New IRS Offshore Account Disclosure Program Takes Shape

As the IRS continues its increasing focus on international tax issues, a new IRS offshore disclosure program announced in December continues to take shape. While the IRS has not made public a full description of the program, details have emerged in comments of IRS officials over the past weeks.

Using the 2009 IRS voluntary disclosure program as a template, the IRS is apparently tweaking the approach that generated approximately 15,000 disclosures in the 2009 effort.

The IRS Criminal Investigative Division (“CI”)–already quite busy with UBS account holders identified through the Swiss bank’s Deferred Prosecution Agreement with the U.S.–was the “entry point” for the 2009 disclosure program. CI reportedly will retain that role, but will centralize the process in its Philadelphia office.

Most interesting was the comment this week by IRS spokesman Frank Keith that the new disclosure program will not be as “generous” to taxpayers as the 2009 IRS voluntary disclosure program. That comment surprises some international tax practitioners with clients who felt that the 2009 program was not “generous” enough–and decided not to disclose their offshore accounts as a result.

Nonetheless, IRS scrutiny of offshore accounts has exploded in recent years, with the 2009 voluntary disclosure program, the UBS settlement, the “re-alignment” of what is now the IRS Large Business and International Division, and the other IRS international tax initiatives we have followed. “CI has never had as many banks under investigation or access to as much information about international financial transactions as it does now,” according to Tax Notes’ summary of comments by Leslie DeMarco, Special Agent in Charge of CI’s Los Angeles field office.

Those using offshore accounts to evade taxes may think twice about bypassing this new program. The IRS Whistleblower Program has generated many disclosures by whistleblowers with detailed knowledge of offshore tax abuses–so taxpayers’ offshore accounts may be revealed to the IRS either way.