Offshore Tax Evasion & the IRS

Offshore Tax Evasion & the IRS

Offshore Tax Evasion

Offshore Tax Evasion: For decades, the IRS has been actively pursuing matters involving offshore compliance. But in the past few years, the number of offshore criminal investigations have been steadily rising, including FATCA criminal indictments and FBAR criminal indictments —  traditionally these were civil violations. When it comes to offshore and international tax related matters, evasion typically involves money laundering and/or structuring in addition to foreign account, asset, and investment reporting non-compliance — and not just missing the FBAR filing requirement. 

When a person is willful, neither the Streamlined, Delinquency nor Reasonable Cause options are available.

Rather, the person submits to the traditional Voluntary Disclosure to try to avoid a tax evasion investigation.

Is Tax Evasion a Crime?

Yes. Unlike other violations, tax evasion is a crime that is codified under 26 USC 7201.

26 USC 7201

“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

Offshore Tax Crimes

Offshore tax crimes come in all different flavors.

It is important to note that not all tax violations are criminal.

Oftentimes taxpayers reach out to us after being fear-mongered into believing that every violation of FBAR, FATCA, etc. will land them behind in prison — it won’t.

Standard of Proof

It is important to remember that since tax evasion is a crime, the U.S. government must prove their case by beyond a reasonable doubt, and not merely preponderance of the evidence (Civil FBAR) or clear and convincing evidence (Tax Fraud).

Examples of Offshore Tax Evasion

Here are some of the more common (potential) offshore tax evasion scenarios:

  • David earns significant money from selling and exchanging cryptocurrency held overseas. David knows he is supposed to report the income, but he knowingly and intentionally does not include it on his U.S. tax return.
  • Michelle opened several investment accounts in her name in different countries to escape detection (pre-FATCA). Michelle is a U.S. Person and is aware that she is required to include the income on her tax return, but she knowingly and intentionally excludes it from her tax return.
  • Scott operates a business overseas. He has significant profits, but instead of distributing the income, he has the company pay all of his (lavish) personal expenses and writes them off as business expenses. He knows they are not proper deductions, but thinks he will not get caught.

Examples of Non-Offshore Tax Evasion

  • David was unaware he had to report his foreign accounts or the income associated with it. His CPA never asked him about it, and he only recently learned of the reporting and tax requirements.
  • Michelle never reported her foreign income, because she was unaware that her tax exempt interest in Taiwan was reportable and taxable in the U.S.
  • Scott never disclosed his foreign pension income from a non-treaty country on his tax return, because he sincerely misunderstood the reporting requirements and sincerely believed it was not reportable in the U.S.

Offshore Amnesty: We All Have 20/20 Hindsight

One of the most important aspects of determining whether a person is guilty of tax evasion or fraud is the intent of the individual.

And, whether a person is willful (criminal vs civil) or non-willful will impact which IRS Disclosure program they should submit to.

Here are a few things to keep in mind:

Are You Very Risk Averse?

Some individuals are by nature, very risk-averse.

They would never do anything to put themselves in harms way.

For these individuals, the moment they even read about IRS international tax penalties, they are convinced they will be heading to prison, even when it is clearly not the case based on their own specific facts and circumstances.

Do You Like to Walk the Line?

Other individuals tend to like to walk the line, for better or worse.

Since these types of individuals are inherent risk-takers, they may believe they could sneak by the IRS by entering the Streamlined Program (even though they are willful) or even riskier (and illegal) by submitting a Quiet Disclosure.

Analyze YOUR Facts, Not Someone Else’s Facts

Be sure to take a step back and make sure you are assessing the situation using your own fact-pattern, and not one you may have read online.

Foreign Banks ARE Reporting

These days, with more than 110 countries and hundreds of thousands of foreign financial institutions entering into intergovernmental agreements (IGAs) with the United States for the enforcement and reporting of U.S. account holders, it is a much riskier move to try to hide your money offshore.

Whistleblowers & Informants are Everywhere

Unfortunately, this a fact of life.

Now more than ever, the U.S. government is able to track taxpayers through social media and other media outlets.

Once a person gets caught, it is not uncommon for them to turn on anyone they can, to save their own hide.

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.

How to Hire Experienced Foreign Accounts Counsel?

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

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

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+.