The news related to IRS actions usually goes unnoticed by the vast majority of people unless it involves something they have a financial interest in. The IRS has been making a lot of news the last few years related to hunting down Americans who hide money offshore and don’t pay taxes. What if you find yourself in this situation?
It all seemed so clear. You read a story on the web about how going offshore would provide you with asset protection and “tax advantages”. After all, who would really know about a bank account or trust in the Cayman Islands? You took the plunge and stuck some money offshore. Now you’ve watched the IRS penetrate Swiss banking privacy laws and have read they’ll be turning to the Caribbean next. What do you do?
The first thing to understand is that going offshore with your finances is not illegal. “Offshore” sounds glamorous, but it simply means any country outside of the United States. If you have a bank account in Canada, you’ve gone offshore. It really isn’t all it is cracked up to be, eh?
The problems with going offshore start when people don’t pay taxes on their gains. It is oh, so tempting to buy stock in London, make a gain and not report it. Who is going to know? Well, that is ultimately the question. In some cases, the IRS will figure it out if it gets into a particular bank’s records. In others, an unhappy ex-spouse or employer might report you. It all just depends.
The far more common problem is the situation where a taxpayer enters into some offshore strategy a salesman pitched. It all sounded legal, but now you are a bit nervous. It is hard to ignore the fact the salesman is outside of the United States and won’t come back in. What do you do? The answer is fairly simple and straightforward. You need to go talk to a tax attorney.
Why a tax attorney? The first reason is to get your actions checked out. There is a very real possibility everything was done on the up and up, which means you don’t have to sweat anything. What if there is a problem? The tax attorney can advise you on a strategy for dealing with the IRS. The agency is much more passive if taxpayers come forth voluntarily to report wayward conduct than if the agency has to go after them. You will still have to pay taxes, penalties and interest, but you can at least avoid jail.
The last thing you want to do in this situation is nothing. Letting it hang over your head for years is simply not going to be good for your health.
Thomas Ajava writes for
AttorneyHoustonTaxTexas.com - find a tax attorney in Houston, Texas who is familiar with offshore transaction laws and other tax issues.
