Offshore compliance programs net IRS $8 billion

The U.S. Internal Revenue Service has collected more than $8 billion from its offshore voluntary disclosure program since its launch in 2009. More than 54,000 taxpayers have come forward to disclose previously undeclared offshore accounts to the IRS to take advantage of reduced penalties and fines. 

The IRS reminded U.S. taxpayers with undisclosed offshore accounts that “they should strongly consider existing paths established to come into full compliance with their federal tax obligations.” 

Both the Offshore Voluntary Disclosure Program (OVDP) and the streamlined procedures enable taxpayers to correct prior omissions and meet their federal tax obligations while mitigating the potential penalties of continued noncompliance. There are also separate procedures for those who have paid their income taxes but omitted certain other information returns. 

“The groundbreaking effort around automatic reporting of foreign accounts has given us a much stronger hand in fighting tax evasion,” said IRS Commissioner John Koskinen. “People with undisclosed foreign accounts should carefully consider their options and use available avenues, including the offshore program and streamlined procedures, to come back into full compliance with their tax obligations.” 

Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and partner jurisdictions, automatic third-party account reporting began this year, making it less likely that offshore financial accounts will go unnoticed by the IRS. 

In addition to FATCA, the Department of Justice’s Swiss Bank Program has resulted in more than 100 non-prosecution agreements with Swiss financial institutions that facilitated tax evasion by U.S. taxpayers. As part of these agreements, banks provide information on potential noncompliance by U.S. taxpayers, the IRS said. 

The U.S. tax authority warned that potential civil penalties increase substantially if U.S. taxpayers associated with participating banks wait to apply to the offshore voluntary disclosure program to resolve their tax obligations. 

The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution. 

The streamlined procedures, initiated in 2012, were developed to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts but whose circumstances substantially differed from those taxpayers for whom the OVDP requirements were designed. 

More than 30,000 taxpayers have used streamlined procedures to come back into compliance with U.S. tax laws. Two-thirds of these have used the procedures since the IRS expanded the eligibility criteria in June 2014. 

Separately, based on information obtained from investigations and under the terms of settlements with foreign financial institutions, the IRS has conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions. 

The IRS remains committed to stopping offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the agency continues to pursue cases in all parts of the world. 

John Koskinen
John Koskinen