IRS: Don't wait for new offshore deal

WASHINGTON (Reuters) - There will be no new deal for rich Americans seeking to come clean about offshore income once an amnesty deadline expires next week, the head of the U.S. Internal Revenue Service told Reuters on Thursday.

IRS Commissioner Douglas Shulman said in an interview the amnesty was just one part of broad crackdown on offshore tax evasion that would include more audits of high-wealth individuals.

Shulman said the deterrent impact is just as vital to the effort as the revenue it might generate.

"It's about sending a signal to people that we are going to be much more focused... we're going to have some breakthroughs that you haven't seen in the past," he said.

The voluntary disclosure initiative that was launched in late March was extended recently to October 15, from an initial September 23 deadline, to cope with the rush of people coming forward.

But Shulman warned the amnesty window is closing. "We ran an initiative that says you have six months to come clean and that's what it is."

Under the amnesty offer, wealthy Americans who come forward to declare income from offshore or secret bank accounts get the certainty of reduced fines and general immunity from criminal prosecution. The tax evaders must pay back taxes and interest, plus a penalty of 20 percent of their highest account balance over several years.

The amnesty program has attracted more than 3,000 individuals so far. "I think it was tough but fair," Shulman said.

Individuals who hid illegally sourced income do not qualify for the amnesty. Those who set up elaborate separate companies to hide their income also do not generally qualify.

Before the program, individuals who hid their foreign holdings faced a potential fine of 50 percent of the highest account balance for each year.

TURNING UP THE PRESSURE

Tax lawyers with wealthy clients have speculated that after the October 15 deadline, the IRS may adopt some kind of regime tougher than the amnesty program but less harsh than original disclosure guidelines.

Shulman would only say that the underlying penalties for tax evaders will stand, and warned that those seeking a better deal should act before the deadline next week.

"We've been turning up the pressure in the last year and we're going to turn it up going forward," he said.

Governments around the world have cracked down on tax evasion as they look to close widening budget gaps fueled by economic weakness.

The centerpiece of the U.S. tax recovery effort has been its legal case against Swiss banking giant UBS AG (UBSN.VX), which earlier this year agreed to pay $780 million to settle criminal claims that it helped U.S. citizens evade taxes.

In August, UBS agreed to turn over 4,450 names of American clients with undisclosed offshore accounts to settle a civil suit by the U.S. government.

U.S. officials, including Shulman, have said the crackdown is not limited to one bank, though they have declined to name any other financial institution that may be under inquiry for helping Americans evade taxes.

A congressional investigative committee has said nearly $100 billion is lost annually from offshore tax evasion by individuals and corporations.

Shulman declined to estimate how much money the IRS hopes to bring in from its stepped-up enforcement effort, but added: "Intuitively, we know, just from our experience the last year, there is money out there."

Lawyers for individuals taking part in the amnesty have said that a large majority of those turning themselves in are immigrants who might have inherited the money, some even who were fleeing the Holocaust.

They worry the IRS is reining in more small fish than intended.

Shulman said there are provisions for people who have not touched an account in years that could help people in such situations.

"There are also plenty of people out there that were doing the wrong thing. Those people are coming in," he said.

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(Reporting by Kim Dixon; Editing by Tim Dobbyn)