If you thought the Internal Revenue Service was being a little overzealous in its implementation of the Offshore Voluntary Disclosure Program, take a second look at the results. Since 2009, the IRS said recently, more than 54,000 taxpayers had reported foreign assets that they had not reported before. Those filings mean an additional $8 billion in tax collections for the agency. That is enough money, according to one local wag, to add a few people to the call center.
We discussed foreign account reporting in detail in our Feb. 3, 2015, post, "Topical look: the IRS and offshore bank accounts." In general, the federal government does not mind if taxpayers deposit their money abroad as long as they pay their taxes. The IRS streamlined filing procedures and made it clear that failure to pay could result in severe penalties. Plus, thanks to the Foreign Account Tax Compliance Act, the IRS has a much better chance of finding out about undisclosed funds.
FATCA is the law that, among other things, requires foreign financial institutions to report the holdings of American citizens who live or work outside of the U.S. This is the first year foreign governments have had to comply with the reporting requirements; for the IRS, the result was well worth all of the implementation headaches.
Swiss financial institutions sought additional assurances that they would not be prosecuted for their part in concealing taxable accounts from U.S. authorities. The Department of Justice is working on plans with individual institutions that will bring them into compliance but will shield them from prosecution.
The banks may be off the hook, but individual taxpayers have seen criminal fines and been ordered to pay restitution for failing to comply. Civil audits alone have reaped the agency tens of millions of dollars in taxes and penalties.
The IRS has pledged to continue its enforcement efforts with foreign account holders. The agency also warns that the grace period for individual taxpayers will soon come to an end: Now that taxpayers have clearly received the message, the agency will not hesitate to move forward with fines, penalties and even criminal prosecutions.
Source: Accounting Today, "IRS Collecting $8 Billion from Offshore Tax Compliance Push," Michael Cohn, Oct. 16, 2015