About 12,000 tax cheats have come clean under a program that offered reduced penalties and no jail time to people who voluntarily disclosed assets they were hiding overseas, the Internal Revenue Service announced Thursday.
Those people have so far paid $500 million in back taxes and interest. IRS Commissioner Doug Shulman said he expects the cases to yield substantially more money from penalties that have yet to be paid.
The voluntary disclosure program, which ran from February to last week, is part of a larger effort by the IRS to crack down on tax dodgers who hide assets in overseas accounts. The agency stepped up its efforts in 2009, when Swiss banking giant UBS AG agreed to pay a $780 million fine and turn over details on thousands of accounts suspected of holding undeclared assets from American customers.
Since then, the IRS has opened new enforcement offices overseas, beefed up staffing and expanded cooperation with foreign governments. A similar disclosure program in 2009 has so far netted $2.2 billion in back taxes, penalties and fines, from people with accounts in 140 countries, Shulman said.
Between the two disclosure programs, a total of 30,000 tax cheats have come clean.
"The world has clearly changed," Shulman said. "We have pierced international bank secrecy laws, and we're making a serious dent in offshore tax evasion."
The IRS has long had a policy that certain tax evaders who come forward can usually avoid jail time as long as they agree to pay back taxes, interest and hefty penalties. Drug dealers and money launderers need not apply. But if the money was earned legally, tax evaders can usually avoid criminal prosecution.
Fewer than 100 people apply for the program in a typical year, in part because the penalties can far exceed the value of the hidden account, depending on how long the account holder has evaded U.S. taxes.
The latest disclosure program offered reduced penalties, but it was no free walk. Taxpayers were required to pay up to eight years of back taxes and a penalty of up to 25 percent of the highest annual amount in the overseas account from 2003 through 2010.
The disclosure programs have also provided the IRS with information about banks and advisers who have assisted people with offshore tax evasion. Shulman said the agency will use the information to continue its enforcement efforts.
"Unlike a few years ago, it's very clear now that there's a real price to be paid for people who think they can hide offshore and not pay their taxes," he said.
Former Head of Marine Corps: Obama's ISIS Strategy Doesn't Have a Snowball's Chance in Hell | Katie Pavlich