IRS Targets Offshore Accounts

Faced with the largest budget deficit on record, the Obama administration is aiming to cut some of the shortfall by boosting revenues. In the crosshairs of the revenue-enhancing push are offshore bank accounts that are used by the affluent to evade taxes. A Senate committee has estimated that the country loses about $100 billion a year in tax revenue because of offshore tax abuses.

As part of its revenue-boosting effort, the IRS recently reached an agreement with UBS, a Swiss bank that handed over information on 250 of its US account holders. The agency is also working hard to get other tax-haven countries like Luxembourg and Lichtenstein to provide data on secret accounts. The IRS is also trying to lure tax evaders into the open by offering leniency. Tax dodgers who come forward voluntarily over the next six months cannot only cut the amount of any penalties that may be due, but are also likely to avoid criminal prosecution. Those who don’t volunteer will be treated much more harshly, say IRS officials.

Under the leniency program, the taxpayer must not only pay back taxes, penalties, and interest, but also give up the names of bankers, lawyers, accountants, or other financial advisors who helped them set up the offshore accounts. According to some tax experts, the agency is clearly interested in going after banks and other financial firms to cut deals similar to its agreement with UBS, which paid $780 million in fines in addition to providing information on account holders.