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Lahti, Lahti & O'Neill, P.C. Blog

Monday, February 2, 2015

Hiding Money or Income Offshore is Among the IRS’ "Dirty Dozen"

By Michael T. Lahti 

As reported in Tax Notes Today, the Internal Revenue Service recently claimed that avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the "Dirty Dozen," for the 2015 filing season.

"The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it's a bad bet to hide money and income offshore," said  IRS Commissioner, John Koskinen. "Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order."

It was reported that since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 50,000 disclosures and $7 billion in collections from this initiative, partially as a result of thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

 Commissioner Koskinen emphasized that the IRS remains committed to stopping offshore tax evasion wherever it occurs.  Even though the IRS has faced several years of budget reductions, it will pursue cases in all parts of the world.  This is regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.

Individuals are being pursued for 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.

The article noted that while there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled.  U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

If you have money oversees that have not been reported, it is highly recommended that you talk to your attorney or accountant about the “Offshore Voluntary Disclosure Program” (OVDP), to bring such accounts into compliance.


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