TAX NEWS - 2010

Evading Tax: Are You a Tax Evader? Don't Worry, the IRS Still Loves You

Tax evaders are set to benefit from this new program by the IRS, which offers wealthy Americans the chance to pay up their taxes with lower penalties while at the same time avoiding criminal prosecution. But there are two conditions though. One is that you pay the taxes that you would owe on in your offshore accounts. Second is that you volunteer information on who helped them hide the money.

IRS officials said that the agency is developing a network of intelligence on accountants, bankers, lawyers, and other professionals who help the rich hide their assets from tax authorities. The offer made by the IRS for taxpayers is expected to raise its chances to successful crack down on major financial firms. The IRS had previously been successful against the Swiss bank UBS AG, which admitted in a settlement that some of its bankers had helped U.S. clients evade taxes.

Tax lawyers who are representing clients before the IRS say their clients are being prodded to name names of the people who helped them set up offshore accounts. Otherwise, they risk losing the leniency they would otherwise receive by coming forward. Lawyers are even being asked to identify the people whom their clients have interacted with.

The IRS warned the situation "will only become more dire" if tax evaders do not voluntarily come forward. Under IRS's new program against tax evasion, evading tax payers must voluntarily disclose unreported offshore income and pay penalties, and back taxes and interest going back a maximum of six years. Previously, the IRS penalties were equivalent to 20% of the value of an account during the tax year in which it had its highest value. In the past, tax evaders rarely come forward on voluntarily. But with the IRS' most recent success against UBS AG, the number of people who declared offshore accounts more than doubled in 2009 compared to 2008.

In a July 2008 report issued by the U.S. Senate Permanent Subcommittee on Investigations, it was estimated that the U.S. government "loses an estimated $100 billion in tax revenues due to offshore tax abuses.