Irs Ends Amnesty for Use of Overseas Tax Havens

IRS Ends Amnesty For Use Of Overseas Tax Havens

Question 1: What is a tax haven? Why is the use of tax havens attractive to individuals and corporations? Why has the IRS chosen to crackdown on the use of tax haven accounts?

    Tax havens are particular countries or territories where individuals and/or corporations are not taxed or low taxed on their money. Examples can be Switzerland, Luxembourg, the United Arab Emirates or the Cayman Islands. American citizens or corporations tend to evade the U.S. tax system in order to avoid paying the taxes on their income or on amounts of money they have; for the account to be considered an illegal undeclared one, it should be equal or grater than $10K. According to the IRS, tax evaders are mostly individuals who inherited money, survived from the Holocaust or simply are businessmen and women that decide to hide their money to avoid U.S. taxation. Because of this system, the U.S. government is lacking tax revenues as much as $100.000.000 billion each year; the IRS is aware of the huge amount of money lying in secret offshore accounts and decided to chase the evaders with a stronger emphasis. Therefore, the IRS is encouraging tax evaders to come forward through an amnesty program with which they can declare any untaxed illegal account and avoid criminal prosecution in exchange for some conditions, such as paying back taxes; the effort is directed towards recovering part of the government lacking revenue and ensure that those individuals that make a voluntary disclosure in regards to their offshore accounts will actually be paying taxes on their money in the future, and it is considered to be a great opportunity for other offshore accounts owners to come clean without having to face more serious legal and financial consequences once discovered after the deadline of the amnesty program.

Question 2: What does the recent action of the IRS mean to companies like USB that build their reputation on client confidentiality and...