When you use the term offshore tax planning, many will immediately think that you’re trying to swindle the IRS. As defined by the IRS, offshore means “a jurisdiction that offers financial secrecy laws in an effort to attract investment from outside its borders.” In conjunction with that term, the IRS looks to countries considered “tax havens”, which are countries that provides a no-tax or low-tax environment. It is the secrecy and hiding of income that makes offshore tax planning illegal.
Risks with Offshore Taxes
There are ways to manage offshore monies that can help with international tax planning. Likely, this involves individuals who earn income in one or more countries (The US possibly included), while living in the US or abroad. Any money earned by an American worldwide is subject to taxation. While you may be subject to US and foreign tax liability, you should speak with an experienced tax attorney to help formulate an international tax plan. The IRS is looking to find monies earned or invested by Americans in foreign ventures that are disguised so as to hide income that should be reported.
According to the IRS, violations of the Internal Revenue Code with the intent to evade income taxes may result in a penalty of up to 75% of the underpayment of tax attributable to fraud, in addition to the taxes owed and the possibility of criminal convictions resulting in fines up to $250,000 and up to five years in prison.
Help from a Tax Attorney
Offshore Tax Planning is a very difficult area to navigate, and a small mistake can result in severe civil and criminal liabilities. One cannot simply place money overseas looking to avoid taxes. Any dealings in international investment or income production can result in potential offshore tax violations if it is not properly reported. Speaking with an experienced international tax attorney will ensure that you are protected against potential criminal or civil liabilities, and that you are doing the right thing.
