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IRS slammed for savage offshore cash penalties
| Published: | 27 Jan at 6 PM |
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An annual report by the USA’s consumer watchdog Nina Olson has revealed that the IRS has hit out unfairly at taxpayers who inadvertently broke tax laws when making their annual returns.
Olson stated that the IRS has been unreasonably zealous in pursuing taxpayers who had made genuine mistakes in declaring their offshore holdings. Even worse, her study revealed that taxpayers who decided not to voluntarily disclose their holdings were hit with automatic audits resulting in penalties of 70 per cent of the unpaid tax and interest.
Opt-outs will, she said, have paid less than those who opted for the voluntary disclosure, but the arbitrary fines were unreasonable. Taxpayers declaring the minimum amount of $87,145 were disproportionately billed for penalties six times higher than the unpaid tax.
US Expats living abroad have already voiced their concerns, with many using the lobby group American Citizens Abroad to voice their displeasure. The group has been active in condemning the IRS’s attitude to expats who have made genuine mistakes due to a lack of understanding of the authority’s rules.
Olson, appointed in 2001 as national taxpayer advocate, says she has made dozens of recommendations via her annual reports, but only 15 have been taken on board. More than seven million US citizens live overseas, but only 807,000 overseas bank reports have been sent to the IRS.
Thousands of US citizens living in the country and holding offshore accounts have also failed to file reports of their overseas holdings. American Citizens Abroad is also fighting against FATCA, due to come into force next July.
Olson stated that the IRS has been unreasonably zealous in pursuing taxpayers who had made genuine mistakes in declaring their offshore holdings. Even worse, her study revealed that taxpayers who decided not to voluntarily disclose their holdings were hit with automatic audits resulting in penalties of 70 per cent of the unpaid tax and interest.
Opt-outs will, she said, have paid less than those who opted for the voluntary disclosure, but the arbitrary fines were unreasonable. Taxpayers declaring the minimum amount of $87,145 were disproportionately billed for penalties six times higher than the unpaid tax.
US Expats living abroad have already voiced their concerns, with many using the lobby group American Citizens Abroad to voice their displeasure. The group has been active in condemning the IRS’s attitude to expats who have made genuine mistakes due to a lack of understanding of the authority’s rules.
Olson, appointed in 2001 as national taxpayer advocate, says she has made dozens of recommendations via her annual reports, but only 15 have been taken on board. More than seven million US citizens live overseas, but only 807,000 overseas bank reports have been sent to the IRS.
Thousands of US citizens living in the country and holding offshore accounts have also failed to file reports of their overseas holdings. American Citizens Abroad is also fighting against FATCA, due to come into force next July.
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