Can You Still Hide Bank Accounts Offshore (How IRS Finds You)

Can You Still Hide Bank Accounts Offshore?

Offshore Banking is not illegal. It is not uncommon for US taxpayers to want to hide their assets from the Internal Revenue Service and other US government agencies. Unfortunately, many taxpayers are under the misconception that simply by moving money overseas they can keep it out of the prying eyes of the US government — but that is incorrect. These days, with more than 300,000 Foreign Financial Institutions actively reporting US persons who have foreign accounts, it is much more difficult to conceal assets simply by moving them overseas. If you are considering moving your assets abroad to avoid the IRS, here at five important facts to consider:

FATCA Reporting

FATCA refers to the Foreign Account Tax Compliance Act. More than 110 foreign countries and over 300,000 Foreign Financial Institutions actively report US persons with foreign accounts to the US government. Therefore, at any time the IRS can audit a US Person while armed with this information — and oftentimes the US taxpayer does not even know about the fact that the IRS already has the information. This is referred to as a reverse eggshell audit or IRS special agent investigation— which may result in significant fines and penalties (or worse).

International Wire Transfer Audits

Even if you were able to successfully move your money overseas, chances are at some point in the future you will want to transfer that money back to the United States. Depending on the number of transfers or the size of the transfers, it may result in an international wire transfer audit which can lead to an examination with the IRS — and it only goes downhill from there when if the Taxpayer misrepresents to the US government about whether or not they owned foreign money.

Whistleblowers (Incentives)

The Internal Revenue Service provides incentives for persons who come forward as whistleblowers. A whistleblower does not have to occur as a result of some altruistic intention — as it is often publicized in the news. It can be as simple as a taxpayer knowing that another taxpayer has significant money overseas and also knowing that that person has not properly reported it on their FBAR — or other international information reporting form.

Offshore Disclosure by 3^rd Party

Sometimes a taxpayer may have overseas money held in a joint foreign account or jointly own a foreign asset. For one reason or another, the other person may decide they want to come forward and report their foreign accounts and assets. This may lead to that person making an offshore disclosure — which then thrusts the non-disclosing party into the IRS crosshairs.

IRS Audit or Examination 

When a person is under IRS audit or examination, they are required to truthfully disclose their information to the IRS agent. If they fail to do so and the IRS gets wind of it, it may result in high fines and penalties — or even worse if the IRS believes the person acted criminally. In a criminal situation, the case is referred to the IRS Special Agents for them to pursue a criminal investigation.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.