It will soon get a lot harder to use overseas accounts to hide income and assets from the Internal Revenue Service.
More than 77,000 foreign banks, investment funds and financial institutions have agreed to share information about American account holders with the IRS as part of a crackdown on offshore tax evasion, the Treasury Department announced on Monday.
The list includes 515 Russian financial institutions. Russian banks had to apply directly to the IRS because the United States broke off negotiations with the Russian government as a result of an information-sharing agreement because of Russia's actions in Ukraine.
Almost 70 countries have agreed to share information from their banks as part of a law that targets Americans hiding assets overseas. Participating countries include the world's financial giants, as well as many places where Americans traditionally hid assets, including Switzerland, the Cayman Islands and the Bahamas.
Starting in March 2015, those financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by taxpayers.
Under the law, foreign banks that don't agree to share information with the IRS might pay steep penalties when doing business in America. The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program — a significant price for access to the world's largest economy.
More than half the world's money passed through the secretive world of offshore banking, according to “$hadow Economy,” a national award-winning 2012 Tribune-Review investigation. As much as $25 trillion — almost $10 trillion more than the gross national product of the United States — was stashed in 70 or more countries whose banking laws allowed individuals and corporations to mask their wealth from the Internal Revenue Service and avoid paying taxes that help fund the federal budget, the Trib discovered.
To demonstrate how easy it is for people to stash money out of the IRS' reach, two Trib reporters spent less than $1,000 to set up a shell company and bank account in Belize that was accessible through ATMs. Thousands of U.S. taxpayers took advantage of an IRS program begun in 2003 that reduced penalties for people who admitted to hiding money offshore, resulting in more than $5 billion in back tax collection.SOURCE