The IRS has announced its annual "Dirty Dozen" list of tax scams, which are areas of enforcement that the agency will focus on in 2015. Once again, the list includes undisclosed offshore accounts, which has been a top priority since 2009.
Since 2009, the Department of Justice has indicted more than 150 individuals for offshore account violations. This includes both account-holders and "enablers" who assisted them. Nearly all of these cases have ended with convictions. On the civil side, the IRS has collected billions of dollars in penalties, mostly through the Offshore Voluntary Disclosure Program (OVDP). The OVDP allows taxpayers with undisclosed offshore accounts to voluntarily come forward and pay a civil penalty of 27.5%, in exchange for guarantees against criminal prosecution or much larger civil penalties. Since 2009, more than 50,000 taxpayers have made disclosures. Last year, the IRS announced new Streamlined Compliance Procedures, which allow non-willful violators to pay a much smaller penalty, or in the case of non-residents, no penalty at all.
Other tax scams that made the "Dirty Dozen" list include the following:
- Identity Theft
- Pervasive Telephone Scams
- False Promises of "Free Money" from Inflated Refunds
- Return Preparer Fraud
- Impersonation of Charitable Organizations
- False Income, Expenses or Exemptions
- Frivolous Arguments
- Falsely Claiming Zero Wages or Using False Form 1099
- Abusive Tax Structures
- Misuse of Trusts
Those who engage in these tax scams face significant penalties and interest, as well as the possibility of criminal prosecution. In 2014, the IRS initiated 962 criminal investigations, resulting in 768 indictments and 723 convictions. The average sentence in these cases was 40 months.