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Offshore Accounting: What it is and Why You Should Not Try It



 

Have you heard of the Dirty Dozen? Well if not, it is a list of the most popular tax schemes for the year 2021 that was compiled by the IRS.

Tax schemes include phishing, fake charities, social media scams and offshore accounting. The list keeps growing and the schemes get more complicated every year. Tax evasion, money laundering and even organized crimes, many times go the route of using offshore accounts as a means to hide or obscure a money trail.

We have all seen and heard the numerous stories and schemes of those people who have been caught by the federal government because they hid money in offshore accounts, but what was really the problem?

It technically is not a major problem so long as certain regulations and rules are followed, but when individuals start to try and hide from the IRS, that is when the real issues start rolling in.

In this blog, we are talking about what offshore accounting is and the implications of getting caught up in a potentially illegal financial activity.

What is Offshore Accounting?

Offshore accounting is when you have financial assets that are held in foreign countries. Normally, there wouldn't be a problem in having a bank account or two in foreign countries, but the IRS takes issue when people try to evade paying their taxes on these funds.

Many people try to evade paying taxes using offshore accounts because they claim to offer strong privacy controls and secrecy, low to no corporate taxes and in some cases protection against other countries who may be unstable or have other political fluctuations.

Unfortunately, many of the foreign banks are hailed as tax havens that offer secrecy and are under no obligation to report their financial holdings to any particular governing body associated with the United States. This is why the appeal is strong to many because they do not want to have to pay taxes on their money.
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How does the IRS catch criminals?

Get ahead of the situation before it becomes a real problem. It is best to voluntarily come forward and get these finances sorted out as quickly as possible.

With the IRS ramping up the focus on civil-related audits, they are slowly and surely recovering funds that have been long overdue. If you are thinking they are only going after civil cases, then you would be mistaken.

Not only are they pursuing restitution and related fines, they are also bringing criminal charges against the banks themselves, associates and others they find in connection with the activity as well.

It is also not just those account holders the IRS is pursuing, it’s also the bankers and other people who facilitate the connections to these illicit activities. They are rounding up everyone who is connected to that activity and then prosecute them. If you’re thinking this type of government crackdown only involves the IRS, you would be mistaken again.

They have established an international network of organizations and governments who they work together with in order to bring criminals to justice. A country who has become synonymous with offshore accounts and money laundering and has cheese named after them, is the only clue you need to figure out.

If you figured Switzerland, then you would be correct! In addition to that relationship, there was also a program called the Swiss Bank Program back in 2013.

Offshore Bank

The Swiss Bank Program was created for foreign banks who participated in any illegal financial activities, it would give them a way to come forward. By acknowledging their participation in the knowing of the illegal financial transactions, their prosecution could be potentially resolved.

The only catch is that the banks had to come forward before the end of December 2013, in order to not be prosecuted. Some did come forward, but many did not and so the cat and mouse saga continues.

Accolade Accounting

Accolade Accounting has got your back!

With the threat of unknowingly, conducting certain questionable financial activities, when you get an offshore account, it is best to operate with the utmost certainty. Accolade Accounting provides you with the guarantee that all financial activity is above board. You won’t have to wonder or worry if you will be the next target of the IRS because of questionable financial practices. Let us ensure you are in good standing with the IRS and get in touch with us today!

 

Until next time my friends,

Cheers!

JD Longino, CPA

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