In its annual call-out of common scams to defraud federal coffers, offshore tax evasion still ranks high for the Internal Revenue Service (IRS).
The IRS “Dirty Dozen” is a yearly guide provided by the agency to identify and deter some of the more common criminal tax matters perpetrated each year by individuals or their tax preparers.
Along with other schemes and scams, offshore tax cheating remains a prominent concern of the IRS. While investment in offshore tax interests is legal, failing to disclose or report offshore holdings is a tax crime.
Due to declining participation and greater awareness of offshore reporting requirements, the
IRS is closing its Offshore Voluntary Disclosure Program (OVDP) on September 28, 2018. As we mentioned earlier, the program gave taxpayers the opportunity to voluntarily disclose and rectify irregular offshore investments. Since 2009, the IRS program has served 56,400 customers and collected more than $11 billion.
Headlines in recent years have highlighted the popularity of using offshore banks to conceal assets. Celebrities, politicians, athletes and other high-asset individuals use offshore accounts for investment and transactional purposes. As long as the assets are disclosed and taxes paid, all is good. For these taxpayers, the Report of Foreign Bank and Financial Accounts (FBAR) is due each year by June 30.
What constitutes offshore tax cheating?
There are many ways to conceal assets in offshore or foreign accounts. Just a few of the vehicles used for abusive tax schemes highlighted by the IRS include:
- Related-party loans
- Offshore private annuities
- Foreign trusts, partnerships, and corporations
- Credit cards associated with offshore banks
Two prominent avenues for offshore tax fraud include exploiting the differences in taxation between foreign persons and US citizens, and taking advantage of hazy regulatory areas.
There is no shortage of fronts for offshore deception. Dummy corporations, documents, and transactions are routinely churned out to return secret offshore money to the US in ways that throw auditors off the trail. The idea is to hide the money as it goes out, and conceal its use on its return to the States.
As the OVDP comes to an end, the IRS is not stepping down on its pursuit of undisclosed offshore monies, it has enhanced its investigation and scrutiny of offshore accounts. In addition, in December 2017, Mark Daly, Senior Litigation Counsel on Tax Fraud with the Department of Justice (DOJ) announced a major shift – from federal sentencing based on the loss of tax to the IRS to sentencing based on the entire value of an undisclosed offshore bank account. Higher dollar values mean longer prison sentences.
Get good legal advice if you are noncompliant
If you know or suspect you, or your business, are out of compliance in offshore reporting, you need good legal advice. There are usually options to voluntarily correct your filings before you become the subject of an IRS criminal investigation.
The Dirty Dozen list highlights where the IRS is going to focus its energies. Get skilled legal representation before that focus falls on you.
Experienced tax attorneys serving local, national, and international tax clients
In Cleveland, Chicago, and internationally, Robert J. Fedor, Esq., LLC provides decisive, confidential legal strategies and solutions for persons or entities facing tax challenges from the IRS. Contact us or call 800-579-0997 today.
