WALLINGFORD, CT, Mar. 8, 2011 — There have been earth shaking, significant changes to the off-shore tax climate for the American investor. The IRS is offering a new deal to taxpayer with unreported income. Those trying to make sense of the shift, would be well-advised to think of what is happening as a hurricane that has just begun to make landfall on low-lying island, according to tax resolution attorney, Anthony Parent.

”For years, everyone has known that taxes have to be paid on money made abroad. But the truth is, with few exceptions, it was extremely difficult for the IRS to track and enforce the law,” says the founder of IRS Medic in Wallingford, CT. “People got away evading tax for years. It was an open secret. So everyone knew there was a storm lurking out in the distance, but it seems so far away. The law was ignored, with many of these people deciding the rewards were worth the risk.”

Unfortunately for those who chose to ignore the law, things have changed and the IRS is both willing and able to search out overseas tax evaders. “The storm has not only come ashore, but it has gotten incredibly stronger on its track. Just as a hurricane is dependent on warm water, the IRS’s ability to prosecute is fed with information. And boy, have they been able to learn a lot.”
Attorney Parent gives six significant changes that have fed more and more information to the IRS’ enforcement machine.

• Information from the 2009 Offshore Voluntary Disclosure Initiative (OVDI) uncovered a treasure trove of information. There have been 18,000 people who have come forward under that initiative. By coming forward they had to disclose all of their offshore assets and give information on everyone involved in helping them move their money offshore. The program helped the IRS learn about 200 banks in 60 separate countries involved in these transactions. Many know about how the program pointed to issues with UBS (the primary target of the program and Swiss bank accounts. But that wasn’t all they learned. The IRS has a more complete understanding of foreign bank accounts everywhere in the world.
• The IRS now employs investigators around the world to check into the tax avoidance patterns that they learned about through the OVDI program with particular banking institutions
• The IRS now has the ability to issue a “John Doe” summons, allowing them to find out more information on anyone’s foreign account who they suspect of hiding assets.
• The IRS has new methods of collecting background including new information sharing deals with other foreign countries, and the new Foreign Account Tax Compliance Act of 2009. This legislation aims to prevent U.S. persons from hiding their identity behind a foreign corporation, trust, foundation or other type of foreign entity. In addition they are using the Patriot anti-money laundering provision to build cases.
• The IRS doesn’t care if the information they receive is stolen. For example, WikiLeaks recently published a stockpile of information of confidential offshore account with. The Julius Baer Group, a leading Swiss private banking group.
• The IRS provides substantial incentives for anyone who knows compromising information about someone else’s offshore accounts. They will give some informants up to 30% of whatever the IRS collects. And they don’t care who the informant is or whether they have an axe to grind. Ex-spouse? Bring her one! Ex-lover, well why not? Or how about an ex-business partner, battling family members, or even private investigators? Sure thing.

To put this in perspective, the IRS has learned more in 2009 and 2010 then it did in the prior ten years. And those who still stick their heads in the sand can expect the IRS to learn even more in 2011.

So what does this mean to those who still haven’t come forward? An even bumpier ride through the next storm, according to Atty. Parent: “For non-reporting taxpayer, the optimal decision was 10 years ago,” he says. “But now, it’s as if these folk are on a barrier island in the wake of a storm surge without having made any preparations.

Should they hunker down and attempt to ride it out? There are risks with that. Should they flee the country for good? There could be even more risks with that. A lot of people took an expensive ferry ride off the island in the previous deal through the 2009 OVDI. But they are at least now safe. For those remaining on the island, the forecast is bleak and it is imperative that they make an informed decision now. “

He points out that the 2011 OVDI will be even more expensive for these hold outs. “This round could be so expensive it may completely destroy most or all of their wealth,” he cautions. “For some, it will make a lot of sense to pay the price to get on with their lives. But there is a lot of resistance from people whose off-shore investments represent a substantial portion of their net worth. If they come clean, they could well end up with a tax bill that outstrips their ability to pay. Some will actually consider expatriation, renouncing citizenship as the only way to fully leave the grasp of the IRS. Others will consider what is called a “soft” disclosure. This may sound appealing, but there are hidden risks to those as well.”

He concludes with the warning against doing nothing: “The important thing is that people understand that they must do something. They must work with professionals who can help them sort out their options and evaluate them unemotionally. Pretending the storm has not arrived is like packing a picnic for a day at the beach in the face of a typhoon [and ignoring the weather alerts]. It won’t be pretty and there may not be much left when it blows over.”

About IRS Medic

IRS Medic at Parent & Parent is a practice of tax attorneys that works to resolve tough tax problems for businesses and individuals in the US and overseas. These issues can range from unfiled taxes to audits, liens, penalties, other federal and state agency tax actions and business recovery. Attorney Anthony Parent founded the firm in 2003 to help clients deal with difficult tax problems. He combined an academic background in finance with a law degree to develop the foundations of the practice. The firm recently moved its headquarters into the historic Charles D. Morris House in Wallingford, CT. They also have offices in Farmington, and Norwalk, CT as well as Switzerland. For more information, see www.irsmedic.com.

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