Offshore Tax Dodgers Start to Sweat

Looks like a bad year for tax dodgers and their facilitators (see preceding post). In this week's Tax Report, The Wall Street Journal's Tom Herman reports that many wealthy Americans who bought illegal offshore tax shelters are "facing a difficult decision: whether to turn themselves in – and if so, how."

"People are having trouble sleeping at night," says Charles Rettig, a tax lawyer at Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills, Calif. "They don't want to go to prison."

Lawyers advising tax dodgers are saying their clients are struggling to decide among several alternatives. They can confess and plead for mercy. They can quietly file amended tax returns, pay up, make other required disclosures and hope overworked government prosecutors won't follow up. Or they could choose to do nothing and pray their names won't turn up.

The IRS has turned up the heat on offshore trusts and other shelters, offering higher rewards to informants. The rewards could be a good investment: offshore tax evasion costs an estimated $100 billion in lost revenue each year.