Offshore Bank Accounts, Divorce & the IRS

Offshore Bank Accounts, Divorce & the IRS

Offshore Bank Accounts, Divorce & the IRS

Offshore Bank Accounts & Divorce: Many years ago while I was in Law School (which seems like forever-ago), I clerked for a former Chief Judge for Virginia State. He was an incredible attorney, and he taught me one very important tool for the effective practice of law.

It’s always ready, aim, fire — not ready, fire aim.

More often than not, hot-headed attorneys are all too quick to get aggressive — whether it is with opposing counsel or competitors — and miscalculate the situation to their (or their client’s) detriment.

This is never more true than in situations involving the IRS, Offshore Accounts and Divorce.

Typical Example of Offshore Accounts & Divorce

A married couple with a combined net worth of $5M+ are in the middle of divorce. The wife recently discovered that the Husband has offshore accounts which are held jointly with the woman he is having an affair with.

The wife is understandably pissed-off, and wants revenge.

The first question is: What can the wife do about this newly discovered information?

Of course, she wants to blow the whistle, but she should also think about the end-game and how to make the information as profitable as possible, right?

Family Law & Offshore Accounts

This wealthy married couple (Husband and Wife for the sake of this example) have grown apart and no longer enjoy each other’s company. They divorce and during the divorce, Wife uncovers a treasure trove.

It turns out the Husband has millions of dollars stashed away in offshore funds.

Wife is now in a serious position of leverage on all fronts.

First, when it comes to the divorce, Wife is in the top position. Wife has the ability to use this newfound discovery to leverage a better settlement or otherwise continue probing into Husband’s financial affairs.

Oftentimes, Husband will have other issues here he is hiding as well and would prefer that Wife just let sleeping dogs lie.

As a result, they agree to a settlement which is much higher than Wife would’ve initially believed available because Wife was unaware of the $9 million that Husband has been hiding offshore.

This is a good thing (at least for the Wife).

IRS Offshore Disclosure Aspect

On the other hand, this could actually turn out to be a very bad thing for both Husband and Wife.

Why?

Because the spouses filed married filing jointly (MFJ). Therefore, from the IRS’ perspective, each year the couple filed MFJ is a year in which both spouses will be liable on the tax return.

Therefore, for each year in which the account was not reported and the resulting income was not disclosed to the IRS is another year in which both parties may be subject to significant fines and penalties.

This will impact the amount of money left in the marital settlement, because, if the Internal Revenue Service believes the spouses acted willfully (which it seems like Husband did), then the IRS can come after them for upwards of 50% value of the account per year in penalties.

When this number is multiplied by three or six years depending on how long the audit is for, the penalty can max out at 100% (it used to be 300%, but the IRS was nice enough to limit the penalty to 100% value of the money).

What Do You Do?

Especially when a divorce is acrimonious (and really, when is it not?), Wife wants to run off to the IRS and disclose the information she learned about her husband.

This is not the best way to go about it; in fact, it is a horrible idea, especially in light of all the potential offshore penalties.

Offshore Voluntary Disclosure

The IRS has developed and implemented numerous offshore voluntary disclosure programs designed to safely bring individuals into compliance.

These programs are available whether or not the spouse knew or was unaware of the accounts.

And, even though the penalties can sometimes be a little steep depending on which program the person enters, typically the clients avoid any criminal prosecution.

Moreover, one spouse can enter the program even if the other spouse does not want to cooperate.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.

*Please beware of copycat tax and law firms misleading the public about their credentials and experience.

Less than 1% of Tax Attorneys Nationwide Are Certified Specialists

Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.

Recent Golding & Golding Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.

How to Hire Experienced Offshore Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • Board Certified Tax Law Specialist credential
  • Master’s of Tax Law (LL.M.)
  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience
  • Dually Licensed as an EA (Enrolled Agent) or CPA

Interested in Learning More about Golding & Golding?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant. 

Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.

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