The IRS continues educating taxpayers on the “Dirty Dozen” most common tax scams during tax season. Next on their list: Hiding money or income offshore.
Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, according to the IRS, 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. These types of offshore accounts have been used to lure taxpayers into scams and schemes.
The IRS remains committed to stop offshore tax evasion wherever it occurs and continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank without any offices on U.S. soil.
There are legitimate reasons for maintaining financial accounts abroad; however, there are reporting requirements that need to be fulfilled. Clients and tax pros should be aware that taxpayers who maintain such accounts and do not comply with reporting requirements are breaking the law and risk significant penalties, fines and possible criminal prosecution.
If your client has foreign financial accounts, it’s best for them to come forward voluntarily to disclose those accounts and take advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations.
Editor’s Note: This is post five of a 12-part series covering the IRS “Dirty Dozen” tax scams. Read other “Above the Forms” postings on Intuit® Accountants News Central.