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. Since 2009, the IRS has opened new enforcement offices overseas, beefed up staffing and ex-panded 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.
Between the two disclosure programs, a total of 30,000 tax cheats have come clean. 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. 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.