IRS deal to tax evaders: fess up to avoid "criminal prosecution or confiscatory penalties"

[ProSense]

Tax Deal

IRS Offers Deal To Offshore Evaders

William P. Barrett

Those who fess up won't face criminal prosecution or confiscatory penalties.

Amid the continuing public outcry over big bonuses paid to companies getting federal bailouts, the Internal Revenue Service announced Thursday it is willing to cut a break to income tax evaders with offshore accounts who come in voluntarily now to settle up.

The agency, which is under pressure to narrow the "tax gap," said it wouldn't impose on confessors the stiffest civil penalty for failing to report an offshore account--50% of the account's balance for each year a taxpayer fails to file the required disclosure form.

Instead, the IRS will in most cases demand 20% of the account's highest single balance in the past six years. That penalty will be reduced to 5% if the account was inherited and contained only funds that were initially properly taxed--meaning only the earnings went untaxed.

Taxpayers taking the deal must also pay any new taxes resulting from filing amended--and presumably accurate--income tax returns going back six years, as well as accuracy or delinquency penalties.

In a statement, IRS Commissioner Doug Schulman called the new approach "a firm but fair resolution" that will "provide consistent treatment for taxpayers." He all but ruled out conviction and jail time for voluntary compliers, since such impositions likely would discourage reporting and the payment of back taxes by others.

Under the IRS' longstanding "voluntary disclosure" program, individuals who fess up and pay up before the IRS begins investigating or auditing them, are unlikely to be referred for criminal prosecution. That policy applies to both onshore and offshore evaders.

It remains to be seen whether the amnesty will draw the public outrage generated against Congress and the Obama administration when it became known that U.S. authorities allowed the payment of huge bonuses to executives who ran faltering companies like AIG (nyse: AIG - news - people ) and Merrill Lynch.

[backscatter712]

1. I'll bet that if the IRS could collect a fraction of the money...

hidden in the Cayman Islands, we could cut the budget deficit in half.

[Hansel]

2. No doubt. n/t

[indepat]

3. If only it would, hope it does, apply to corporate income tax evaders and with vengeance

:P

[karynnj]

4. Given the new seriousness of pushing for the information, some may think the

writing is on the wall and take this opportunity to avoid prosecution. They have to pay taxes going back 6 years and a penalty of 20% of the highest annual balance in the last 6 years - which could be a huge amount of money if many people take advantage of it. I suspect with the administration and multiple Senate and House committees talking about seriously investigating this many will take this as a chance to avoid possible jail or at minimum embarrassment.