GAO Recommends Changes to Catch Tax Evasion by Offshore Account Quiet Disclosures

Early this year, the United States Government Accountability Office (GAO) identified an area of tax evasion the IRS may have missed. Specifically, taxpayers with undisclosed offshore accounts who have attempted to come into compliance quietly, and not through one of the IRS' voluntary disclosure programs, may be getting away with paying lower tax, interest and penalties than the taxpayers would pay by participating in one of the offshore compliance programs.

Furthermore, without detecting quiet disclosures, the incentive to participate in offshore programs is diminished for other taxpayers considering a compliance program. The result in undiscovered quiet disclosures is not only lost revenue to the IRS, but also limits important information that might otherwise be mined from an offshore disclosures such as the names of the banks, countries and promotors involved in tax evasion.

In its report, the GAO describes more than 10,000 potential quiet disclosures it identified that the IRS may have missed. The IRS' methodologies are explored in the report and recommendations are made to increase the IRS' ability to identify quiet disclosures. Ultimately, by improving the manner by which taxpayers who are trying to circumvent some of the taxes, interest and penalties that would be due in the IRS' offshore compliance programs, the IRS could increase revenues already in excess of $5.5 billion from the offshore programs collected from 2009 through 2012.

To read the complete GAO report to Congressional Requestors, click here.

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