers would become afraid that their financial institutions would turn over their information to the IRS – and would thus voluntarily disclose their information about previously undeclared offshore accounts themselves and pay any unpaid taxes and penalties.
However, it did not work this way. Instead, the Inspector General found that the IRS spent approximately $380 million as part of the FATCA program. The IRS reportedly received mountains of paperwork from foreign financial institutions, much of which proved to be difficult to validate and potentially inaccurate.
The inspector general also determined that, in spending time dealing with all of this paperwork, tax enforcement agencies neglected some of their other responsibilities. Further, many Americans were found to have renounced their U.S. citizenship in response to the burdensome FATCA requirements. This could result in a future loss of tax revenue that these taxpayers might have otherwise paid had they remained citizens.
The IRS has questioned the findings of the Inspector General, but has agreed to make changes going forward to their enforcement processes. Taxpayers with undeclared offshore funds need to be aware that IRS techniques and tactics are changing and should make certain they understand how to protect themselves from coming under investigation by the IRS.
A New Jersey international tax attorney can provide insight into your options if you are a taxpayer with foreign financial accounts and you want to explore your options for protecting your assets and avoiding potential adverse action by the IRS. Contact attorney Kevin Thorn today to learn more. Call 201-842-7696.