IRS Extends Amnesty Program
The IRS is extending the deadline for international tax dodgers to apply for an amnesty program. To date more than 3,000 Americans hiding assets overseas have applied for the program. The program offers no jail time and reduced penalties for tax cheats who come forward.
The Internal Revenue Service is expected to announce that the program will be extended until Oct. 15. The IRS has a long standing policy that permits tax evaders who come forward before they are contacted by the agency will usually avoid jail time. Provided that they agree to pay back taxes, interest and hefty penalties. Drug dealers and money launderers are exempted from this policy but if the money was earned legally, tax evaders can avoid criminal prosecution. Approximately 100 people apply for the program in a typical year because the penalties can far exceed the value of the hidden account.
In March, the IRS began a six-month amnesty program that sweetened the offer with reduced penalties for people with undeclared assets. The amnesty program is part of a larger effort by federal authorities to crack down on international tax evaders. In August, the U.S. and Switzerland resolved a court case in which Swiss banking giant UBS agreed to turn over details on 4,450 accounts suspected of holding undeclared assets from American customers.
The process of turning over that information is expected to take several months. But once the IRS obtains information about international tax dodgers, they will be ineligible for the amnesty program. Publicity from the UBS case, even before the agreement was announced, had many wealthy Americans with offshore accounts nervously running to their tax advisers. Lawyers and advisers from several firms have said they were swamped with calls from people hiding assets overseas. attorneys are advising their clients to take advantage of the IRS Amnesty program and to contact the IRS before they contact you.
Hedge funds and other investment partnerships need to enhance risk management practices to mitigate rising tax risk. Sum2 publishes the IRS Audit Risk Program (IARP) to assist investment partnerships and corporate entities that utilize offshore SIVs to assess audit tax risk factors and take steps to manage this significant business threat. The IRS has developed an audit risk profile that guides field examiners through an assessment of an investment partnerships tax audit risk factors. The IARP helps tax managers assess threats and more effectively prepare and manage tax audit risk exposures within the focus of IRS examiners.
Risk: audit, tax, regulatory, compliance, reputation
