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Will Trump close the IRS International Tax Amnesty?

The IRS recently announced its offshore efforts over the last few years have collected over $10 billion and brought over 100,000 taxpayers back into compliance for not reporting their involvement with foreign income, bank accounts, trusts and companies.  It is also interesting to note how these numbers break down between the two major amnesty initiatives: 1. The Offshore Voluntary Disclosure Program (“OVDP”) for taxpayers with possible criminal exposure for intentionally evading taxes and 2. The Streamlined Filing Compliance Procedures (“Streamlined”) for taxpayers who were simply negligent.  While the 100,000 participants are split almost evenly between the OVDP and Streamlined initiatives, 99% of the $10 billion was collected from the OVDP participants. 


The disproportionately low amount of revenue collected from Streamlined participants is consistent with the current IRS policy of imposing reduced or even zero penalties on taxpayers with unreported ties to foreign assets, trusts or companies who voluntarily comply and who the IRS considers to have been “non-willful”.  However, these amnesty programs are merely IRS policy, not law. In other words, the IRS can at any time modify the terms, change the criteria for who qualifies and who doesn’t, or even terminate the programs entirely, potentially closing the window of opportunity for non-compliant taxpayers to sleep well at night for a relatively low cost.  For example, the IRS could decide the amnesty is for US citizens only; not green card holders or foreigners who are considered US taxpayers solely due to the amount of time they spend in the US.  This would be consistent with the 2012 Supreme Court case holding that tax evasion is a deportable offense.


A new Commissioner of the IRS will soon be appointed by President-Elect Trump, and may be asked to reevaluate whether it’s now time replace the amnesty “carrot” with the law enforcement “stick”. Indeed, IRS investigators and federal prosecutors have already been mining the vast amounts of information collected from these voluntary disclosures, ongoing investigations of foreign banks and offshore intermediaries, two years of automatic information reporting under FATCA, and the steady stream of public and private leaks. 


Anyone unsure whether they have fulfilled all their tax and information reporting obligations should seek the privileged advice of an independent U.S. tax attorney as soon as possible to determine the safest and most economical way of resolving their non-compliance prior to detection. Contact us at 305-444-7662 or e-mail to schedule a confidential meeting in person, over the phone or via Skype to learn more about how our multidisciplinary team of attorneys and accountants can help resolve tax non-compliance.