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Understanding Offshore Tax Evasion Charges in Federal Court in NYC
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Understanding Offshore Tax Evasion Charges in Federal Court in NYC
Getting charged with offshore tax evasion in federal court in New York City can be a scary and confusing experience. This article aims to provide a helpful overview of what these charges mean, what penalties you may face, and what defenses you can raise.
What is Offshore Tax Evasion?
Offshore tax evasion refers to illegally hiding income or assets overseas to avoid paying U.S. taxes. This often involves setting up foreign bank accounts, trusts, corporations, or other entities in tax havens like Switzerland, the Cayman Islands, or Panama.
According to the IRS and Department of Justice, common offshore tax evasion schemes include:
- Not reporting foreign income on your tax return
- Underreporting income earned abroad
- Claiming false deductions or credits related to foreign assets or entities
- Hiding ownership of foreign accounts or companies
- Transferring funds to evade taxes
Simply having money in a foreign account is not necessarily illegal. But intentionally hiding assets and income offshore to avoid taxes is a felony crime.
Charges and Penalties
There are a few main criminal tax charges prosecutors often pursue in offshore evasion cases:
Tax Evasion
This charge means willfully attempting to evade paying taxes you owe. It carries up to 5 years in prison and fines up to $250,000 for individuals.
Filing a False Tax Return
Intentionally providing false information on your 1040 form can lead to up to 3 years in prison and $250,000 in fines.
Failure to File FBAR
Not properly reporting foreign accounts on an FBAR form when required can mean civil FBAR penalties up to $100,000 or 50% of the account balance, whichever is greater.
Other possible charges include wire fraud, mail fraud, and money laundering. The more money involved, the harsher the potential sentence.
How Cases Start
Often offshore tax evasion charges begin with a civil IRS audit of your tax returns. If auditors find large discrepancies suggesting assets or income hidden offshore, they may refer the case for criminal investigation.
The IRS also runs an Offshore Voluntary Disclosure Program where people can self-report foreign assets and pay back taxes and penalties to avoid criminal prosecution.
Increasingly, offshore tax evasion charges originate from whistleblowers coming forward or leaks like the Panama Papers revealing secret foreign accounts.
Proving Offshore Tax Evasion
For a conviction, prosecutors must prove beyond a reasonable doubt that you intentionally violated tax laws. That means showing that you:
- Knew you had a legal duty to pay taxes on worldwide income
- Knew about the foreign accounts or assets
- Intentionally failed to report or lied about the foreign assets and income
The government often relies on circumstantial evidence like large cash withdrawals, emails, travel records, and inconsistencies in your statements.
Possible Defenses
There are several defenses that may apply in offshore tax evasion cases:
Lack of Intent
If errors or omissions were accidental, not willful, you may be able to avoid criminal liability. Common arguments include ignorance of reporting requirements, lack of understanding of finances (for spouses), reliance on professionals, etc.
Statute of Limitations
Tax evasion charges must be brought within 6 years of the tax year in question. If prosecution begins after the statute of limitations expires, charges could be dismissed.
Unconstitutionality
Some argue tax evasion laws violate Constitutional rights and protections. However, courts have consistently upheld the constitutionality of tax evasion statutes.
Improper Investigation
If investigators violated due process or your rights, evidence may be suppressed and charges dismissed.
References
Here are some useful resources for learning more about offshore tax evasion charges: