Tax authorities in the US have been told to step up the hunt for taxpayers with overseas accounts after a report revealed how lucrative the move could be for the government.
The report lists a number of recommendations from the Government Accountability Office (GAO) which could see many more taxpayers finding themselves facing hefty fines or even jail for failing to disclose offshore assets.
The GAO focused on so-called ‘quiet disclosures’ used by taxpayers to alter previous years’ tax returns to avoid Offshore Voluntary Disclosure penalties.
The move could see US citizens and expats with offshore accounts changing their financial strategy as the Internal Revenue Service (IRS) takes a more aggressive stance in dealing with offshore accounts.
One reason for the move is that of the 10,000 taxpayers reported from 2009 in the voluntary disclosure programme, the average account balance was £367,000.
$1 million dollar fines
Those making disclosures then forked out £3.5 billion in penalties and taxes, which highlights just how lucrative the programme has been.
Around 6% of those paying penalties each handed over more than £650,000 – which is about $1 million.
The problem for the IRS is that the GAO analysed amended returns from 2003 to 2008 and then compared them with offshore accounts and managed to find more ‘quiet disclosures’ than the tax authorities.
The GAO is now saying that the IRS is missing too many offshore account holders trying to dodge paying extra penalties and tax on their accounts and should do more to find them.
The report also highlights that the number of overseas accounts disclosed rose by 100% to 515,000 between 2007 and 2010.
Widow’s hidden offshore accounts
The GAO points out that most people did not participate in making ‘quiet disclosures’ which means there are thousands of people who have yet to pay billions of dollars in unpaid taxes.
The IRS is now analysing offshore accounts reported for the first time to find more people who have hidden cash and assets in foreign accounts.
To underline the new ‘get tough’ strategy, the IRS recently pursued Mary Curran, a widow living in Palm Beach, Florida.
She was sentenced to a year’s probation after pleading guilty to tax evasion charges.
However, Judge Kenneth Ryskamp immediately revoked the sentence, telling prosecutors that he thought the case was unnecessary and told Curran’s lawyer that he should seek a presidential pardon for his client.
The case was brought after Curran failed to pay income tax on £27.6 million in Swiss and Liechtenstein banks.
Curran had agreed to a £14 million fine, but faced six years in prison – with the IRS asking for a three-year sentence.
