More On Tax Planningfrom The Advisor's Professional Library
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- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
Getting straight with the IRS is gaining momentum among Americans who have previously evaded taxes by not disclosing offshore assets and income.
The motivation is a much toughened approach to global tax evasion and a two-part program that gave taxpayers with undisclosed offshore assets an opportunity to square their accounts with the IRS.
Since 2009, some 30,000 taxpayers have made disclosures as part of the IRS’s Offshore Voluntary Disclosure Program, including 12,000 in 2011, the agency reported Thursday.
The first disclosure program, which ended in October 2009, proved so successful that the IRS initiated a 2011 follow-up program that ended Sept. 9.
The IRS said the 2009 program led to about 15,000 voluntary disclosures and another 3,000 applicants who came in after the deadline, but were allowed to participate in the 2011 initiative. The agency has closed about 80% of these cases, and collected $2.2 billion in taxes, interest and penalties. These cases represented bank accounts in 140 countries.
The agency is now starting to process applicants in the 2011 program, and so far has collected $500 million in payments.
The new program was more onerous that the original one, penalizing those who did not come forward before the October 2009 deadline. Participants in the 2011 initiative have to pay taxes and back interest for up to eight years, as well as accuracy-related or delinquency penalties.
Moreover, a new penalty framework requires individuals to pay a penalty of 25% of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the years 2003 to 2010. This compares with a 20% penalty covering up to a six-year period in the first program.
“We have changed the risk calculus,” IRS commissioner Doug Shulman said in a statement. “Americans now understand that if they try to hide assets overseas, the chances of being caught continue to increase.”