Robert J. Fedor, Esq., L.L.C.

Foreign accounts and entities often red flag for IRS

Much like you'd rely upon a doctor for physical health, many people rely upon the advice of a tax professional when attending to their financial health. This is especially true for those individuals who own a business and likely have tax issues that are more complex in nature.

It's the professional goal of tax preparers to help their clients retain as much wealth as possible. Tax professionals often have a wealth of knowledge related to so-called tax loopholes and readily advise clients on ways to avoid paying high amounts of taxes. In some cases, however, the methods employed by some tax professionals teeter a bit too closely on the line what is and what is not legal.

The Internal Revenue Service recently prevailed in a tax fraud case against a prominent doctor. According to court documents, the doctor was accused of using offshore accounts to hide and funnel millions of dollars in assets. The doctor and her husband owned and ran two Caribbean medical schools. Upon selling the schools in 2007, the IRS asserts the doctor failed to pay taxes on the more than $35 million dollar sale.

Additionally, the doctor and her husband were accused of setting up accounts using nominee entities and a foundation. According to the IRS and U.S. Department of Justice, these actions were a direct attempt to "conceal assets and income". As a result of her recent conviction, the doctor now faces up to five years in federal prison as well as a $250,000 fine.

This case highlights now individuals and small business owners can get into tax trouble when using foreign or offshore bank accounts. In recent years, the IRS has cracked down on the use of foreign accounts and entities as tax shelters. Individuals who are facing criminal charges related to alleged tax crimes would be wise to contact a tax attorney.

Source: Herald-Tribune, "Englewood doctor found guilty of tax fraud," Oct. 25, 2013

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