DOJ Waging War Against Offshore Shell Companies


A Florida doctor was recently sentenced to multiple years in prison for income tax evasion. The taxpayer hid income and assets through the use of offshore bank accounts concealed by the use of offshore shell companies. This is a common technique for asset protection purposes.

In its press release the Department of Justice reiterated its position on the use of shell companies and other nominees (like offshore asset protection trusts).

“The Justice Department is committed to investigating and prosecuting those who continue to evade taxes by hiding income and assets in undisclosed offshore bank accounts,” said Assistant Attorney General Kathryn Keneally for the Tax Division. “As this sentence shows, those who fail to come into compliance risk high penalties and jail.”

“Those who use nominee entities to conceal their assets and income in offshore accounts should realize by now that no bank offering such services will be a safe haven from the IRS,” said Chief of IRS — Criminal Investigation Richard Weber. “Regardless of wealth, everyone must pay taxes on all of their income, not just the amount they choose to report. It is more important that the American people feel confident that everyone is playing by the same rules and paying their taxes. ”

The filing date for disclosure of offshore financial accounts is June 30 by filing a Report of Foreign Band or Financial Report (FBAR). The requirements for filing an FBAR are restated as follows:

“U.S. citizens must file a Report of Foreign Bank and Financial Accounts (FBAR) with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.”

The phrase “or other authority” means indirect control, such as through a trust protector or nominee director.

For those U.S. taxpayers who do not wish to face the same fate as the Florida doctor, by coming forward, they may be able to enter the Offshore Voluntary Disclosure Program (OVDP). The time to come forward is before you are discovered. Once discovered it is too late.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Sanford Millar
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