IRS Expands List of Foreign Facilitators

Over the summer, the IRS continued its fight against offshore tax evasion by reaching nonprosecution agreements with dozens of Swiss banks, bringing the total list of “facilitators” to nearly fifty. This list should continue to grow over the next few months. As part of the new reforms made to the ongoing Offshore Voluntary Disclosure Program (OVDP), individuals with one or more accounts at a bank included on this list must pay an increased offshore penalty of 50%, rather than the usual 27.5% that has been required since 2012.

In 2009, the IRS offered its first Offshore Voluntary Disclosure Initiative, an opportunity for taxpayers with undisclosed foreign accounts to voluntarily come into compliance and pay a civil penalty, in exchange for immunity from prosecution. Due to the success of the program, it was offered again in 2011. In 2012, the current OVDP was opened on an indefinite basis.

While the OVDP has been a tremendous success for the IRS, many complained that the program was too onerous, and the 27.5% penalty too severe, for innocent taxpayers who were not seeking to hide income or assets from the United States authorities. In response, the IRS announced two huge changes in 2014. One change is the increased 50% penalty for account holders at one of the banks listed on the list of “facilitators,” as discussed above. The other big change was the announcement of the new Streamlined Filing Compliance Procedures, a much less onerous method for non-willful taxpayers to bring their offshore accounts into compliance. Under the new streamlined procedures, the offshore penalty is reduced to 5%.

Individuals who still have not disclosed accounts at Swiss Banks should do so as quickly as possible. As banks continue to reach nonprosecution agreements with the Department of Justice, they are turning over information to the IRS about their current and previous American clientele. Once the U.S. authorities are in possession of information about a person’s account(s), they are no longer eligible for the OVDP. Eligibility for the Streamlined Program exists until the IRS has initiated an audit. More than 100 Swiss Banks are cooperating with the Department of Justice and are expected to reach nonprosecution agreements. The Department of Justice has stated that they intend to complete this process by the end of the year.

Those wishing to take advantage of the current initiatives being offered by the IRS should do so quickly. While the Streamlined Program offers many benefits, it does not offer protection from criminal prosecution. Consequently, it is very important to consult with an experienced attorney to determine which program is a better fit.