Prominent Texas Tax Advisor Entangled in IRS Offshore Sting

Prominent Texas Tax Advisor Entangled in IRS Offshore Sting

While moving assets offshore is not technically a crime, it is not uncommon for taxpayers who are engaging in tax fraud, evasion and other criminal activities to assess whether or not moving their assets offshore could help keep them hidden from the IRS and Department of Justice. Before the US government increased enforcement of foreign account compliance reporting (FBAR) and/or introduced FATCA (Foreign Account Tax Compliance Act) – it was relatively easy to move assets offshore and keep them in a Swiss Bank Numbered Account or possibly hidden in a Belize corporation – but those days have since passed. And, with the recent uptick in international tax compliance initiatives by the IRS, the number of people getting caught has increased significantly. Recently, a prominent attorney based out of Texas was allegedly caught in a sting involving illegal offshore transactions.

Using Foreigners to Create Trusts

Essentially, the idea is to hide wealth abroad. This is accomplished by having the attorney assist taxpayers with creating foreign trusts and other shell entities — with the idea of allegedly hiding money from the Internal Revenue Service, spouses, business partners, etc. The hiding the money part is not necessarily a crime unless it was done illegally (and taxes are paid). The key issue would be whether or not these trusts were designed to make it appear that the money was being held by a foreign person – – who would then not be subject to US tax on their worldwide income – – when inside it was actually owned by a US person who should be reporting income to the US government and other international information reporting forms.

Prior Issues with the IRS

More than 20 years ago, this same tax professional had allegedly had a prior run-in with the IRS in which the Internal Revenue Service investigation made it seem as if the attorney was preparing foreign trusts which may have been used for purposes resulting in noncompliance with IRS rules and regulations — but for one reason or another, charges were never pursued against the tax attorney.

Brought Down by Whistleblowers

At the end of the day, it appears that the tax professional was lured into an IRS sting operation by way of other former clients and professionals he had worked with that were cooperating with the US government, but unfortunately, the tax professional was unaware of this. The catalyst appears to have been a divorce by one of his wealthy clients.

Offshore Banking and Compliance

In general, simply moving money offshore is not illegal. But, if money is being hidden in foreign trusts that give the impression that the trust is owned by a foreign person when in fact it is the US person that has the actual control of the assets and money in the trust — then there is cause for concern before entering to one of these tax arrangements.  In general, the IRS frowns upon foreign trusts and oftentimes takes the position that they are merely improper tax avoidance schemes.

Golding & Golding: International Tax Law Specialist Team

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

Contact our firm today for assistance with getting compliant.