Another measure taken is cracking down on tax cheats who hide their taxable assets in offshore bank accounts. Since 2009, the IRS has held the Offshore Voluntary Disclosure program (OVDP) three times targeted at giving opportunity to those with taxable income overseas the chance to come clean by disclosing their assets in exchange for lower penalties and a waiver of criminal prosecution. The latest OVDP is currently ongoing with no official deadline for participants to come forward to declare their offshore accounts. The penalty rate under the current voluntary disclosure program is 27.5%. According to the IRS, this is an increase of 2.5% from the 25% in 2011.
The IRS recently announced that over the last 3 years since the OVDP has been held, some 33,000 taxpayers have participated resulting in a collection of about $5 billion in taxes. In a statement to Bloomberg News, IRS Commissioner Doug Shulman commented, "We're going to crack down on people who are willfully hiding assets overseas and not meeting their obligations. And if there are people who are caught up in this who we can help get back in the system in a seamless way, then we’re going to do that." Although the sum of $5 billion may seem like a lot but it pales in comparison to the tax gap of $385 billion.
As such, lawmakers are formulating a new law set to take effect in January – the Foreign Account Tax Compliant Act – that makes it mandatory for all foreign banks to declare to the IRS the existence of accounts held by Americans. In view of the law’s imminent enforcement, many foreign banks have begun to get their US customers to sign forms to abrogate their rights to confidentiality of their account information, inform the IRS of their accounts, allow the banks the right to divulge information about their accounts to the IRS and waive the banks' legal liabilities.