IN the debate over federal taxes, there is one potential revenue source with few defenders: people hiding money offshore. While there are legitimate business and investment reasons for keeping an account outside the United States, there are no legal reasons not to report those accounts — and pay taxes on the income they earn.
Marilynn K. Yee/The New York Times
“The reality is the world is shrinking, and people who think they can squeak by and they won’t get caught are kidding themselves,” says Warren Whitaker, a partner in the individual clients department at Day Pitney in New York,
Everyone should know this, but that makes the Internal Revenue Service’s current program of voluntary disclosure intriguing. The program came about after a similar one in 2009 drew in some 15,000 formerly undeclared accounts. But after it officially ended, thousands more came forward, flooding the I.R.S. enforcement system.
So it made sense from an I.R.S. perspective to offer a second round of disclosure, which began in February and ends on Sept. 9. (The deadline, originally Aug. 31, was extended Friday because of Hurricane Irene.)
Yet the structure of this program has given pause to people who haven’t declared offshore accounts. The penalties are steeper — up to 25 percent of the value of the assets — and they’re assessed on the highest value of those assets over the last eight years.