It was a question posed to US taxpayers by the IRS in the wake of the UBS scandal: do you feel lucky?
The US offered US taxpayers the opportunity to voluntarily disclose offshore bank accounts as part of an amnesty program earlier this year. The choice? Come forward now and escape criminal prosecution or take your chances later.
It turns out that a number of US taxpayers didn’t feel quite so lucky. IRS Commish Doug Shulman has announced that more than 14,700 taxpayers came forward under the voluntary disclosure program. The disclosures were in the billions and covered accounts in 70 countries.
The number is higher than originally projected due to the numbers of taxpayers who made disclosures in the run up to the deadline. The deadline for disclosures had initially been September 23 but was extended to October 15 after input from tax professionals who were still fielding questions about the program from taxpayers.
UBS and the feds separately reached a settlement where UBS, in addition to a significant fine, agreed to release the names of over 4,500 US account holders at the bank. So far, only a handful of names has actually been released: at least two of those account holders have been sentenced to prison for their activities.
The remaining names will be disclosed over the next 10 months. Under the agreement, UBS will release the names of those account holders where there is a reasonable suspicion of “tax fraud or the like.” Generally, that includes high dollar accounts and accounts where there is a lot of movement of assets or complicated schemes. There will be procedure for appeals available in Switzerland.
ABC News is reporting that lawyers are already whining that their clients were misled by UBS about the extent of the banking secrecy. I suspect that means that lawsuits will be filed. That is, of course, how we like to solve problems in the US. It is *always* someone else’s fault, right? If the lawyers are smart, any such suits would do well to land in Switzerland and not in the US. Beyond the whole “juries likely don’t have sympathy for rich people who hide their money” issue, lawsuits based on the misdeeds of plaintiffs are not usually successful. Of course, that hasn’t stopped people from trying before…
For now, it’s a waiting game for UBS clients. The question is: do you feel lucky… now?
IRS Commish Doug Shulman has not been shy about talking about targeted enforcement. Targeted enforcement – the idea of cherry picking certain target groups to investigate or examine – is nothing new: it’s happened for years. In fact, as a young lawyer, I remember FLPs (Family Limited Partnerships) being called out under the Clinton Administration. But the IRS hasn’t been all that eager to talk about it. Until now.
Shulman has been very open about the fact that it’s happening and very happy to say what’s being targeted. Right now, the IRS seems to be circling the tank around three main areas:
Offshore accounts
Pass through entities (esp s corporations and LLCs)
High wage earners
Areas of targeted enforcement vary depending on what’s happening in the world, who’s in the White House and how many resources are available. Previous efforts have included self-employeds with Schedule C and Family Limited Partnerships.
So today’s Fix the Tax Code Friday question is two-fold:
Do you think targeted enforcement makes sense? And if does, it is fair?
So, who among us didn’t see this coming? IRS Commish Doug Shulman has announced the establishment of a new enforcement unit targeting the very wealthy. The group, called the Global High Wealth Industry, will specifically investigate partnerships, offshore trusts and other techniques used by the wealthy to hide income.
How wealthy is wealthy? Unlike a number of reality TV shows of late, this isn’t about faux millionaires. Try tens of millions of dollars wealthy.
The new enforcement group comes on the heels of a recent amnesty program offered to taxpayers who had been hiding money offshore. Tax pros, including me, viewed the amnesty program as the writing on the wall that the IRS would be ramping up enforcement. A mere two weeks after the extended amnesty deadline, the IRS confirmed that suspicion.
Whether the new enforcement group is a success remains to be seen. Some critics argue that an additional level of administration won’t help – and may, in fact, just confuse matters. But Shulman sees it differently: “You cannot assess compliance among the nation’s wealthiest individuals by looking only at their 1040s…. Our goal is to better understand the entire economic picture of the enterprise controlled by the wealthy individual and to assess the tax compliance of that overall enterprise.”
In an effort to recover income from funds that might have been hidden offshore, the US introduced a Voluntary Compliance Program that offers reduced civil penalties and no criminal penalties.
At the time, IRS Commission Doug Shulman described the program as stating:
The goal is to have a predictable set of outcomes to encourage people to come forward and take advantage of our voluntary disclosure practice while they still can… We set up a penalty framework that makes sense for them. They need to pay back taxes and interest for six years, and pay either an accuracy or delinquency penalty on all six years.
The program, which has tentatively been referred to as a success, wraps up on September 23, 2009.
But while the US program is winding down, the British program is just getting started. The UK has announced an amnesty program for unpaid taxes on income linked to offshore accounts.
The program is called the New Disclosure Opportunity and has similar provisions to the US program. The amnesty program begins September 1 and runs for six months. During that time, taxpayers have the opportunity to work out agreements to pay back taxes with a reduced penalty rate and little risk of prosecution.
The UK had previously resisted the urge to offer an amnesty program, hoping instead to force tax havens like Switzerland and Luxembourg to make disclosures. However, with government borrowing hitting an all time high, $21.4 billion last month, they decided to give it a second look. HM Revenue and Customs believes that the initiative could raise as much as $825 million over 4 years.
It seems that the IRS’ on again off again love affair with the idea of certifying tax preparers is on again. Earlier this month, IRS Commish Doug Shulman announced a proposal that would require tax preparers be licensed and certified. The immediate feedback on the proposal has been mixed.
My colleagues at the ABA [...]
Just a few days ago, IRS Commissioner Doug Shulman asked for public feedback on proposals to clarify a 1989 law regarding the taxation of cell phones. Apparently, he got some. Earlier today, Shulman announced that he, together with Treasury Secretary Geithner, has asked Congress to repeal the tax altogether.
(Remember, Congress makes the tax [...]
The good news under ARRA (American Recovery and Reinvestment Act of 2009): if you buy a qualifying new vehicle after February 16, 2009, and before January 1, 2010, you can deduct state or local sales or excise taxes paid on the purchase. The deduction is available whether or not you itemize.
The bad news [...]
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Settling tax debts is not necessarily high on the list of taxpayers struggling to keep their homes and who may have lost their jobs. Delinquent taxpayers are, however, getting a little bit of sympathy… from the IRS.
The IRS Commish, Doug Shulman, who began his stint at the IRS in 2008, announced today that tax [...]
