IRS eases rules for taxpayers to disclose offshore accounts

The Internal Revenue Service is making it easier for some U.S. taxpayers to disclose offshore accounts.

The changes open the simplified version of the IRS voluntary disclosure program to people with larger tax debts, eliminate a questionnaire and require taxpayers to say that any violations weren’t willful.

The IRS Wednesday also announced higher penalties for taxpayers whose banks and advisers are under investigation for allegedly aiding tax evasion. The agency encouraged those taxpayers to come in under a more complicated procedure that allows some protection from prosecution.

“If you’re engaged in willful tax evasion, time is getting quite short for you to come in,” Mike Danilack, an IRS deputy commissioner, said at a news conference in Washington. “Enforcement efforts in this area are continuing to thrive. We are very intent on stamping out noncompliance in this area.”

Typically, taxpayers who come forward must pay back taxes and penalties. For the IRS, the voluntary disclosure program has provided a way to gather information about taxpayers and promote future compliance.

“This opens a new pathway for people with offshore assets to come into tax compliance,” IRS Commissioner John Koskinen said in a statement. “We provide additional flexibility in key respects while maintaining the central components of our voluntary programs.”

Worldwide income

Unlike most countries, the U.S. taxes its citizens on income they earn around the world, creating a burden for many expatriates and people who have birthright citizenship but little other connection to the country.

The announcement comes before the July 1 effective date of the Foreign Account Tax Compliance Act, which requires banks outside the U.S. to report accounts held by U.S. taxpayers.

Since the IRS began a voluntary disclosure program in 2009, more than 45,000 people have come forward, resulting in about $6.5 billion in back taxes, interest and penalties, the agency said.