The United States Government Accountability Office (GAO) is an independent entity that exists to audit, evaluate, and investigate federal government activities to support Congress. They have just released a report to Congress on offshore tax evasion and its findings regarding on OVDP accountability for the 2009 program data and results.The full report can be found here: http://www.gao.gov/assets/660/653369.pdf and has some fascinating metrics and data collation regarding the first OVDP from 2009.
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These numbers will probably turn out to differ significantly from the 2011 and 2012 programs. It’s our general understanding that the high number of Swiss accounts identified by the 2009 program are those intentional tax evaders taking advantage of what was, for them, a great deal. In our experience 2011 and 2012 came to the attention of an increasing number of immigrants and expats who were unaware of or did not understand their tax obligations and were looking for a way to come into compliance.
The IRS did use prior OVDPs to detect the banks and people involved in hiding assets overseas.
As many of our clients have learned, the volume of information demanded by the IRS is vast and often takes some effort to compile. Dates, names, addresses, going back many years. One note that I found interesting was this:
"Using 2009 OVDP data, IRS identified bank names and account locations that helped it pursue additional noncompliance."
This further clarifies something we already knew, which is that the main intent of the information gathering is so the IRS can pursue others similarly situated, not to trap or penalize those disclosing it.
The IRS has done nothing to alert Visa Holders and dual citizens of FBAR obligations
The most interesting point in the report to me comes early on and mentions the problem we touched on earlier:
"IRS officials from the Offshore Compliance Initiative office said they have not targeted outreach efforts to new immigrants."
This is a common complaint among our clients and others who contact us: “If I had known, I would have done it. They should have a pamphlet when you get your visa/green card, ” is what they tell us. Nothing has yet been done to address this continued lack of education, except the dire warnings to be found on the IRS website and recent publications, warning of extreme consequences for those who have not disclosed in the past.
Later and in slightly more depth, the report states:
"In our case file review, we found examples of immigrants who stated in their 2009 OVDP applications that they were unaware of their FBAR filing requirements. We found they had often opened banks accounts in their home country prior to immigrating to the United States. IRS officials from the Offshore Compliance Initiative office stated that although there are several FBAR education programs, none are specifically targeted at new immigrants. Furthermore, these IRS officials were unaware of any IRS work with other federal agencies such as the State Department or the Department of Homeland Security to educate recent immigrants about their foreign account filing requirements. These officials stated that one of the challenges that they face in their office, which is part of IRS’s Large Business and International Division, is that taxpayer education and outreach is the responsibility of IRS’s Wage and Investment Division and that issues concerning FBARs fall under IRS’s Small Business/Self-Employed Division."
This is of course from 2009; our anecdotal evidence is that the problems of immigrants who have not reported offshore income and bank accounts have only become more pronounced.
The unsurprising, deeply disappointing fact is that the bureaucracy of the Service is such that these identified, profound problems are someone else’s responsibility and those who are fully aware of the situation can only shrug and say that it’s not their job (and they’re not aware of any communication with those who could/should do it).
All in all, an interesting read, not too much new information, but underscores what is evident to all, even those whose job it is to report on the IRS’s progress: the OVDP is a program that focuses on all the wrong things, to the detriment of all taxpayers. If you have found yourself in a position where you should have reported something but have not, contact us for a confidential consultation.
