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.

Call: 323-782-9139 or email: gsw@gswlaw.com

Gary Wolfe, of The Wolfe Law Group, has written 6 books and 4 articles
on IRS Offshore Tax Evasion issues. See below.

The IRS & Offshore Tax Evasion: US Foreign Grantor Trusts
US Taxpayers who establish foreign trusts are subject to the US grantor trust rules which require them to pay tax on all trust income and declare all foreign bank accounts (over $10k, Fincen Form 114).

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.

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The IRS and Swiss Banks 

Switzerland is the epicenter of International Tax Evasion & Money Laundering. Under the 2013/2014 US Govt. GAO Report, the IRS Offshore Voluntary Disclosure Program listed the top 7 countries with undisclosed accounts. #1 was Switzerland with 42% of the accounts (UK was a distant second with 8% of the accounts). Switzerland holds more than 5x the bank accounts of “US tax cheats” than the 2d biggest jurisdiction (UK).

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.

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OTE-OVDP
Since 2008, U.S. prosecutors have charged at least 86 people in their crackdown on offshore tax evasion including: two dozen bankers, lawyers and advisors. An additional 39,000 Americans have sought to avoid prosecution by entering into the IRS Offshore Voluntary Disclosure Program.

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.

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OTE-FATCA-FBAR2
On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act, which included the Foreign Account Tax Compliance Act (FATCA). Under the Act, new reporting and disclosure requirements for foreign assets will be phased in between 2010 – 2014. FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts.

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.

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Int-Tax-Evasion3
International tax evasion has been the “Sport of Kings” for centuries. Cloaked in secrecy, done surreptitiously, no one could ever prove it. The “Super-rich” (i.e. the top 1%) get away with “tax cheating” and used their “tax cheating proceeds” to buy assets; e.g., real estate, boats, planes, cars, diamonds and art (all of which may constitute “money laundering”).

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.

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OTE-foreign-entitites4
U.S. Taxpayers, including: U.S. citizens, “green card holders,” foreign nationals who are in the U.S. for 183 days in one year or over 122 days per year, for three years, who establish:

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.

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ARTICLES:
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)