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September 22, 2009
BY JIM WYSS
Procrastinating tax dodgers will have a little more time to come clean after the Internal Revenue Service extended a Wednesday deadline for people to report their secret overseas bank accounts.
The IRS is offering a one-time extension of its amnesty program until Oct. 15, citing “repeated requests” from tax attorneys and individuals. It also warned those who fail to come forward will “face much harsher civil penalties” and “possible criminal prosecution.”
More than 3,000 Americans have applied for the program, a government official told The Associated Press on condition of anonymity. The IRS would not confirm that figure, but the program has been a boon for South Florida tax lawyers. Seth Entin, an international tax expert at the Miami branch of Greenberg Traurig said his firm is working with about 70 clients.
While some are eager to avoid criminal prosecution, others are still weighing the costs. “People sitting on the fence either have to fish or cut bait,” he said. “The penalties are virtually certain to get worse once the partial amnesty ends.”
Under the program, those who report their offshore accounts will pay a 20 percent penalty on the highest balance carried from 2003 to 2008, in addition to interest and other regular fines. For example, someone with an offshore account balance of between $1.05 million and $1.3 million during the period would pay $386,000 under the program, the IRS explained on its website. If that same person fails to come forward and is caught, the bill would be $2.3 million — and tax cheats could face criminal charges.
In addition, anyone who inherits an offshore account and hasn’t made withdrawals faces reduced penalties of 5 percent.
Those with illegal income and individuals already under investigation by the IRS are not eligible for the program.
While the amnesty is generally a good deal, it fails to account for individual circumstances, said Alan L. Weisberg, a tax attorney at Miami’s WEISBERG KAINEN MARK, PL.
Weisberg said he has clients who lost 40 percent of their portfolio in the stock market and others who lost everything with accused financier fraudster Allen Stanford. Still, they have to pay fines based on those accounts at their peak. “I have a couple of people that will find that difficult,” Weisberg said. “Either they don’t have [the money] or it will wipe them out. But given the potential draconian fines or criminal exposure they could face, they need to take advantage of the program.”
The amnesty is part of a larger government crackdown on international tax cheats. In August, Swiss banking giant UBS AG agreed to turn over details on 4,450 accounts suspected of holding undeclared assets of U.S.-based customers.
While the penalties under the amnesty program are not insignificant, it offers a fresh start for many, Weisberg said.
“A lot of people see this as an opportunity and a wake-up call,” he said. “Some people have described it as a blessing in disguise.”
