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Offshore tax shelter investigations showing no signs of slowing

According to several recent reports, offshore tax accounts comprise a surprisingly large component of holdings for both wealthy individuals and corporations. According to a 2014 report by U.S. PIRG Education Fund and Citizens for Tax Justice, up to 70 percent of Fortune 500 companies have subsidiaries in countries that may lessen their U.S. tax burden. A U.S. Senate report estimated that foreign tax havens cost the U.S. government $150 billion per year. According to a report by Assistant Professor Gabriel Zucman of the London School of Economics, approximately 8 percent of global financial wealth of individual households is held in tax havens, the vast majority of which goes unreported.

These numbers have caught the attention of U.S. regulators and politicians alike. A renewed focus on finding and taxing foreign holdings has led to many prominent investigations, including investigations of large banks abroad. The implementation of Foreign Account Tax Compliance Act in 2014 is only the beginning of the crackdown on unreported foreign income.

However, that is not to say all prosecution has been successful. In November, the number three executive at Swiss bank UBS was found not guilty of helping Americans avoid tax obligations through sham corporations. The U.S. government charged Raoul Weil with conspiracy to defraud the U.S. government in excess of $2 billion. Had he been convicted, Weil could have faced a $250,000 fine and up to five years in prison. Instead, he is again back in Switzerland.

Still, the implementation of FATCA has resulted in quite a few settlements with foreign banks. Over 100 Swiss banks have settled with the U.S. government, providing American names and paying billions to the U.S. government. According to several reports, the IRS received 7,000 names of tax evaders from the UBS settlement alone.

Facing an IRS investigation or unsure about unreported income?

The IRS has instituted several offshore voluntary disclosure programs that can help taxpayers concerned about unreported income become compliant with the U.S. Tax Code. In addition, a taxpayer may simply have made an error or omission when filing returns, which can be resolved by providing additional documentation to the IRS. However, it is extremely important to obtain the representation of an experienced tax attorney when confronted with an IRS audit or request for further documentation. A taxpayer under audit may unwittingly provide documentation that increases IRS suspicion or leads to further liability.

Taxpayers with questions regarding their offshore accounts and tax compliance should speak to the experienced tax law attorneys at M. Bradford Randolph, Esq. to discuss their situation and legal options.