Overall, the number of indictments from the IRS's Criminal Investigation (CI) unit has declined in recent years, as the agency copes with budget and resource cuts. Notably, however, the number of international indictments has been rising, signaling the CI unit's increased focus on offshore tax evasion.
According to a Bloomberg Tax analysis of data from the CI unit's
2017 annual report
, international cases made up more than 9 percent of the unit's investigations in 2017 - the highest level in 10 years, and a hundred-fold increase over 2015 numbers. Further, the indictment rate - charges brought as a percentage of cases investigated - has gone up, as the government takes a more targeted approach to maximize its resources.
It's believed that the shift toward international indictments is due to the greater return on investment opportunity these cases present for the IRS, which needs to align its available resources strategically in the face of budget cuts. Instead of focusing on lower offenses, such as identity theft, the agency can strategically allocate resources to target holders of offshore accounts. Since 2009, offshore compliance programs, designed to help taxpayers correct previous shortcomings, have helped the government bring in upwards of $10 billion dollars. Now, the IRS is increasing its enforcement of Foreign Bank and Financial Accounts reports (FBARs), which should theoretically lead to an additional windfall for the agency.
Penalties for failure to file FBARs can be significant. Those who are found to have willfully and knowingly failed to file the form can be assessed penalties of $100,000 or 50% of the amount in the account at the time of the violation, whichever is greater. The IRS can go back several years and impose similar penalties for each offense.
The Department of Justice (DOJ) has also made prosecuting those who flout offshore tax rules a priority. On top of its investigations of Swiss banks that may have helped filers evade taxes, the Department is also looking at Asian banks that may be aware of clients who are noncompliant with U.S. tax filing rules.
The IRS, through its Offshore Voluntary Compliance Program, and the DOJ, through its Swiss Bank Program, are making a concerted effort to tackle noncompliant offshore tax filers. The data they gather through these efforts, coupled with a sharpened focus on FBARs, arm the agencies with greater resources and the information needed to detect those who don't conform with U.S. tax rules.