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Offshore Accounts©2007
Robert E. McKenzie
On January 14, 2003 Internal Revenue Service officials announced the launch of an initiative aimed at bringing taxpayers who used "offshore" payment cards or other offshore financial arrangements to hide their income back into compliance with tax law. Complete details on this initiative and eligibility can be found in Revenue Procedure 2003-11.
Over the past two years the IRS has summons records from Visa, MasterCard and American Express for records concerning the use by Americans of cash debit cards to access offshore bank accounts. The credit card companies have provided information concerning over 1 million cash debit cards for foreign accounts. Many of the identified taxpayers have failed to disclose their foreign accounts on their tax returns as required by law. While an exact figure of the number of taxpayers involved remains uncertain, IRS officials believe the use of offshore credit, debit and charge cards to evade payment of U.S. taxes involves a substantial number of taxpayers. Dozens of cases have already been referred to Criminal Investigation for possible action. The initiative is designed to give taxpayers who voluntarily correct their returns a chance to avoid IRS enforcement.
Under the Offshore Voluntary Compliance Initiative, eligible taxpayers who step forward will not face civil fraud and information return penalties. However, taxpayers will still have to pay back taxes, interest and certain accuracy or delinquency penalties.
Eligible taxpayers who come forward will also avoid criminal prosecution based upon application of the revised voluntary disclosure practice. A taxpayer who does not come forward now, however, will be subject to payment of taxes, interest, penalties and potential criminal prosecution.
"It's time for those involved in abusive avoidance schemes to make things right," said Acting IRS Commissioner Bob Wenzel. "Our investigators have gathered valuable information about offshore payment cards and offshore financial arrangements in recent months. With today's action, the IRS is sending the clear signal that those involved in these offshore schemes should come forward now on their own."
The Voluntary Compliance Initiative reflects an attempt to bring taxpayers back into compliance quickly while simultaneously gathering more information about the promoters of these offshore schemes. As part of the request to participate, the taxpayer must provide full details on those who promoted or solicited the offshore financial arrangement. The last day a taxpayer can apply is April 15, 2003.
The IRS will use this information to pursue promoters and to obtain information about taxpayers who have avoided tax through the use of offshore payment cards or other offshore financial arrangements and who do not come forward under the Voluntary Compliance Initiative. Those who promoted or solicited others to avoid tax by using offshore payment cards and other domestic and offshore abusive schemes are not eligible to participate in the Voluntary Compliance Initiative.
It is not illegal to have a credit, debit or other payment card issued by an offshore financial institution. However, such cards can provide easy access to offshore funds and accounts in tax haven or bank secrecy countries that allow income to be hidden. U.S. citizens must pay tax on their worldwide income.
Under the Voluntary Compliance Initiative, eligible taxpayers will have to file or amend their returns and pay interest and certain civil penalties, as well as the tax. The interest and penalties depend on the amount of the unpaid tax liability, the years involved, whether a return was inaccurate or if a return should have been filed and was not.
02/09/2007
