Criminal Results of IRS Offshore Push Prove Lenient
GUEST BLOGGER
Matthew Walsh
WithumSmith+Brown
Princeton, NJ
Starting in 2009, the U.S. government began an outward push to punish those taxpayers who hold foreign bank accounts and have previously neglected to report them on the informational Foreign Bank Account Report. While multiple amnesty programs have been released that offer civil penalties in turn for immunity from criminal prosecution, these programs are contingent upon acceptance into the program by the Internal Revenue Service (IRS) and carry hefty fines.
Since 2009, U.S. officials have charged at least 71 taxpayers with crimes related to hiding offshore accounts. Compared with other criminal tax cases, judges have consistently delivered rulings that err on the lenient side in terms of prison time. For comparison purposes, the average sentence in a tax shelter case over the past three years has carried prison time of 30 months. From the start of the government’s push to prosecute offshore account holders, the average sentence handed down in these types of cases has been less than half that.
What causes the discrepancy in sentencing between one form of criminal tax behavior and another? Experts point to many factors. For one, the Offshore Voluntary Disclosure Initiative amnesty programs have been successful. These programs have admitted more than 39,000 taxpayers, raising more than $5.5 billion dollars. Cooperation by defendants has also contributed toward the lower than recommended sentencing. Cooperation by the defendants is extremely valuable to investigators, as they are able to use information from defendants to seek out banks and other account holders who have failed to report. On the justice side of the decision, some judges have found it unfair to jail defendants when many of their circumstances match those who settle their case civilly upon acceptance into the OVDI program. Finally, judges take into consideration sentencing in similar hearings when deciding upon the case. Since the precedent of lenient incarceration rulings has been set, judges have been more likely to continue the trend.
While lower than recommended sentences have, on average, been handed down in offshore account cases, playing roulette with the IRS and the justice system is never recommended, and taxpayers should still make necessary strides to become compliant.
