Offshore Tax Evasion in 2019 (IRS Pursues Evasion of Offshore Money)

Offshore Tax Evasion: If you intentionally or willfully hide or fail to report foreign income, assets, investments, or accounts, you may be guilty of Offshore Tax Evasion – which a Tax Crime.

What is Offshore Tax Evasion?

When a Taxpayer intentionally avoid paying U.S. tax on Offshore (aka international or foreign) income, it is a form of evading U.S. Tax — otherwise called “Offshore Tax Evasion.

This type of Offshore Fraud is a Tax “Crime,” and The IRS has made the enforcement on Offshore Tax Evasion, and other offshore or foreign related crimes a priority. So much so, that the IRS has recently created new enforcement units to pursue these “criminals”

Offshore Tax Evasion in 2019 (IRS Pursues Evasion of Offshore Money) - Golding & Golding

Offshore Tax Evasion in 2019 (IRS Pursues Evasion of Offshore Money) – Golding & Golding

Offshore Tax Evasion is the process of knowingly or willfully (including reckless disregard) illegal reducing your tax liability by not reporting your offshore or foreign income, or falsifying deductions and expenses.

What is the IRS Definition of Offshore?

When people think of offshore, their mind immediately takes them to a beach in the Cayman Islands or a Villa in the Bahamas, but this is not accurate (at least from the IRS’ perspective)

When the IRS speaks of the term offshore, they are essentially referring to any country that is outside of the United States (aka Foreign, Overseas, Abroad, etc.) and not just “Tax Havens.”

The IRS estimates that it loses several billions dollars annually as a result of people who have hidden or otherwise not reported money their foreign money, and the IRS has made the collection of these monies and prosecution of these individuals and businesses and enforcement priority.

Would the IRS Consider Your Actions, Willful?

The most important aspect of the analysis is to determine if you we willful, or non-willful.

Willful

If you know or should have known (or acted with Reckless Disregard) that you had a duty to report the information on an FBAR (Report of Foreign Bank and Financial Accounts) or to the IRS on a U.S. Tax Return (8938 – Statement of Specified Foreign Assets), but intentionally do not report your accounts, then the IRS will want to try and prove you acted “willfully,” in order to collect massive fines and penalties from you.

If you knew you had to report but were unaware what a FBAR or FATCA Reporting was, it does not negate the issue of willfulness. If your CPA sent you a questionnaire that you completed improperly, chances are you are willful as well — unless you did not understand the questions in the questionnaire. 

Non-Willful

You are non-willful if you acted unintentionally and/or did not know you were required to either report or disclose your foreign income, accounts, or other specified assets.

Offshore Disclosure is the process of coming forward and disclosing overseas assets and foreign income to the IRS in exchange for (in most cases) a much reduced chance of prosecution by the Internal Revenue Service. Whether a taxpayer is Willful or Non-Willful will determine which Offshore Disclosure Program the taxpayer should enter — and what their penalty will be.

Whether or not an applicant will have to pay an OVDP penalty (and if so, how much they will have to pay) or qualify for a reduced penalty (or penalty waiver) under the Streamlined Compliance Procedures will depend on a few different factors – with the most important factor being whether the applicant was willful or non-willful.

What Was Your Intent?

One of the most important aspects of determining whether a person is guilty of tax evasion or fraud is the intent of the individual. It is very important that you understand that there must be some intent or Mens Rea (absent willful blindness or reckless disregard) to commit a crime such as, offshore tax fraud or tax evasion.

Unfortunately, depending on which website you land on in your quest to understand international tax law, you may draw the incorrect conclusion that you are guilty of some sort of tax crime solely because you have unreported foreign money.

Willful vs. Non-Willful

Examples of Unreported Tax and Income

We typically prefer to provide examples in our writing to give you a better factual understanding of more complex issues, such as this. For example:

Offshore Tax Evasion Example 1

David just moved to the United States a few years ago. Before moving here, he had several accounts in his home country of Hong Kong, which he did not know he was supposed to report in the United States. While David could be subject to certain penalties (and they might be unnecessarily high), it does not mean David is guilty of any crime.

Offshore Tax Evasion Example 2

Michelle opened a few foreign life insurance policies in case of an emergency, because her parents still live in the UK. The life insurance policy has an investment component to it, but Michelle had no idea, and was also completely unaware that she is required to report the information to the IRS. Like David, Michelle may be subject to significant penalties, but would presumably not be subject to a criminal investigation.

Offshore Tax Evasion Example 3

Finally, Peter worked in Australia for many years and was a Highly Compensated Employee (“HCE”). His Australian Superannuation Fund is worth a few million dollars, but Peter neither reported the account nor contributions — as well as did not book the increase in value as income. Peter could get hit with significant penalties and fines — but presumably nothing criminal.

Be Honest with Yourself

But, don’t be too judgmental either — we have 20/20 hindsight.

Are You Very Risk Averse?

On one side of the coin, there are the individuals who are very risk-averse and would never do anything to put themselves in harms way. For these individuals, the moment they read about IRS international tax penalties, they are convinced they will be heading to prison – even though nothing could be further from the truth.

Do You Like to Walk the Line?

