On March 15, 2019, the IRS announced that it will keep undisclosed offshore bank accounts on its 2019 Dirty Dozen list.
2019 Dirty Dozen List: Background Information
The “Dirty Dozen” list is complied annually by the IRS. It consists of common tax scams and noncompliance schemes that the IRS prioritizes in its enforcement efforts. Many of these scams and schemes peak during the tax filing season, but offshore evasion is present throughout the year.
2019 Dirty Dozen List: Offshore Evasion Remains a Priority for the IRS
Despite many years of an intense focus on this area, the IRS still priorities its enforcement efforts in the area of offshore evasion. “Offshore evasion remains a primary focal point of overall IRS enforcement efforts,” said IRS Commissioner Chuck Rettig. “Our Criminal Investigation and civil enforcement teams work closely with the Justice Department in the international arena to ensure our nation’s tax laws are followed. Taxpayers considering hiding funds or assets offshore should think twice; the civil penalties and criminal sanctions can be severe.”
2019 Dirty Dozen List: Undisclosed Offshore Bank Accounts May Lead to Criminal Prosecution and Imposition of Huge Civil Penalties
This is very much true. Over the years, the IRS has conducted thousands of offshore-related audits that resulted in the imposition of multimillion-dollar civil penalties as well as additional tax liability. Moreover, the IRS has also been very active in pursuing criminal penalties, which resulted in the collection of billions of dollars in criminal fines and restitution.
Many of these cases involved undisclosed offshore bank accounts. In fact, the IRS has expressly warned noncompliant taxpayers that hiding income in undisclosed offshore bank accounts may result in significant penalties as well as criminal prosecution.
2019 Dirty Dozen List: Common Schemes Involving Undisclosed Offshore Bank Accounts
The IRS has identified numerous schemes that involve undisclosed offshore bank accounts. The most simple of them (and the one that is becoming increasingly rare) is the direct ownership of secret offshore bank accounts and brokerage accounts. The more sophisticated schemes use nominee entities and prepaid debit cards. The most complicated schemes often involve foreign trusts, employee-leasing schemes, private annuities and insurance plans.
The IRS has emphasized that it is not illegal to have offshore bank accounts, foreign business entities and foreign trusts. All of these foreign assets, however, must be disclosed and the appropriate US taxes must be paid.
2019 Dirty Dozen List: How the IRS Finds Out About Schemes In order to Prosecute Noncompliant Taxpayers
There are many different ways for the IRS to find out about undisclosed offshore accounts and schemes that involve such accounts. Let’s briefly review the top four of them. First, the IRS has built up a significant pile of information from prior prosecutions of taxpayers with undisclosed foreign accounts as well as bankers and other financial experts suspected of helping clients hide their assets overseas. Each new audit and prosecution continues to bring in more information.
Second, the IRS also received a huge amount of information from US taxpayers who participated in the different versions of the IRS Offshore Voluntary Disclosure Program (“OVDP”) during 2004-2018 as well as Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. OVDP has been particularly helpful, because it involved a large number of taxpayers who could be classified as willful in their prior noncompliance.
Third, the IRS has also obtained very sophisticated information concerning offshore schemes from the Swiss Bank Program. As part of this program, Swiss banks disclosed their strategies for using undisclosed offshore bank accounts to hide income overseas.
Finally, as a result of the implementation of the Foreign Account Tax Compliance Act (“FATCA”) and the network of Intergovernmental Agreements (“IGAs”), there is a continuous and automatic flow of information concerning US-owned accounts from third parties to the IRS.
Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Undisclosed Foreign Assets
The fact that undisclosed offshore bank accounts remain on the 2019 Dirty Dozen list demonstrates the IRS commitment to fighting tax noncompliance in this area. As a result of the information collection efforts by the IRS, US taxpayers with undisclosed foreign accounts are at a severe risk of discovery by the IRS.
This is why, if you have undisclosed foreign assets or foreign income, you should contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, and We Can Help You!