Financial Resource

The U.S. Treasury has hinted that it may again offer an amnesty program for taxpayers hiding undeclared money in offshore accounts.

Just before Christmas, IRS Commissioner Doug Shulman commented about the success of 2009’s amnesty. He suggested that people with undeclared foreign accounts would get a second chance to come forward.

Will another amnesty be any more successful than the last? Many tax professionals question just how successful the last amnesty was.

Shortly after the highly publicized legal action against Swiss bank UBS began, the IRS offered an amnesty to Americans with undeclared foreign bank accounts.

According to federal money laundering laws and IRS regulations, businesses and individuals holding more than ,000 in offshore accounts are required to complete an annual Foreign Bank Accounting Report (FBAR). Having offshore bank accounts and foreign hedge funds isn’t illegal but failure to disclose them is.

The UBS suit alone estimated that 52,000 Americans were holding offshore funds at UBS. Many, if not most, of those accounts were not properly reported. Enter the Obama administration and the IRS’ amnesty plan.

Under the old plan, American taxpayers with undeclared foreign accounts could come forward without fear of prison. The government says the plan was successful with some 7,500 taxpayers coming forward. One taxpayer reportedly came clean on over 0,000,000 in unreported foreign holdings.

As worldwide pressure continues and the number of tax havens that have not yet signed tax exchange agreements with Uncle Sam dwindles, the pressure is on.

Schulman says that he next amnesty will not have as favorable terms, although taxpayers can still avoid prosecution by coming forward first.

Should a taxpayer with unreported accounts wait for the amnesty? How much do you savor the playing Russian Roulette?

The IRS follows a “first contact policy” when screening cases for criminal prosecution. If you contact the IRS first and thereafter promptly come into compliance, the Treasury Department will not criminally prosecute, even if they have been investigating someone for months. But if they knock on your door first then they have made “first contact” and will often prosecute.

Another IRS amnesty is probable given Commissioner Shulman’s comments but nothing is guaranteed. The chance of being the target of a criminal probe is slim but that risk can be eliminated b prompt compliance. Will most people wait for the amnesty before coming forward? Of course.

There is no word on when a new amnesty may begin or what the terms will be.

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