The Internal Revenue Service (IRS) recently announced the Offshore Voluntary Disclosure Program (OVDP) will come to an end in September of 2018. The OVDP was essentially a set of rules that outlined how United States taxpayers could voluntarily come into compliance with tax obligations for foreign assets. In exchange for voluntarily bringing these obligations into compliance, the taxpayer would face minimal penalties. This often-included freedom from criminal persecution.
Entrepreneurs know that paperwork can become unmanageable while running a business. Business owners are constantly making decisions on which material to keep and which to shred. But what if you inadvertently shred important tax documents or fail to file taxes at all? The Supreme Court of the United States (SCOTUS) recently addressed this question.
SCOTUS recently heard oral arguments on a case involving a New York businessman convicted of several counts of tax evasion for failing to pay personal or company taxes for a number of years. The government presented evidence that Carlo Marinello II purposely destroyed business records (including bank statements, receipts, employee time sheets and bills), paid his employees in cash to avoid tax issues, never issued tax documents like W-2 forms, and didn't fail tax returns for nearly 20 years.
Offshore accounts are in the news again. Another massive data leak, this one referred to as the Paradise Papers, has resulted in the disclosure of the identity of a number of people and businesses that use these accounts. So what have we discovered from this most recent leak? Basically, we are coming to realize that these accounts are fairly common.
Shell corporations get a bad rap. There are situations when a shell corporation is not just legal, but makes good financial sense. Navigating through the legal intricacies that distinguish the legitimate use of a shell corporation from the illegal can be difficult. A recent case provides an example of an individual that allegedly failed to make this distinction.
It seems like a plot from a blockbuster action movie. A man takes on a position as a deep undercover agent, a spy for Germany. He blends into the criminal underworld, gathering evidence to support the arrest and conviction of drug dealers, diamond smugglers and terrorists all over the world. He helps negotiate the release of hostages and stops the dumping of 41 barrels of toxic chemicals. He was so good at his job that he earned the nickname, the German “James Bond.”
Accusations of tax evasion are very serious. Not only do they come with the social stigma associated with the word "evasion," wherein others may think you were attempting to game the system to get out of paying your fair share, but they also could result in serious criminal penalties like:
Lionel Messi is known throughout the world for his soccer abilities. The sports star has made millions off his success, making a profit from both his actual sporting ability as well as his image.
Digital currency, such as Bitcoin, has gained in popularity over recent years. As a result, the Internal Revenue Service (IRS) is scrambling to update tax rules and regulations to address this new form of currency. The federal agency was recently chastised twice by Congress for its handling of digital transactions. The concerns were voiced in two separate letters, sent within three weeks of each other.
In part one of this post, we took note of the unsuccessful appeal by soccer star Lionel Messi of his tax fraud conviction.His attempt to claim lack of knowledge of his father's use of shell companies to hide income didn't go over well with the appeals court. The court upheld Lionel Messi's 21-month conviction, even as it reduced his father's sentence to 15 months due to cooperation with authorities. What does the resolution of the Messi case tell us about tax compliance and enforcement, particularly regarding offshore accounts?