IRS extends amnesty program deadline

The IRS is extending the Sept. 23 deadline by 22 days after the “repeated requests” from tax officials, who are experiencing an influx of applicants and need more time to help taxpayers enter the program.

“We have seen what I would classify as an unprecedented number of calls from clients and potential clients," said William Sharp, a tax attorney in Tampa.

More than 3000 taxpayers have applied under the program since its announcement in March, compared to just 80 last year, according to the government officials.

The amnesty program is an effort by federal authorities to dob in international tax evaders.

The administration had indicted 300 citizens for using Swiss banks for tax evasion. As a result of the legal action in February, a Swiss bank, UBS, gave the details of 300 account holders. Later, U.S. had demanded information on 50,000 more account holders, which the bank refused to reveal.

In August, U.S. and Switzerland resolved a court case under which UBS is preparing to hand over details on 4,450 accounts with hidden assets from American customers.

Reduced penalties for voluntary disclosures
The extension of deadline will allow taxpayers to avoid stiffer penalties. Those tax payers who come forward before being tracked by the authorities can avoid imprisonment as long as they pay back taxes, interest and penalties. Thus they will be able to escape criminal prosecution.

In case the accounts are not disclosed, IRS can seize the higher of $100,000 or 50 percent of an offshore account’s value, and penalty will be imposed for each year separately, so after three year, the account holder would have to pay 150 percent of the account’s value as penalty.

Brian Compton, president of the California-based consultancy Tax Resolution Services, was quoted by AP as saying, “There will be a lot of prominent people caught up," and added that failure in filing the required reports could lead to imprisonment for 10 years.

He further added that taxpayer with one million dollars in an offshore bank could be penalized up to 380,000 dollars under the amnesty, but the penalty could exceed more than 2.1 million dollars, once the amnesty expires.

"The IRS will vigorously pursue tax cheats around the world, no matter how remote or secret the location," IRS Commissioner Doug Shulman said last month.

Deadline extension is in government’s interest
The IRS expects to handle around 10,000 cases related to undisclosed accounts, of which half would fall under amnesty program.

“This is a positive step,” said Stuart Bassin, a partner at the Washington law firm Baker & Hostelter LLP and a former senior litigator in the Department of Justice Tax division. “This gives everybody a couple of weeks to digest what’s happened in the last three weeks and get their paperwork together.”

Currently, IRS handles 1000 criminal tax cases in a year. The extension will enable government to effectively utilize its resources as they cannot litigate and investigate so many cases at the same time.

Lawrence Horn, an attorney at Sills Cummis & Gross in Newark, New Jersey was quoted by Bloomberg as saying that authorities stand a higher chance of tracking tax evaders by extending the deadline.

“The money is coming in, why turn off the faucet?” he said. “It would be in my opinion a mistake for the Internal Revenue Service not to extend this program at least until Thanksgiving, if not the end of the year, in view of how successful it’s been. The government doesn’t lose anything by extending.”