White Collar: IRS Offers Second Amnesty Program

The Internal Revenue Service has created an amnesty program for offshore account holders for the second time in three years. The intent of the amnesty is to lure tax evaders to self report. The penalties to which such self reporting individuals are subject are considerably less than if the government had uncovered the evasion. Additionally, the IRS has announced that it will not refer to the Justice Department for prosecution any of those self reporting.

The amnesty program will last until August 31, 2011. An individual taking advantage of the amnesty will pay a penalty of 25% of the amount in the offshore bank account in the year with the highest aggregate account balance over the eight year period running from 2003 to 2010. This is a substantial saving over the normal penalty of 50% of the greatest amount in the account for each year over a six year period. Moreover, some taxpayers may be eligible for reduced penalties of 5% or 12.5%. Back taxes and interest for up to eight years must also be paid.

Persons with offshore accounts containing $75,000 or less in a year covered by the program will qualify for a lower penalty of 12.5%.

In 2009 the IRS instituted an amnesty program and found it to be very successful. That program resulted in approximately 15,000 tax payers notifying authorities of their tax evasion, accomplished through the use of offshore bank accounts. The penalties at the time of the first amnesty were lower than those announced for the second program. Under the prior program taxpayers paid a penalty of 5% or 20%.

For more about the amnesty, please see The New York Times, "IRS Offers New Amnesty Deal for Offshore Accounts," February 8, 2011, http://www.nytimes.com/2011/02/09/business/09tax.html?ref=business.