IRS Commissioner Outlines Programs Targeting International Taxpayers

Posted on December 10, 2010. Filed under: Uncategorized | Tags: , , , , |


In Notice IR-2010-122 (December 9, 2010) IRS Commissioner Doug Schulman addressed IRS intentions to focus on tax evasion as it relates to international taxes in the forthcoming year. Mr. Schulman goes on to target wealthy individuals and the desire to hide or otherwise evade income taxes.

The IRS has been successful in exerting pressure on banking institutions to disclose information related to asset balances and income associated with holding assets offshore, previously not available.

One program that has been successful relates to the voluntary disclosure of taxes by individuals, in light of political pressure on UBS Bank to disclose this information. This Voluntary Disclosure Program (VDP) had resulted in approximately 15,000 disclosures (and an additional 3,000 disclosures once the program had ended.

Mr. Schulman goes on to say “that we expect to make the terms of any new program available to those who have already come in after October 2009 when that program expired…”.

As a result, banks are much less willing to facilitate offshore evasion than they were in the past… advisors are asking more questions of their clients regarding offshore accounts… and taxpayers understand that their chances of getting away with hiding assets overseas have diminished. While very difficult to measure, this deterrent effect has important, lasting, multi-billion dollar consequences for our tax system.

On the corporate front, new legislation includes the Foreign Account Tax Compliance Act (FATCA).  FATCA provides the IRS with better transparency and additional tools that we need to crack down on Americans hiding assets overseas. FATCA will increase information reporting by U.S. taxpayers holding financial assets outside the United States and impose stiff penalties for failure to comply. It will also require reporting of U.S. persons who hold accounts in foreign financial institutions or who own large interests in foreign entities that hold such accounts.

“Today, banks are much less willing to facilitate offshore evasion than they were in the past… advisors are asking more questions of their clients regarding offshore accounts… and taxpayers understand that their chances of getting away with hiding assets overseas have diminished. While very difficult to measure, this deterrent effect has important, lasting, multi-billion dollar consequences for our tax system.”

A second area of corporate concentration in tax collection will focus on transfer pricing, where last year, the IRS had implemented the Transfer Pricing Pilot program. Its success will lead to an expansive program to be rolled out this coming tax year.

Finally, the IRS is procuring increased cooperation in partner programs with non-US taxing authorities in an effort to increase tax collections worldwide.

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