[Updated Oct. 2018] Government tax authorities asking banks and credit card companies for information on foreign account holders is hardly news these days. The I.R.S. does it, so do Germany, Britain and many other countries. Officials want to know when their citizens transfer wealth overseas or open foreign accounts. Generally the practice is legal if the accounts and activity are disclosed. Australia, however, has taken their quest to root out unreported accounts to a new level.
Published news reports indicate that the Australia Tax Office is asking banks if any customers have merely asked about setting up foreign accounts. “Asked,” not opened.
Assistant Tax Commissioner Malcolm Allen is quoted as saying that his agency will begin investigating bank customers that merely had offshore conversations with their bankers. This means merely mentioning to your banker that some of your money is stashed overseas or asking how one opens a bank account in the Caymans may get you audited. Even if you never actually open a foreign account!
Is there a lesson here? Absolutely!
Just ASKING QUESTIONS about offshore banking may get you audited. Obviously, complying with federal reporting requirements is always the single best approach to avoid unwanted scrutiny and possible prosecution. If you are unsure what to do, however, then “Don’t ask, Don’t tell” may be the best policy. It certainly is the best policy with respect to your banker. Do not ask about opening an offshore account and do not tell them if you have opened one without proper disclosure.
Government officials have long claimed that a tremendous amount of unreported offshore income never gets taxed each year. As long as there are “tax havens” and “secrecy jurisdictions,” the tax police will continue to be creative in their methods to ferret out these accounts.
Of course, offshore investing and banking is legal. Many invest overseas to diversify risk, thwart vexatious litigation risks at home or to to better keep their affairs private. The U.S. government requires Americans to disclose offshore accounts to the Treasury and report any foreign source income.
Failing to properly report is a crime. Even if you are not prosecuted criminally – few people are – the IRS will impose huge fines. Often the fines are as large as the balance in the foreign account.
Why are the penalties so high? Despite millions of Americans holding legitimate offshore accounts for legitimate reasons, foreign accounts are often used to facilitate money laundering, tax evasion and criminal activity. Prosecutors and the IRS just don’t like them. That makes it even more important that to hire a professional to assist you.
If you think offshore investing is for you, speak to a qualified lawyer, financial planner or CPA. Think twice, however, about talking to your banker. If you find yourself with existing unreported accounts or income, speak only to a lawyer. Financial planners and accountants are generally obligated to not disclose confidential client information but they can be compelled to answer questions in a formal investigation.
A word about our services. MahanyLaw is a whistleblower and lender liability law firm. We sue banks and help whistleblowers collect cash rewards for turning in tax cheats. We no longer perform tax services. (If you have a tax issue, we can refer you to one of our former partners or a trusted CPA firm that specializes in offshore reporting.)
So why do we post so many stories about opening foreign accounts? Like the IRS, we hope to encourage voluntary compliance. We want to see people follow the law. Of course, no matter what we or the IRS say, a few people will deliberately go out of their way to cheat the government. That is where whistleblowers step in/
Under the IRS Whistleblower Program, if you have inside information about a company or person cheating the U.S. out of taxes, you may be entitled to a sizable cash reward. Cheating could include having an unreported foreign account or failing to report foreign income on your U.S. tax return.
Rewards are based on a percentage of what the IRS collects from the wrongdoer. In most cases, the entire process is confidential too meaning you may be able to turn in a tax cheat, receive an award and still remain anonymous. (Every case is different, we can help you evaluate your information.)
No one likes paying taxes. We find , however, that honest, hard working people hate tax cheats even more. That is because everyone else must pick up the pieces when a few people cheat.
If you have information about individuals or businesses fraudulently failing to file tax returns, failing to pay taxes or hiding money offshore, you may be entitled to an award. To learn more, visit our offshore tax fraud whistleblower page. Ready to see if you have a case? Contact us online, by email or by phone at 202-800-9791.
All inquiries are protected by attorney -client privilege and kept confidential. Our services are offered on a contingent fee basis meaning we do not get paid unless you win and collect.
You do not have to be a US citizen, green card holder or even resident to qualify for an award. But depending on the tax treaty between the US and the country of residence of the whistleblower, the IRS may want to tax your reward! Yes, the adage about the two things you can rely on in life, “death and taxes” is true. If you make a few millions dollars as a whistleblower in the United States, chances are good that Uncle Sam wants to tax your reward.