November 2017 JD Supra
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Paradise Papers, Panama Papers…. The Message is Clear: Report Offshore Accounts! – JD Supra.

First, the Panama Papers, and now… the Paradise Papers.  The Paradise Papers contain the names of approximately 31,000 US citizens, including entities, or persons with US addresses.   The IRS and The Department of Justice will “harvest” the names in the Paradise Papers for their mission uses.  That said, there is a window of time to seek expert professional advice, and non-compliant Taxpayers should take action. 

Non-compliant Taxpayers at risk of detection should have an expert tax professional evaluate their US tax reporting position.  IRS already has significant FATCA derived taxpayer information that has been exchanged across multiple jurisdictions.  In addition to FATCA, IRS has other tools to extract information; such as its whistleblower program, and the John Doe summons (used to trace activity in correspondent bank accounts).         

The IRS message to US taxpayers to come forward is one to take seriously.  The US Government wants individuals and companies to come forward and take the first step, as opposed to having to identify individuals or companies itself.  Taxpayers still have options through IRS amnesty Programs.  It is not clear as to why more non-compliant Taxpayers are not taking advantage of these programs.    

Streamlined Filing Compliance Procedures (Streamlined) is one of the options available for US Taxpayers with unreported foreign financial assets and income.   It is intended for the Taxpayers that have acted non-willfully.   The Streamlined process is available to US non-willful individual Taxpayers and Estates that have failed to report foreign financial assets and pay the taxes due with respect to those assets. The Individuals and Estates cannot be under IRS examination for any year, and they both must have a valid tax identification number.

Through its Offshore Voluntary Disclosure Program (OVDP), IRS permits willfully noncompliant taxpayers to disclose unreported offshore accounts and related income.  The “key” word for OVDP is Willful.  Unlike the Streamlined Filing Compliance Procedures program which is intended for Taxpayers that have acted Non-Willfully, OVDP encourages Taxpayers who have acted willfully to immediately disclose through OVDP to eliminate risk of prior IRS detection and virtually eliminate the possibility of criminal prosecution.

Perhaps non-compliant US Taxpayers are fearful of disclosing or they simply have not found the right tax professional?   It is important to note that IRS may, at its sole discretion, increase penalties or limit eligibility for participating in amnesty programs for some or all taxpayers or defined classes of taxpayers.  IRS can also decide to end these programs in their entirety at any time.  This is why it is so important for non-compliant Taxpayers to take action first before they are contacted by the IRS or the Department of Justice.