Some reports from an IRS watchdog have indicted the federal tax agency for certain practices regarding offshore account disclosure. An arm of the IRS known as the Taxpayer Advocate Service has been responsible for reporting these kinds of voluntary disclosure policies aimed at wealthy Americans. According to the watchdog report, the IRS has failed to cap penalties in cases of this kind of disclosure.
A standard practice of the IRS has been to reduce the penalties for those who willingly disclose that they have hidden offshore bank accounts. These taxpayers have often accumulated this wealth from overseas jobs or from family inheritances. The discovered lack of penalty caps has been linked to higher-than-necessary tax payments for some American taxpayers. Some experts believe that this lack of consistency could undermine the IRS’s credibility in the future if the agency implements similar types of programs.
Prior IRS voluntary disclosure programs have netted over $4.4 billion USD in unpaid taxes from these kinds of offshore accounts over a recent two-year period. A renewal of this disclosure is expected to bring in more names of wealthy Swiss bank account clients who have avoided their obligatory tax payments.
Information from this IRS watchdog report reveals that the ordinary cash penalty is supposed to be a maximum of $10,000 for account holders who accidentally fail to report these assets. Willful withholding of information on foreign bank accounts can carry a penalty of up to 50% of the highest account balance for each covered year of tax nonpayment.
- More IRS Audits Planned in 2012 (2011taxes.org)
- The IRS is Making Immense High-Tech Strides (2010taxes.org)