Offshore Investigations: The IRS Has Spent Millions, But Has Taken Little Action
If you have funds offshore that are undeclared, it is a good idea to speak with a Washington DC international tax attorney as soon as possible. The IRS has been aggressively investigating offshore accounts in an attempt to prevent tax dodging and to ensure that all funds are declared.
The IRS has used numerous tactics, including threatening banks with prosecution if they don't enter into agreements to pay fines and disclose accountholder information, and attempting to convince taxpayers to voluntarily disclose previously undeclared offshore accounts by limiting penalties.
New reports now indicate that the IRS has spent $380 million in an attempt to identify and prevent offshore tax dodges – but has taken limited action to date.
The IRS Has Spent Millions Investigating Offshore Tax Dodgers
The new reports regarding the actions of the IRS come from a federal watchdog, the Treasury Inspector General for Tax Administration. According to the Treasury Inspector General's report, the IRS spent a small fortune to implement an Obama-era program that involved collecting information about offshore investments in foreign accounts directly from foreign financial institutions including banks and brokerage firms.
The new program was initiated through a law called the Foreign Account Tax Compliance Act (FATCA). FATCA was passed in 2010 in response to the extensive use of offshore financial accounts in order to avoid disclosing funds to the IRS. The goal was to prompt U.S. taxpayers to declare their assets voluntarily because they would become concerned that their foreign financial institution would give the IRS their details under FATCA reporting requirements.
The problem is, when this paperwork came in to the IRS from the foreign financial institutions, it proved to be riddled with errors. The Inspector General found that the IRS struggled to validate much of the data that came in from the foreign institutions. And, as it was spending its time attempting to make use of the mountains of paperwork that came in, some of the agencies other responsibilities did not get carried out effectively.
The IG report also found that the IRS took limited action in response to a majority of the information that was provided to the agency. The IRS, however, said that the compliance roadmap that the Inspector General pointed to as evidence that the agency had fallen short was not intended to be a comprehensive compliance plan, and the IRS insists that the report is inaccurate in its suggestions that FATCA isn't being enforced properly.
Further, the report shows many Americans ended up renouncing their U.S. citizenship after the passage of FATCA in order to avoid being subject to the law's burdensome provisions. This may have cost the IRS tax revenue that these Americans would ordinarily have paid.
While the IRS may not have taken much action as a result of its investigations, it is unlikely to curtail its aggressive efforts to fight tax dodgers, especially after having investing so much time and money into putting together initiatives to prevent funds from being kept offshore.
Taxpayers need to remain vigilant and a Washington DC international tax attorney should be consulted to explore options if you have undeclared offshore funds and are concerned about the possibility of coming under investigation by the IRS. Contact tax attorney Kevin Thorn online or by calling 202-349-4033 today.