On the other side of the coin, are the individuals who like to walk the line — as well as those who cross over that line into criminal territory — because they feel bulletproof. But fast-forward to 2017 and the enforcement priority by the IRS to find individuals and penalize them extensively under FBAR, FATCA, and other bothersome acronyms — and suddenly the chances of getting caught increase exponentially.

Since many of these types of individuals are 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.

Be Sure to Analyze Penalties with Your Facts, Not Someone Else’s Facts

Why you should not presume you are necessarily going to prison, you should not underestimate the IRS either. The reality is, while they are overworked and understaffed —  if you are one of the unlucky ones that gets stuck in their crosshairs, you could be subject to 100% penalty and seizure of both your domestic and foreign accounts. Moreover, if the matters is referred to the Criminal Investigation Department (CID, Special Agents) or Department of Justice (DOJ) you could find yourself potentially sitting in a prison cell for tax fraud or tax evasion.

Foreign Banks are Reporting

These days, with more than 100 countries and tens of thousands of foreign financial institutions entering into intergovernmental agreements (IGAs) with the United States for the enforcement and reporting of US account holders, it is a much riskier move to try to hide your money offshore.

Even using cash alternatives such as Bitcoin is no longer fail-safe. All one would have to do is see what happens to silk Road which thought it was full and operated on the underbelly of the Internet, to realize that even if you have Bitcoin, if the IRS wants to find it, they’ll find it.

Whistleblowers

Aside from the banks that are enforcing FATCA and proactively reporting your information the Internal Revenue Service, there’s also the issue of whistleblowers. These are individuals who approach the Internal Revenue Service with information about your accounts – you may know the name of the Whistleblower (Upset Business Partner, Scorned-Ex) or you many not.

For example, if a bank employee at your Swiss Bank in which you maintain a number account decides that he or she wants to try to make some money from the IRS, the person may report all the account information of all individuals who were considered US account holders, to the IRS – aka “blow the whistle on the Account Holders”

It would be unfortunate to get hit with such high fines and penalties due to a third-party you probably never met. 

How to Avoid an IRS Investigation

Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.

What Can You Do?

Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.

We Specialize in Safely Disclosing Foreign Money

We have successfully handled a diverse range of IRS Voluntary Disclosure and International Tax Investigation/Examination cases involving FBAR, FATCA, and high-stakes matters for clients around the globe (In over 65 countries!)

Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.

You Need an Attorney and Law Firm that is Highly-Experienced

We have successfully more than 1000 offshore Disclosures — including complex issues involving FATCA, PFIC, CFC, Foreign Mutual Funds, and more.

Some less experienced attorneys will rely on issuing a  “Kovel Letter” (since they do not have the tax experience needed to represent you) but it puts your confidentiality at risk.

The area of law is always changing, and due to recent updates in the law, including changes to various international tax agreements, regulations, statutes, and enforcement procedures — oftentimes even a “simpler” FBAR disclosure becomes an incredibly complicated process. 

Golding & Golding is a full-service International Offshore Disclosure Law Firm and Tax Firm specializing exclusively in OVDP and Offshore Disclosure maters.

We are the “go-to”firm for Attorneys, CPAs and Accountants (and even IRS agents) when they need assistance.

We routinely represent clients in:

  • FATCA
  • FBAR
  • PFIC
  • Offshore Assets
  • Offshore Investments
  • Offshore Income
  • Offshore Accounts
  • Foreign Businesses
  • Foreign Life Insurance
  • Foreign Cryptocurrency
  • Foreign Real Estate
  • Foreign Gifts
  • Foreign Inheritance
  • International Tax Investigations
  • Tax Treaty Analysis
  • “Cross-Border” issues

Golding & Golding is led by a Board Certified Tax Law Specialist (less than 1% of Attorneys nationwide) who practices exclusively in Offshore Disclosure.

We represent clients nationwide and worldwide in nearly 70-countries with all aspects of OVDP (IRS Offshore Voluntary Disclosure Program).

Offshore Disclosure Lawyers – 5 Types of Lawyers to Avoid

5 Easy Ways to Vet Out IRS Offshore Disclosure Attorneys

Offshore disclosure is like a puzzle. And, you need all the pieces of the puzzle to complete the task at hand. 

There is a reason why the top tax attorneys nationwide in IRS Offshore Disclosure generally will have five (5) main qualifications:

  • Board Certified Tax Law Specialist (less than 1% of attorneys nationwide)
  • Enrolled Agent or CPA status
  • LL.M. (Masters in Tax)
  • Litigation & Trial Experience
  • A Firm that Specializes Exclusively in IRS Offshore DIsclosure

4 Types of IRS Voluntary Disclosure Programs

There are typically four types of IRS Voluntary Disclosure programs, and they include:

Contact Us Today; Let us Help You.

International Tax Lawyers - Golding & Golding, A PLC

International Tax Lawyers - Golding & Golding, A PLC

Golding & Golding: Our International Tax Lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70 different countries. Managing Partner, Sean M. Golding, JD, LL.M., EA and his team have represented thousands of clients in all aspects of IRS offshore disclosure and compliance during his 20-year career as an Attorney. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo and various Law Journals nationwide.

Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)
International Tax Lawyers - Golding & Golding, A PLC