Concealing assets and value in foreign bank accounts during divorce can lead to an IRS criminal tax investigation.
For high wealth individuals and couples, the use of offshore tax havens is common. When done legally, placing wealth in offshore jurisdictions can protect and grow wealth. Filing FATCA and FBAR reports on foreign wealth ensures the Internal Revenue Service (IRS) is informed of your offshore holdings and maintains your compliance with these important tax regulations.
For individuals or couples of any kind of wealth, divorce upsets the apple cart. If you have maintained compliance in the reporting of your domestic and foreign holdings, the work before you is to split the holdings in keeping with agreements approved or ordered by the court.
If couples or one partner are maintaining unreported offshore or foreign bank accounts, divorce can create financial havoc and could trigger allegations of tax crimes, restitution, and penalties. Consider these points:
- Offshore accounts are relatively easy to open and to keep secret. Oftentimes a higher earning partner understands divorce is on the horizon and quietly safekeeps wealth in secrecy jurisdictions where it is not likely to be disclosed during divorce.
- If one partner is concealing assets held in foreign bank accounts, the natural investigation that occurs during a divorce proceeding may (or may not) reveal the wealth to the other party—especially if the divorce is litigated or acrimonious. Partners who hire forensic accountants have a better chance of discovering hidden wealth.
- For couples who filed joint tax returns, while only one (or both) parties knew of the unreported offshore holdings, both parties can be held accountable by the IRS for penalties and forfeitures if their assets were not properly reported.
- Failure to file a FATCA form can lead to penalties between $10,000 and $50,000 and higher. Falling out of compliance with FBAR filings can cause a fine of $100,000 or a percent of the value of the foreign-held account.
- During a bitter divorce, the discovery of secretly held wealth can encourage the wronged partner to contact the IRS—which could result in tax litigation involving both parties and potential eventual loss of the assets to fines and penalties.
Divorce is never pretty—and it is often expensive. If you are concealing unreported assets in an offshore tax account, the IRS is already interested in you. Whether or not you are heading for divorce, work with an experienced IRS tax lawyer to protect your wealth by bringing your accounts into compliance before you receive notice of an IRS audit.
Concerned about criminal tax fraud? We offer experienced criminal tax defense in Chicago and across the country
If you are involved in an offshore tax fraud or other tax issue, contact Robert J. Fedor, Esq., LLC for a confidential consultation. With offices in Cleveland, Ohio, and Chicago, Illinois, we deliver aggressive legal representation to resolve or deter tax litigation and help you legally shelter your investments. Contact us or call 800.579.0997 today.