The Government Accountability Office has asked Congress to consider enacting a statute period longer than three years for taxpayers involved in questionable offshore activities.
The GAO said it began researching the effects of the existing statute based on the fact that numerous illegal offshore schemes have been devised to hide or disguise the true ownership of income streams and assets. According to its recently issued report, the GAO said that under the current three-year statute, the additional time needed to complete an offshore examination often results in the Internal Revenue Service having to prematurely end offshore examinations, or choose not to open an investigation at all, despite evidence of likely noncompliance.
Audits involving offshore tax evasion take much more time to develop and complete than other examinations for reasons such as technical complexity and the difficulty of obtaining information from foreign sources. The GAO also noted that the median assessment from an offshore audit is almost three times larger than other types of audits.
The GAO said that disadvantages from changing the statute would be increasing taxpayer uncertainty, although staff had discussed options to lessen that uncertainty, such as making an exception apply to all taxpayers having offshore accounts or entities.
The IRS agreed that a longer statute makes sense and should enhance compliance. Congress has granted a statute change or exception in the past for similar enforcement problems, such as when it changed the statute for certain abusive tax shelters that involved technical complexity and negligent taxpayer tactics.
The full GAO report is available at
