IRS Leniency Program to be Extended

September 21, 2009 Offshore BankingTaxation in EUTaxation in SwitzerlandTaxation in USA  No comments

The US Internal Revenue Service (IRS) will extend the deadline for those wishing to apply for the offshore account declaration leniency program.

Originally scheduled to end on the 23rd of September, the IRS’s leniency program promised to reduce penalties paid by those declaring their UBS accounts. Applications for the program have significantly increased following a settlement between the IRS and Swiss bank UBS, which saw the details of 4,450 American owned accounts promised to the IRS. According to IRS officials, over 3,000 applications for the leniency program have been received since the institution of the program. The IRS has stated that approximately 10,000 cases are expected to arise in regards to UBS, half of these will be through the voluntary disclosure program.

Typically, the IRS receives no more than 100 voluntary taxation disclosures. The sudden influx of amnesty seekers has prompted accountants throughout the US to request extra time in preparing client information for declaration. In compliance to the requests, the 15th of October is set to be the new deadline for the leniency program.

If no amnesty is given to tax evaders and they are discovered by the IRS, they are liable to face fines and criminal prosecution. Typically, tax evasion through offshore accounts will see a liability of $100,000 or 50% of an accounts peak value in the last six years. The decision is made depending on which is higher and can apply consecutively on each year that evasion has occurred, for up to three years. Effectively, fines on an offshore account can therefore reach 150% of six year peak value.

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