by Brian Mahany
Headlines around the world carried the story – in one of the most massive data breaches of the new millenium, the Washington DC based International Consortium of Investigative Journalists managed to obtain confidential financial records containing the names of people with offshore accounts. According to Canada’s CBC News, the records contain information on as many as 100,000 individuals.
Included in the data are records on 120,000 shell corporations and trusts involving approximately 100,000 with accounts in over 170 countries. We have long warned against relying on nominee entities to hide money from the government. Such strategies often fail and the IRS considers such trusts and shell entities to be “an affirmative act of tax evasion.” In other words, if caught trying to conceal your money by using a different name or similar tactic the IRS will criminally prosecute.
Said CBC News, “In many cases, the leaked documents expose insider details of how agents would incorporate companies in Caribbean and South Pacific micro-states on behalf of wealthy clients, then assign front people called “nominees” to serve, on paper, as directors and shareholders for the corporations — disguising the companies’ true owners.”
Included in the data dump are emails to and from Commonwealth Trust Ltd and Portcullis TrustNet, two entities that help taxpayers establish foreign entities to stash their cash.
The full extent of the breach is hard to estimate but already, several prominent public figures have been outed by the leaked news. If reporters can access this information, be assured that the IRS and Justice Department are doing the same.
Owning a foreign bank or financial account is completely legal if the account is properly reported. That means most offshore financial holdings must be disclosed once a year on a Report of Foreign Bank and Financial Accounts (or FBAR form.) Failure to file FBARs may be a felony and can easily cause your entire offshore holdings to be consumed by penalties.
Most of our clients simply didn’t understand that foreign accounts must be disclosed. We are living in an increasingly mobile society where many Americans were born outside the U.S., are here on “greencard” immigration paperwork or retired to another country. While some folks intentionally try to cheat the IRS, most people we meet simply don’t understand the complex foreign reporting regulations.
Time is quickly running out for taxpayers to take care of their unreported account problems. Under the new FATCA law, offshore banks will soon be required to examine their records to identify account holders with ties to the United States. Once your name is disclosed or you are contacted by the IRS, all bets are off.
With the names of 100,000 taxpayers with unreported foreign circulating in the public domain, it won’t take long before the IRS finds out who you are. Remember, once the IRS identifies you, the many amnesty options offered by the government are off the table.
For more information, contact attorney Bethany Kroes at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Whether you hire or us or not, we will gladly discuss your options at no cost and without obligation.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.
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