Opportunity for Taxpayers with Secret Offshore Accounts to Reach U.S. Compliance

February 25, 2014Tax Alert

On February 26, 2014, the U.S. Senate's Permanent Subcommittee on Investigations will hold a hearing on "Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts."

This hearing is another step in an ongoing effort by U.S. authorities to identify U.S. taxpayers who have failed to pay income taxes on income derived from assets kept secretly in foreign accounts, and the bankers and brokers who have aided or facilitated those taxpayers.

As part of its efforts, the government is also — through the Offshore Voluntary Disclosure Program (OVDP) — affording taxpayers the opportunity to come forward, reveal the existence of their previously secret accounts, and come into compliance without exposure to criminal prosecution. The cost of this protection can however be substantial, as participants in the program often are required to consent to significant penalties.

The benefits of OVDP are not available to taxpayers whose identity, and the existence of whose offshore assets, has already come to the attention of the Internal Revenue Service. Given the wide net cast by this government inquiry, and the cooperation of foreign governments, banks and other institutions, taxpayers who have not yet come into compliance, whether through OVDP or otherwise, should seriously consider doing so before they otherwise become targets of the IRS, and their options are limited.

Herrick's team of professionals have significant experience in assessing the options available to taxpayers in a variety of circumstances, and in dealing with a wide range of significant government investigations. We will be monitoring Wednesday's hearing and will provide clients with updates on the substantive and strategic issues that arise in connection with this difficult area.

For more information on this and other tax matters, please contact:

Louis Tuchman at +1 212 592 1490 or [email protected]