On July 1, 2014, the Foreign Account Tax Compliance Act (FATCA) takes effect, compelling up to 400,000 foreign financial institutions to disclose the names of up to 10 million U.S. taxpayers with undisclosed offshore accounts. These U.S. taxpayers are subject to significant civil and criminal penalties for these undisclosed accounts. Many have already taken advantage of the the IRS Voluntary Disclosure Program, however other cost-effective, tax efficient alternatives do exist which obviate the IRS disclosures required by the OVDP. These disclosures include:
- 1. Waive Constitutionality Protected Rights. These include: 5th amendment against self-incrimination, 4th amendment right against unreasonable search and seizure, 8th amendment right against excessive fines.
- 2. Waive Statute of Limitations Defenses
- 3. Jeopardize taxpayers who submit evidence to the IRS, of the undisclosed, offshore accounts which evidence is not subject to either ” transactional” or “use” immunity and may be used against them by the IRS for both civil tax fraud and criminal tax evasion.
Gary Wolfe, of The Wolfe Law Group, has written 6 books and 4 articles
on IRS Offshore Tax Evasion issues. See below.
In addition, if the foreign trust owns foreign assets over $50k they must be declared on Form 8938 (FATCA filing) as part of their Form 1040 tax returns. A US taxpayer failure to declare the trust income, file the Form 114 to declare the offshore foreign bank and financial accounts, or the Form 8938 for foreign financial assets over $50k subjects the US taxpayer to serious civil and criminal tax penalties and may suspend the statute of limitations on IRS tax audits.
The foreign trusts have additional tax filings including Form 3520 (on trust formation) and Form 3520-A (annual trust filings). Failure to file any of these trust tax returns suspends the IRS statute of limitations for tax audits and may subject the taxpayer to civil and criminal penalties.
Major Swiss banks have admitted to tax evasion as their “business”: In Feb 2009 UBS agreed to pay a $780m fine and entered into a deferred prosecution agreement with the US Dept. of Justice
In Jan. 2013, Wegelin Bank, the oldest Swiss Bank (est. 1741) paid a $74m fine and entered a guilty plea to tax evasion charges and announced it would close its bank;
In November 2014, Credit Suisse entered a guilty plea to tax evasion and agreed to a $2.6B penalty.
As of December, 2014 more than a dozen Swiss Banks including major banks: HSBC & Julius Baer continue to be investigated for their roles in helping US taxpayers evade taxes.
In his recently published eBook, Offshore Tax Evasion: IRS Offshore Voluntary Disclosure Program, International Tax Attorney, Gary S. Wolfe, examines the intricacies of the IRS program including issues of civil tax fraud, criminal tax evasion, expensive penalties, and waiver of 5th amendment rights against self-incrimination without immunity from prosecution.
A FBAR filing is a Report of Foreign Bank and Financial Account (Form TD F 90-22.1). If you fail to file a FBAR (due June 30th of each year), you may be subject to penalties of up to 50% of the account balance (annually) and a felony (up to 10 years in jail).
Offshore Tax Evasion: IRS Tax Compliance FATCA/FBAR will answer many of your questions regarding the who, what, when, where and why of FATCA/FBAR reporting requirements. It is specifically geared for those U.S. taxpayers with foreign financial accounts who seek more information regarding U.S. tax compliance.
The willful tax cheating by the super-rich may be “tax treason” defined: the betrayal of a trust, treachery; the offense of attempting by overt acts to overthrow the government of the state to which the offender owes allegiance.
So why do tax cheats get away with treason? Why do governments all over the world let the richest people cheat on their taxes and commit “tax treason”? What is the bottom line to tax treason? Is it that billions of people around the world suffer and live without adequate nutrition, housing, clothing, health care and education? Who is responsible for this tax mess?
With the proliferation of the Internet as an information database, after centuries of secrecy, the truth is coming out. Transparency is coming of age, and for the super-rich tax cheats, their days appear numbered.
1. Foreign Trusts (Grantor Trusts)
2. Controlled Foreign Corporations (“CFC”)
3. Passive Foreign International Companies (“PFIC”) are subject to intricate, extensive U.S. tax compliance rules.
In Offshore Tax Evasion: U.S. Tax & Foreign Entities, the tax compliance rules are discussed in detail.
ABA/The Practical Tax Lawyer – International Tax Evasion and Money Laundering
ABA/The Practical Tax Lawyer – Why Tax Evasion is a Bad Idea: UBS & Wegelin Bank
California Tax Lawyer – FBARs and Offshore Hedge Funds
California Tax Lawyer – Penalty Regime for Foreign Bank Account Filing (FBAR)