What is offshore tax evasion? | Florida Tax Evasion Attorney

What is Offshore Tax Evasion? | Florida Tax Evasion Attorney

Offshore tax evasion is when a taxpayer tries to illegally avoid paying taxes by hiding income or assets outside of the United States. This is a serious crime that can lead to criminal charges, huge fines, and even jail time if caught by the IRS.

There are a few common ways that people try to commit offshore tax evasion:

• Not reporting foreign bank accounts or foreign income on your tax return
• Moving money to offshore accounts in tax havens to hide it from the IRS
• Setting up shell companies in foreign countries to disguise ownership of assets
• Claiming fake business expenses to lower your taxable income

The IRS and Department of Justice have been cracking down hard on offshore tax cheats in recent years. They have special teams that investigate foreign accounts and assets. The IRS can even get account information directly from banks in tax havens now thanks to agreements like FATCA.

Why Do People Commit Offshore Tax Evasion?

There are a few main reasons why people try to hide money offshore:

1. To avoid paying U.S. income taxes – This is the biggest reason. The U.S. has high income tax rates compared to many foreign countries. Hiding money offshore illegally avoids U.S. taxes.
2. To hide illicit funds – Criminals can try to launder money through offshore accounts and shell companies.
3. To hide assets in divorces or lawsuits – People involved in legal disputes sometimes try to hide money offshore so it can’t be divvied up in a settlement.
4. To evade taxes in their home country – Wealthy foreigners will sometimes open U.S. accounts to evade taxes back home.

Examples of Offshore Tax Evasion

Here are some real life examples of how people have committed offshore tax evasion and gotten caught:

• A businessman had over $3 million in a Swiss bank account that he did not report on his taxes for over a decade, evading nearly $1 million in taxes (Source).
• A professor kept money he embezzled from a university in offshore accounts and failed to report it on his taxes (Source).
• The owner of a chain of pizza restaurants evaded $3.5 million in taxes by hiding profits in Swiss bank accounts under the names of sham offshore corporations (Source).

How to Avoid Offshore Tax Evasion Charges

If you have unreported foreign income or assets, it is critical to take action before the IRS catches you. Here are some steps you can take:

1. Disclose Through the IRS Offshore Voluntary Disclosure Program: This program allows taxpayers to get back into compliance while avoiding criminal prosecution. You must disclose all foreign assets and pay back taxes and penalties.
2. File Amended Returns: File amended tax returns to properly report any undeclared foreign income. Pay the additional tax and interest due.
3. Close Foreign Accounts: Close any undisclosed offshore accounts and transfer the funds back to the U.S.
4. Get Into Compliance on FBAR and FATCA Forms: File any delinquent FBAR and FATCA forms to report foreign assets.
5. Hire an Attorney: An experienced tax attorney can guide you through the process and negotiate lower penalties.

By taking proactive steps towards compliance, you may be able to avoid criminal tax evasion charges and drastically reduce penalties. But you need to fully disclose all foreign assets – the IRS offers its lowest penalties to taxpayers who come forward before being caught.

Criminal Charges for Offshore Tax Evasion

Willfully evading taxes by hiding money or assets offshore is a felony that can result in up to 5 years in prison and $250,000 in fines under 26 U.S. Code § 7201. If caught after failing to disclose offshore assets, you could face the following criminal charges:

• Tax Evasion – Up to 5 years imprisonment and $250,000 fine for each count.
• Filing a False Tax Return – Up to 3 years imprisonment and $250,000 fine.
• Tax Obstruction – Up to 3 years imprisonment and $250,000 fine.
• Conspiracy to Defraud the IRS – Up to 5 years imprisonment and $250,000 fine.

In egregious cases with very high tax losses, offenders can receive up to 20 years in prison. Tax evasion related to other crimes like drug trafficking or terrorism can also lead to stiffer sentences.

Civil FBAR and FATCA Penalties

In addition to criminal charges, the IRS can impose huge civil fines for failing to properly report foreign accounts and assets:

• FBAR Penalties – Up to $100,000 or 50% of account balances per violation for willful failures to file FBAR forms.
• FATCA Penalties – Up to $50,000 for failing to file FATCA Form 8938 to report foreign assets.

These penalties can quickly multiply into the millions of dollars for taxpayers with multiple unreported foreign accounts across several years. Coming forward through the Offshore Voluntary Disclosure Program can help significantly reduce these penalties.

Beware of “Quiet Disclosures”

Some people consider trying to slip through a “quiet disclosure” by simply filing amended returns and FBAR forms without actually going through the IRS disclosure program. This is very risky and can bring even higher penalties!

The Offshore Voluntary Disclosure Program brings major benefits like:

• Avoiding criminal prosecution
• Capping civil penalties at 50% of account balances (27.5% in some cases)
• Preventing IRS audits of multiple tax years

These incentives are only available when properly disclosing through the OVDP. Quiet disclosures lack these protections. The IRS made an example out of quiet disclosers in recent cases by assessing maximum penalties of over $770,000 despite amended returns being filed.

Consult an Attorney Before Disclosing Offshore Assets

If you have unreported foreign income or accounts, it is essential to consult an experienced offshore disclosure attorney before taking any action. An attorney can advise you on the best disclosure options and guide you through the process to minimize penalties.

Do not go it alone without proper legal counsel – the disclosure process is complex and the penalties for mistakes can be severe. An attorney can be the difference between reasonable fines or multi-million dollar penalties, or even staying out of prison for tax evasion.

At our firm, we have successfully represented many taxpayers with undisclosed foreign accounts get back into IRS compliance. We can help you navigate the disclosure process and negotiate reduced penalties. Call our tax law office today for a risk-free consultation.

There are a few main options we may recommend for coming into compliance:

• IRS Streamlined Filing Compliance Procedures – This program is for taxpayers who simply failed to report foreign income or file required forms like FBARs. It caps penalties at 5% of foreign account balances and avoids criminal charges.
• IRS Offshore Voluntary Disclosure Program – For taxpayers with more egregious violations, the OVDP may be recommended. It provides criminal immunity but penalties are higher at 27.5% of balances.
• Quiet Disclosure – Simply filing amended returns is very risky and not recommended. The IRS offers lower penalties through its formal disclosure programs.

As experienced attorneys, we can analyze your situation and advise you on the best disclosure option. We will handle the entire disclosure process for you, negotiate with the IRS on your behalf, and work to minimize penalties based on reasonable cause arguments.

Do not attempt to disclose foreign assets on your own – the stakes are too high. Call our office today for a confidential consultation. We can protect you from criminal prosecution and excessive fines.