National Taxpayer Advocate Nina Olson says that the IRS' treatment of criminal tax evasion is unfair when compared to how the IRS treats individuals who unintentionally shielded assets from U.S. taxation. The National Taxpayer Advocate is an autonomous figure within the IRS who addresses taxpayer issues. The recent wave of offshore bank account-related activity has drawn the advocate's attention and she has decided to speak out against the disparities in the IRS's approach toward different classes of taxpayers.

We have discussed the issues surrounding offshore bank accounts in previous posts. Although many Miami residents may think of an offshore bank account as some secret Swiss account owned by a millionaire, many dual citizens of average means come across offshore bank account issues as well. American citizens are required to pay tax on their worldwide income, so an account in a dual citizen's second country of citizenship may violate that person's income tax or reporting obligations.

Another common issue arises when a person inherits a bank account which was not properly disclosed to the IRS. There are forms and documentation requirements for offshore accounts including FBARs, or Report of Foreign Bank and Financial Accounts. An experienced tax law attorney can help explain the requirements and obligations associated with your particular account and help you decided on how to best move forward. Ideally, the disclosure of an account should result in no criminal penalties and minimal penalties, but there are various factors which go into the determination of which consequences are possible for a taxpayer.

Source: Bloomberg, "IRS Called Easy on Criminal Tax Evaders in Watchdog's Critique," Jan. 17, 2012