IRS recovers $5.5 bn from tax cheats

Government investigators said over 39,000 tax cheats had come clean under a series of programmes that offered reduced penalties and no jail time to people who voluntarily disclosed assets they were hiding overseas AP reports. In all, the Internal Revenue Service (IRS) recovered over $5.5 billion. There was more though, according to the report.

The Government Accountability Office (GAO) suspects that thousands of other taxpayers had quietly started reporting foreign accounts without making any payments of penalties or interest. According to a  new report by the government watchdog, the number of people reporting foreign accounts to the IRS nearly doubled from 2007 to 2010, to 516,000 accounts.

The report said the sharp increase suggested that  some people were simply starting to report their accounts without being part of the disclosure programmes.

"IRS has detected some taxpayers with previously undisclosed offshore accounts attempting to circumvent paying the taxes, interest and penalties that would otherwise be owed," the report said. "But based on GAO reviews of IRS data, IRS may be missing attempts by other taxpayers attempting to do so."

According to the report, some taxpayers tried to avoid penalties through a technique the IRS called "quiet disclosure," in which they filed amended tax returns that reported offshore income from prior years. The report added, others simply declared existing offshore accounts for the first time with their current year's tax return.

"If successful, these techniques result in lost revenue for the Treasury and undermine the offshore programs' fairness and effectiveness," the report said.

According to Peter Zeidenberg, a partner at the law firm DLA Piper in Washington, it was pretty obvious that people had started reporting foreign accounts that probably existed for years.

According to IRS commissioner Steven Miller, catching overseas tax dodgers was a top priority of the agency. In a written response to the report, he said the agency was working to bring about improvement in the way it identified people who were still trying to get around the agency's disclosure programmes.

The IRS had run four voluntary disclosure programmes since 2003 and the last three - in 2009, 2011 and 2012 - had yielded almost all of the $5.5 billion in back taxes, penalties and interest. The latest programme was still open.