30,000 Taxpayers Who Submitted Voluntary Disclosures May Be Subject to Criminal Prosecution

Streamlined Offshore Voluntary Disclosure At Risk

30,000 US taxpayers have submitted streamlined offshore voluntary disclosures since 2012. Now the IRS and Justice Department are “taking all of that data and scrubbing it for leads,” Nanette Davis, a trialTax Evasion Boston Tax Attorney attorney in the Justice Department’s tax division, said at the New York University Tax Controversy Forum.

As part of the U.S. Government’s efforts to collect unpaid taxes from U.S. taxpayers with undisclosed foreign bank accounts, the IRS opened the Offshore Voluntary Disclosure Program (OVDP) and a streamlined version of the program. 54,000 U.S. taxpayers have participated in the voluntary disclosure program since 2009. The streamlined version has lower penalties and taxpayers must certify that they did not willfully conspire to evade paying taxes. It does not offer protection from criminal prosecution. The regular OVDP has higher penalties, up to 27.5%, but offers protection from criminal prosecution.

Sifting Through the Data for Tax Cheats

In addition to information submitted by taxpayers through OVDP, the U.S. government has agreements with more than 110 countries and 80,000 banks and financial institutions to share account information.

“We’re getting spreadsheets with U.S. client names, account numbers, details, entity names, account balances,” Davis said. “It’s a little bit of a dangerous time if you are an offshore account holder and have not gotten right, because there’s just been an avalanche of information that’s come to the department and the IRS.”

Evaluating Voluntary Disclosure Options

Taxpayers do have options for coming into compliance with U.S. tax regulations. But it is critical to carefully consider the pros and cons of the options. While the streamlined OVDP may be faster and have lower penalties, taxpayers may be subject to criminal prosecution resulting in jail time.

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