Report Offshore Tax Fraud - Brian P. Kenney, Esq.

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Kenney & McCafferty, PC works exclusively with individuals who would like to obtain a monetary reward from the IRS for blowing the whistle on individuals and/or corporations that have committed tax fraud in monetary amounts of 
$2 Million Dollars or more.

Abusive Foreign Trust Schemes - These schemes begin as a string of domestic trusts layered upon each other. This is done to make it look as if the taxpayer has turned their business and assets over to a trust and is no longer running their business or handling their assets. Once moved to the domestic trust, the income and expenses are sent to foreign trusts established in tax haven countries.

As an example, a taxpayer's business is split into two trusts. One trust would be the business trust that is in charge of the daily operations. The other trust is an equipment trust formed to hold the business's equipment that is leased back to the business trust at inflated rates to nullify any income reported on the business trust tax return (Form 1041). Next the income from the equipment trust is distributed to foreign trust-one, again, which nullifies any tax due on the equipment trust tax return. Foreign trust-one then distributes all or most of its income to foreign trust-two. Since all of foreign trust-two's income is foreign based there is no filing requirement.

Once the assets are in foreign trust-two, a bank account is opened either under the trust name or an International Business Corporation (IBC). The trust documentation and business records of this scheme all make it appear that the taxpayer is no longer in control of his/her business or its assets. The reality is that nothing ever changed. The taxpayer still exercises full control over his/her business and assets. There can be many different variations to the scheme.

International Business Corporations (IBC) - The taxpayer creates an IBC with the same name as their business. They'll also create a bank account in that country. When the taxpayers customers send payments, they're sent to the foreign bank. The foreign bank then uses its correspondent account to process the checks so the customer won't discover they're payments were sent offshore. Once the checks clear, the taxpayer's IBC account is credited for the check payments. The result is that unreported income has been successfully transferred to an offshore tax haven.

False Billing Schemes - A taxpayer establishes an International Business Corporation (IBC) in a country serving as a tax haven, but a nominee is listed as the corporation's owner. A bank account is then opened under the IBC. On the bank's records the taxpayer would be listed as a signatory on the account. The corporations nominee (usually the scam's promoter) then sends invoices to the taxpayer's business for goods bought by the taxpayer. When the taxpayer pays the IBC the money is deposited into a joint account held by both the taxpayer and IBC. The taxpayer deducts the payment as a business expense. This both reduces their taxable income has deposits the unreported income into the tax haven's bank account.

How do Tax Evaders Access their Funds from Offshore Accounts?

Although the unreported funds sitting in the offshore bank account are earning interest or being used for investment purposes, most of the time the taxpayer wants to have access to the money. There are several methods used to get the funds back to the taxpayer, but the following are the most common.

Fraudulent Loans - The International Business Corporation (IBC) created by the taxpayer will loan he or she their own money. The loan is transferred by wire to the taxpayer's U.S. bank account. The owner escapes paying taxes on this transaction because loans are not taxable! It isn't always easy to prove that the loan is fraudulent because IBC ownership is often through bearer shares. Sometimes the scam's promoters give their clients loan documents which make fraud tougher to prove.

Credit/Debit Card - One of the most popular methods in recent years has been use of the bankcard to access offshore funds. Once the foreign bank account is established, the taxpayer is issued a bank card. The taxpayer can use the bankcard in the to withdraw cash and to pay for everyday expenses.

Offshore Tax Evasion Penalties 

Investors of abusive tax schemes that improperly evade tax are still liable for taxes, interest, and civil penalties. Violations of the Internal Revenue Code with the intent to evade income taxes may result in a civil fraud penalty or criminal prosecution. Civil fraud can include a penalty of up to 75% of the underpayment of tax attributable to fraud, in addition to the taxes owed. Criminal convictions of promoters and investors may result in fines up to $250,000 and up to five years in prison.

Click here for a free and confidential offshore tax fraud case evaluation!

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