IRS collects $5 billion from offshore tax cheats

Posted at 9:21 PM, Jun 26, 2012
NEW YORK (CNNMoney) — The IRS has raked in more than $5 billion from offshore tax cheats since 2009 through its voluntary disclosure programs. Designed to lure in tax evaders with reduced penalties and the promise of avoiding jail time, the programs require offenders to offer up information about their offshore bank accounts and to pay back taxes. The agency launched its first voluntary disclosure program in 2009 and its second in 2011. This January, the agency introduced its third program.

So far, the IRS has netted $5 billion in back taxes, interest and penalties from 33,000 taxpayers who ‘fessed up to offshore accounts under the first two programs, the agency announced Tuesday.

Another 1,500 voluntary disclosures have been made under the new program announced in January, which is expected to bring in even more money for the agency once it has been collected.

In January, the IRS announced it had brought in $4.4 billion from its first two programs, meaning it has collected more than $600 million since then.

“We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore,” said IRS Commissioner Doug Shulman. “People are finding it tougher and tougher to keep their assets hidden in offshore accounts.”

The current program is open for an indefinite period, and could be closed at any time. Taxpayers disclosing offshore accounts are required to pay a penalty of 27.5% of the highest aggregate balance in their offshore accounts during the eight tax years prior to disclosing the accounts. That’s up from the 25% penalty in 2011.

Taxpayers with smaller accounts may be eligible for lower penalty rates of 5% to 12.5%, and, as in the prior programs, taxpayers who come forward through the program are able to avoid jail time. The program does, however, require tax evaders to fork over back taxes, interest and late charges for up to eight years.

Tax evaders who don’t voluntarily disclose their offshore accounts but are instead caught by the IRS risk jail time, and penalties of up to 50% — or more if fraud is involved — of the total account balance.