A major US financial newspaper today echoed Allen Barron’s repeated warnings to offshore account holders to fear the IRS and impending IRS audits. The Wall Street Journal (WSJ) today issued a daunting warning to US taxpayers with offshore bank accounts, investment accounts and assets:
“Are You Hiding Money Overseas from the IRS? Be Very Afraid…”
Allen Barron has sounded the warning for the past several years regarding the disclosure of offshore bank accounts through IRS FBAR forms. The obligation for any US taxpayer, which includes citizens, resident foreign nationals and US citizens abroad, is to report any and all non-US accounts including US banks with offshore branches if the accumulated balance of any and all accounts exceeds $10,000 at any point in the tax year. The failure to do so exposes the taxpayer to penalties of $100,000 per incidence or 50% of the highest accumulated balance of those accounts at any point in the year, regardless of present balance.
Offshore schemes involving multiple layers of corporate entities, trusts or foundations have been deployed in schemes to shelter income from the IRS in offshore accounts. Since the IRS required offshore disclosure FBAR compliance in 2009 more than 55,000 individuals have paid more than $9.9 billion in penalties and settlements through the Offshore Voluntary Disclosure Program (OVDP) or the Streamlined Domestic Offshore Procedures. The IRS believes the majority of those required to comply have not done so.
How will the IRS Find Me? Aren’t I a Small Fish?
Why are we warning US taxpayer offshore account holders to fear the IRS and approaching audits and the genuine risk of criminal prosecution? Over 110 countries and literally hundreds of thousands of banking and investment institutions have agreed to provide the IRS with specific account details tied back to the individual beneficial ownership interest. That means a social security number or federal tax ID. The rest is simply an IT exercise, as IRS computers compare the details provided by the banks themselves with the information disclosed by those US taxpayers on their returns. Those who have failed to disclose offshore accounts face IRS audit, criminal prosecution, as well as exceptionally high financial consequences.
The WSJ article noted “In a little-noticed comment at a conference in late May, an IRS official said the agency has taken action on 100 potential criminal cases and another 14,000 potential civil cases as a result of this analysis.
Justice Department staffers also are combing through data from the Panama Papers looking for U.S. tax dodgers, according to a person familiar with the matter. These documents, which were published last year, contain account details for hundreds of thousands of offshore entities.
What Causes Unreported Offshore Account Holders to Fear the IRS
Meanwhile, courts this year have handed down prison sentences to at least seven people who hid money in offshore accounts, including a retired professor and a plastic surgeon involved in a divorce.These sentences reverse a past trend in which courts imposed stiff financial penalties in offshore cases but little or no time in prison, says Caroline Ciraolo, a former top Justice Department official.”
The IRS has now provided confirmation. They are pursuing jail sentences and harsh financial penalties for those who have not disclosed offshore income, assets and accounts. IRS data systems have begun providing names to IRS Revenue Officers for audit and potential criminal referral. The eerie silence for the past several months has come to an end.
Allen Barron has cautioned US taxpayers who fail to come into FBAR compliance who are offshore account holders to fear the IRS and the draconian penalties associated with these issues. It is still better to enter the OVDP or another program and come clean with the IRS before they contact you for an audit. It may eliminate criminal exposure and could save you a substantial amount of money. We invite you to contact us for a free consultation at 866-631-3470. Today.
