In March, The IRS trumpeted new limits on penalties and fines for offshore account holders. The new guidelines were an effort to entice those with offshore accounts into voluntary compliance with the tax regulations regarding the accounts. To date, however, many of those the new regulations were intended to coax have been slow to come out of hiding.
The new penalty limits were introduced, amidst the high profile and investigation of UBS, Switzerland’s largest banking institution. UBS was charged with, admitted wrongdoing, and agreed to a fine with the IRS over assisting US taxpayers with tax evasion through use of offshore structures and offshore accounts that UBS helped setup.
The case and investigation involved thousands of U.S. citizens with Swiss bank accounts, and has left many a wealthy U.S. citizen scrambling.
The goal of the new IRS program is to get those same people who are panicking over the potential for liability to come forward and wipe the slate clean. However, there are some problems, perhaps, with the way the IRS structured the voluntary compliance program.
One of the major points of emphasis is with those who are holding U.S. securities held in an offshore account. Attorneys working with clients say a number are slow to come forward once they calculate the costs of doing so.
In order to disclose their offshore holdings are too high, especially for those who have seen their account balances shrink dramatically in light of the recent downdraft in world equity prices.
Some believe the IRS miscalculated when estimating what it would take to encourage volutary disclosure by these account holders.
The way the IRS is calculating penalties, offshore account holders must pay taxes, interest, and penalties in arrears for six years. In addition they owe a penalty of 20% of the amount in the account in the year when the account was at its highest value. Many are considering to continue to remain in the shadows given the cost of coming forward.
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