November 23, 2009

Flushing Out Tax Cheats

Tax evaders who use offshore bank accounts to stash their cash mainly use about 90 countries to do so. The most famous one is Switzerland with its famed Swiss bank secrecy laws that have sheltered tax cheats for decades.

But with the recent watershed settlement between the IRS and UBS bank of Switzerland that will see the IRS receiving details of 4,450 bank accounts belonging to suspected tax cheats, the days of secret offshore bank accounts may be numbered. This landmark agreement has also motivated other countries like Great Britain, France and Germany to go after their own citizens who maintain foreign bank accounts without paying taxes. Britain has been pursuing about 5,000 bank accounts of Britons in Liechtenstein that hold at least $3.3 billion.

In another move to flush out tax cheats, President Obama sought Congressional approval in his 2010 budget to spend on recruiting an additional 800 tax agents, lawyers and examiners to catch Americans hiding their money overseas to avoid paying taxes. Last year, then senator Obama sponsored the Stop Tax Haven Abuse Act that was designed to limit such opportunities for wealthy taxpayers seeking to avoid taxes. This year, Senator Carl Levin, D-Michigan reintroduced the bill.

Preventive methods are also being employed. US Treasury Secretary Lawrence Summers proposed an anti-tax haven program with an emphasis on reducing taxes for the wealthy to deter them from resorting to tax evasion.

All these developments has given the IRS the right to warn taxpayers not to use offshore bank accounts to cheat on their taxes and to issue a stern piece of advice to those who already have such accounts to turn themselves in before the IRS gets to them.

In February this year, the IRS launched the Voluntary Disclosure program aimed at enabling tax cheats to turn themselves in to avoid criminal prosecution and only receive monetary penalties for their crimes. So far, hundreds of taxpayers have voluntarily stepped forward to fess up. This amnesty program ends September 23rd.

With the money recouped from these unpaid taxes, the government can increase its tax coffers and utilize it for healthcare reform. No one really knows the amount of taxes that go unpaid due to offshore banking activities but some estimate it to be about $100 billion annually. Considering that overseas assets stored in the Cayman Islands, another tax haven, amounted to about $1.9 trillion at its peak, the estimate may not be far wrong.

But why has this not been done long ago? Most speculate that it is due to the enormous amount of money in the system, money that controls politics and funds political campaigns. Furthermore, US banks themselves have many foreign interests thus making the entire system a highly convoluted maze of corporate, financial and political links that is very difficult to unravel.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

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