The IRS Proceeds Against More Tax Havens

Now that the IRS's second special voluntary disclosure initiative has come to an end, U.S. taxpayers with undisclosed assets in so-called ax havens are being urged by tax audit professionals to come clean on their own, before the IRS finds them out.

The 2011 Offshore Voluntary Disclosure Initiative (OVDI), which ended August 31, 2011, gave taxpayers with foreign accounts the opportunity to pay significantly less penalties as well as avoid the possibility of criminal prosecution. Now, the IRS has been working with many foreign governments of tax havens, including Switzerland, Lichtenstein, and India, and financial institutions to obtain more data on holdings by U.S. taxpayers, making the option to voluntarily disclose offshore tax holdings a good idea.

A tax haven is a is a state or a country or territory where certain taxes are levied at a low rate or not at all while offering due process, good governance and a low corruption rate. Many taxpayers purposely put their assets into accounts within tax havens in order to evade paying taxes; however, the IRS has been pursuing more taxpayers hiding offshore assets. If you are caught with undisclosed offshore income the penalties will be much worse than if you come forward on your own.

Some U.S. citizens who have never even lived in the United States or who have inherited foreign accounts may not be aware that they owe taxes on these assets. But although everyone with a foreign bank account or income may not be trying to hide their assets from the IRS, when doling out penalties the IRS doesn't distinguish between those who were purposely fraudulent and those who were not.

Anyone with worldwide income, earnings taxed abroad, or foreign bank accounts with an aggregate balance of more than $10,000 must file an FBAR annually with the IRS. If you have any question of possibly owing taxes on foreign income, it's essential to contact an international criminal tax attorney.

With the IRS gaining more information every day, the situation will only get worse for those hiding offshore tax holdings. The IRS has recently summoned American Express, MasterCard and Visa and has received a list of over one million U.S. taxpayers who have a foreign credit card. The IRS is currently sending out audit international letters requesting further documentation and threatening civil penalties of 100% of the account balance or at least $100,000, or criminal sanctions of up to 5 years in the federal penitentiary, and loss of any business or professional license. These sanctions apply to tax evasion as well as to simply failing to report the foreign transaction to the IRS.

There are an unlimited number of legitimate defenses for an international audit that are very effective to combat the government's egregious penalties and crimes, each dependent upon each taxpayer's own facts and circumstances. If you think you could be in danger of an international audit, call a qualified tax attorney now.


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