IRS Ends Amnesty for Use of Overseas Tax Havens
KWAME HOLMAN: The Cayman Islands, Liechtenstein, Bermuda, Malaysia, and Luxembourg among more than 70 countries where banks hold accounts owned by Americans who don't pay taxes on the money.
Some estimates show the U.S. government misses out on as much as $100 billion a year in tax revenue because of evasion. But the IRS is collecting some of that money as part of an amnesty deal that expires today. It applies to those who have undeclared foreign accounts of at least $10,000.
In a typical year, about 100 people come forward. But, since the amnesty was announced, some 7,500 people have filled out and filed the forms. Most will pay a penalty of 20 percent of the highest value of the account since 2003, plus back taxes and interest. And, for that, they will avoid criminal prosecution.
SCOTT MICHEL, tax attorney, Caplin & Drysdale: The program was initially set to expire on September 23, and about a week before that deadline, the phones really began to ring. The IRS then, at the 11th hour, extended the program.
KWAME HOLMAN: The program, and the extension, have made for busy days for tax attorney Scott Michel and his colleagues at Washington, D.C.'s Caplin & Drysdale law firm.
Why did the IRS choose to do this?
SCOTT MICHEL: To encourage Americans to come forward and clean up their tax issues involving undeclared foreign accounts. The kicker with this program is that the IRS has offered a cap on the civil money penalties that could be imposed.
KWAME HOLMAN: The firm represents 350 clients who are taking advantage of the program, with accounts ranging from $50,000 to $100 million. He says some of the clients inherited their money. Others are Holocaust survivors and business men and women.
SCOTT MICHEL: As long as the income is from a legal source and the other conditions of the policy are met, these people are allowed to make a voluntary disclosure.
KWAME HOLMAN: Clients had to send the IRS their revised forms stating how much and where their money was kept.
SCOTT MICHEL: If you have a foreign bank account, it needs to be listed here as the amount. You have to pay tax on that income.