The GAO report [PDF 3.51 MB]—Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion (GAO-13-318, dated March 27, 2013):
- Describes the nature of the noncompliance of 2009 OVDP participants
- Determines the extent to which the IRS used the 2009 OVDP to prevent noncompliance
- Assesses IRS efforts to detect taxpayers trying to circumvent taxes, interests, and penalties that would otherwise be owed
As of December 2012, four IRS offshore programs resulted in more than 39,000 disclosures by taxpayers and over $5.5 billion in revenues collected. For the 2009 OVDP, the GAO reported that:
- Nearly all program participants received the standard offshore penalty—20% of the highest aggregate value of the accounts—meaning the account value was greater than $75,000 and taxpayers used the accounts (e.g., made deposits or withdrawals) during the period under review.
- The median account balance of the more than 10,000 cases closed to date under the 2009 OVDP was $570,000.
- Participant cases with offshore penalties greater than $1 million represented about 6% of all 2009 OVDP cases, but accounted for almost half of all offshore penalties.
- Taxpayers disclosed a variety of reasons for having offshore accounts, with more than half having Swiss bank accounts.
Using 2009 OVDP data, the IRS identified bank names and account locations that helped it pursue additional noncompliance. Based on a review of cases, the GAO found examples of immigrants who stated in their 2009 OVDP applications that they were unaware of their offshore reporting requirements, and IRS officials said they have not targeted outreach efforts to new immigrants.
The IRS detected some taxpayers with previously undisclosed offshore accounts attempting to circumvent paying the taxes, interest, and penalties that would otherwise be owed. Still, based on its review of IRS data, the GAO found that the IRS may be missing attempts by other taxpayers attempting to do so.
The GAO analyzed amended returns filed for 2003-2008, matched them to other information available to the IRS about taxpayers' possible offshore activities, and found many more potential quiet disclosures than IRS detected.
Also, the GAO found that the IRS has not researched whether sharp increases in taxpayers reporting offshore accounts for the first time is due to efforts to circumvent monies owed. From 2007-2010, the IRS estimated that the number of taxpayers reporting foreign accounts nearly doubled to 516,000.
The GAO recommended that the IRS:
- Use offshore data to identify and educate taxpayers who might not be aware of their reporting requirements
- Explore options for employing a methodology for more effective detection, pursue “quiet disclosures,” and implement the best option
- Analyze first-time offshore account reporting trends to identify possible attempts to circumvent monies owed and take action to allow for taxpayer compliance