The IRS is currently auditing and prosecuting holders of offshore credit cards, offshore bank accounts, foreign trusts, and international business companies for tax evasion and failure to report transfers. But there are ways to prevent prosecution by the IRS during an offshore tax audit or foreign tax audit.
There are an unlimited number of legitimate defenses that are very effective to combat the government's egregious penalties and crimes, each dependent upon each taxpayer's own facts and circumstances. An aggressive stance with the IRS and a complete understanding of the foreign Controlled Foreign Corporation, Passive Foreign Investment Company and Foreign Personal Holding Company rules are necessary to win an audit and substantially reduce any taxes owed. Careful audit planning and a full understanding of the problem areas are necessary to prevail against the IRS during an offshore tax audit.
The Controlled Foreign Corporation, Passive Foreign Investment Company and Foreign Personal Holding Company rules are complex and are written by congress to assist the IRS. A thorough understanding of the loopholes and the intricacies of these tax laws are necessary to prevail, so it is a good idea to hire a criminal tax attorney if you are facing a foreign tax audit or offshore tax audit.
There are numerous ways to prevent an IRS foreign tax audit from turning into a criminal tax investigation. Ample planning and preparation during the audit process can prevent the IRS from even commencing a criminal tax investigation. An appropriate tax strategy early in the process will protect your reputation in the community and your profession license or career.
Setting up an International Business Corporation or Foreign Trust is not illegal. However, failing to disclose certain transactions, or using before tax funds may be tax evasion. If not done absolutely correct, the IRS may decide to prosecute a tax crime. The sentence for tax evasion includes incarceration in a federal penitentiary for up to 5 years, fines up to $500,000 and restitution of the tax loss, plus the 75% civil fraud penalty and interest.
Any incarceration in a federal penitentiary is emotionally devastating, harmful to your career or profession, and significantly affects family life. Careful manipulation of the Federal Sentencing Guidelines and court rules are imperative to competently defend a tax evasion case. This planning is necessary to reduce a sentence to a halfway house or merely probation.
If you take an aggressive stance early enough in an "eggshell audit" careful planning and preparation may prevent detection all together. A thorough understanding of the potential problem areas allow your criminal tax attorney to filter through all available documents and evidence to determine which documents to voluntarily provide to the government. Ways to prevent a common IRS tax audit from turning into a criminal tax investigation include not volunteering incriminating documents, not making admissions to IRS-Criminal Investigation Division, and treating the case as a common civil tax audit with the IRS Revenue Agent with well prepared common sense explanations to every event.
It is imperative that you not discuss your case with the IRS. During the interview they will elicit statements to be used against you and ignore any information that will help your side. They are your adversary. Even though you believe you will be helping yourself, you will actually be making matters worse by giving them additional evidence to use against you. They have the burden of proof, not you.
The advantage of hiring an experienced criminal tax attorney early in the process is to possibly prevent discovery of the act, prevent further harm and advocate your legal rights to the greatest extent possible. Since you are protected by the attorney-client privilege, everything remains strictly confidential. All actions will be undertaken to protect your professional license, your reputation in the community, and prevent the embarrassment of your family, friends and business associates from discovering this problem. Although expensive, the cost of hiring a competent experienced criminal tax attorney pales in comparison to a criminal conviction on your record and repayment of the tax, 75% civil fraud penalty, interest and court fines.