IRS offshore compliance initiative comes to an end; IRS touts its success

The IRS's offshore compliance initiative came to a close on October 15, with at least 7,500 U.S. taxpayers responding to the initiative, according to IRS Commissioner Douglas H. Shulman. The initiative will not be extended. Shulman revealed that there had been increasing interest in the initiative by taxpayers over the last month. He noted that applications are still coming in, and that the IRS will give high priority to these applications and will be processing them over the next several months.

Compliance initiative

The IRS's voluntary offshore compliance initiative was announced on March 23, 2009, with an original deadline of September 23, 2009, until it was extended until October 15. The initiative is aimed at taxpayers with foreign bank accounts who have not been reporting the income from the accounts or the assets in the accounts. Participants must agree to pay all back taxes for six years, plus interest and penalties, as well as an additional payment of 20 percent of the account's highest balance. By participating in the initiative, taxpayers avoid possible criminal prosecution, a 75 percent fraud penalty and a potential liability of 50 percent of the account's highest balance.

Accounts

Shulman said it is too early to speculate on how much revenue the initiative will garner, but indicated that the size of the accounts ranged from $10,000 to $100 million. According to Shulman, there have been "an unprecedented number of disclosures" and "big numbers are involved."

Participants have accounts in more than 70 countries, said Shulman. Some accountholders have multiple accounts or accounts in multiple countries. Many used trusts or corporations as nominees to hide ownership of the accounts. However, other taxpayers were previously more unaware than anything else of the reporting requirements, having established such family accounts years ago in their former countries before immigrating to the United States. Speculation remains whether the IRS will provide individuals in that group who had missed the October 15 deadline further incentives to come forward.

Shulman has not said how many cases have been processed or when processing will begin.