The Internal Revenue Service (IRS) publishes an annual list of the “Dirty Dozen” tax scams that are on its target list. Earlier this month the IRS said avoiding taxes by hiding assets or money in unreported offshore bank or brokerage accounts remains one of its 2017 “Dirty Dozen” and is one of the hottest items on the list.
Over the years, thousands of individuals have been identified as evading U.S. taxes by hiding assets in offshore accounts and failing to report income from these accounts. The individuals access the accounts by various methods including the use of debit cards and/or credit cards electronically paid by the offshore accounts and/or wire transfers from the accounts to a U.S. account, making sure the transfers are under a certain dollar amount. While it is not illegal to own a foreign bank account, using an offshore bank or brokerage account as a method of tax avoidance and failing to report the account and any related income is tax evasion and is something the IRS has been and continues to target.
Even through several years of budget cuts, the IRS continues to vigorously pursue offshore account cases, including the banks and bankers suspected of helping clients hide assets overseas whether or not the bank has a U.S. location. Thousands of offshore-related audits have been conducted by IRS investigators based on information provided by outside sources including the institutions themselves because in many cases criminal charges were also filed which led to not just additional tax and penalties but also jail time for the taxpayer and bankers or advisors involved.
Rather than wait to be caught, it’s in the best interest of the taxpayer to come clean and voluntarily report undisclosed income and assets that met the IRS’s offshore filing requirements through the Offshore Voluntary Disclosure Program (OVDP). There have been more than 55,800 disclosures and more than $9.9 billion of taxes, interest and penalties collected since the first OVDP began in 2009. While still monetarily painful, enrolling in the OVDP will generally eliminate the risk of future criminal prosecution, reduce the severity of civil penalties and lower the overall cost of becoming compliant with tax obligations. The IRS has said the program terms can change at any time and can also be terminated so it’s a good idea for anyone who has intentionally or unintentionally failed to report foreign income to take advantage of the program now.
For more information about reporting requirements for offshore assets and income contact your LSL Advisor.
