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IRS softens consequences for tax evaders with offshore assets

The Internal Revenue Service has its hands full conducting investigations into tax evasion. Until recently, any investigation into this area was made harder because many tax evaders would hide their assets overseas. Unless declarations were made of these assets, the Internal Revenue Service would not be able to track them. However, in Massachusetts and elsewhere in the United States, the Internal Revenue Service is using a more direct strategy by providing reduced penalties and no jail time for tax evaders to come clean.

This strategy has paid off and reduced the need for investigation as more than 12,000 tax evaders have disclosed their overseas assets. From this exercise, the Internal Revenue Service has managed to collect $500 million in back taxes and interest. This does not include fines and penalties that are still pending payment. Such a strategy is necessary in order to help the IRS investigation into assets that are held in overseas accounts.

The strategy has proven to be so effective that the Internal Revenue Service has actually set up overseas enforcement offices. This will ensure whatever investigation may be underway is done in a timely fashion. The measure has also expanded the opportunity for cooperation with foreign governments. A similar investigation and disclosure by tax evaders in 2009 resulted in the Internal Revenue Service collecting $2.2 billion in back taxes, fines and penalties.

A total of 30,000 tax evaders have been tracked using this strategy that has allowed the IRS to conduct targeted investigation into assets held in more than 140 countries. The focus is on offshore tax evasion and the protection traditionally accorded by international bank secrecy laws and the Internal Revenue Service seems to be making a serious dent in this area. The allowance of reduced penalties and no jail time is applicable to individual tax evaders who have not committed any criminal offences in the acquisition of their assets; the primary enticement is the fact that these individuals will not face criminal prosecution.

Nonetheless, people facing the possibility of tax crime accusations are often best served to seek consultation with an attorney experienced in tax law; doing so may ensure a better understanding of rights, options and possible consequences associated with said allegations.

Source: The Boston Globe, "12,000 tax cheats come clean under IRS program," Stephen Ohlemache, Sept. 15, 2011

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