posted by Admin on Jan 30
There is an increase in illegal activity regarding offshore accounts in an attempt for taxpayers to evade and violate tax laws. While certain foreign accounts are legal, some taxpayers take illegal measures to mislead the IRS into believing the monetary profits are legal. However, the IRS is offering options to help violating taxpayers avoid prosecution and lower the rate of illegal activities.
Voluntary Disclosures
When a taxpayer purposely tries to deceive the IRS and government by violating the tax laws, they put themselves at risk for prosecution. The good news is that they can steer clear of prosecution by reporting their previous violations themselves to the IRS before an investigation begins, which is known as the Voluntary Disclosure Program. While this is a beneficial option, it does not guarantee that the taxpayer will not be submitted to the Department of Justice for criminal prosecution.
However, there are stringent rules and regulations regarding this program. It is the taxpayer’s duty to offer full cooperation during the time their case is being reviewed. There is also an evaluation of the taxpayer’s eligibility and this program usually applies to a taxpayer who:
- Only received legal income;
- Voluntary discloses the information before an investigation begins;
- Satisfies their tax debt in full or makes an installation agreement;
- Fully and voluntarily reports the violation to the IRS;
- Files a truthful return and/or cooperates with the IRS in ascertaining the accurate tax accountability.
The benefit to this program is that along with individuals, all entities such as corporations, trusts, and partnerships are eligible.
Offshore account / Foreign Bank Account Reporting (FBAR)
Many people are under the impression that having foreign bank accounts is against the law; however this is a false belief. It is legal as long as the taxpayer has valid grounds for having a foreign bank account. Although foreign bank accounts are legal, choosing to hide these assets and to not disclose this information to the IRS is illegal.
Anti-Money Laundering
There is a set of laws and regulations that require any type of financial institutions to report and put a stop to money laundering activities known as anti-money laundering. When an institution tries to mask monetary profits from illegal activities as appearing to be legitimate is known as money laundering. This is done by concealing the illegal origins through levels of intricate transactions such as wire transfers and a sequence of deposits and withdrawals to a variety of banks. The last step in this process is including the funds into movement in the mainstream economy by an apparently legitimate explanation for the dishonest profits.
International Tax Disputes
The IRS has been dedicated to renewed efforts to trail international violations that businesses and individuals attempt to violate. The IRS is prepared to address the widespread abusive tax evasion acts through the use of civil audits, criminal investigations, and prosecuting the offenders.
Additional Legal Guidance: Virginia Tax Lawyers, the Thorne Law Group Serving Virginia and the US.