IRS Focus: Offshore Tax Evasion Tops Dirty Dozen List
The IRS issued two New Releases this week that restate its focus on offshore tax evasion. The first was January 29, 2015 which followed the First International Criminal Tax Symposium.
“The Internal Revenue Service Criminal Investigation Division (IRS-CI) and Her Majesty’s Revenue & Customs (HMRC) co-hosted a three-day International Criminal Tax Symposium in Washington, D.C. January 27 – 29, 2015. The symposium focused on combating offshore tax evasion and international financial crimes—including cyber-crime—and brought together delegates from criminal tax and enforcement programs from Australia, Canada, The Netherlands, Norway, New Zealand, the United Kingdom and the United States”
The New Release concludes with the following comments.
“The IRS continues to enhance its international efforts through a number of strategies working with international law enforcement and actively participating in a number of international financial task force groups. We will continue our recent successes in international cases, following the money across the world to bring criminals to justice,” said Richard Weber, Chief, IRS-Criminal Investigation. “Those who believe they can cross international borders to commit financial crimes will find that they have far fewer places to hide.”
The second, “Hiding Money or Income Offshore Among the “Dirty Dozen” List of Tax Scams for the 2015 Filing Season” includes the following comments:
“The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.”
“Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.
The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases”
For those taxpayers who have not yet come forward figuring that they will simply not be caught they may be surprised to find that they received “FATCA” letters from their offshore financial institution. These letters are addressed to direct and indirect owners of accounts where there is evidence that the account holder or beneficiary is a U.S. person. Over 120,000 foreign financial institutions have entered into reporting agreements with the IRS. These agreements require the financial institution to obtain and report (annually) all U.S. persons with direct and indirect interests in accounts at their institution. There are significant penalties which can be imposed on the organization if they fail to comply.
Some people may believe that there are institutions that will not report their account to the IRS. But FATCA applies to all financial institutions that transact business in U.S. dollars. It does so, because it requires “correspondent” banks (those through which organizations clear dollar transactions) to make sure that all their correspondent affiliates comply with the “due diligence” provisions of FATCA. So, the prospect of hiding an interest in a foreign account is likely to fail.
The second New Release concludes with the following:
“At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.”
We are experts in the OVDP, Streamline Procedures, and other forms of offshore compliance. Our objective is to help U.S. taxpayers comply with offshore reporting rules and plan their personal and business affairs correctly and with optimal tax efficiency.
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“What’s right is what’s left if you do everything else wrong.”
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