The United States government takes attempts to avoid tax obligations very seriously. The Internal Revenue Service (IRS) ramped up its efforts to hold those who evade tax obligations through the use of foreign accounts over a decade ago after a Senate report found taxpayers avoid an estimated $100 billion in tax obligations every year by utilizing secret foreign accounts.
Those who set up accounts prior to this study and these increased efforts may not have had time to come into compliance with tax obligations. This may have resulted in leaving beneficiaries with more than just a large inheritance, they may have also left behind a sticky legal situation.
Father dies, children left with hidden foreign asset
One example involves beneficiaries who inherited a secret account from their father. The father left behind a $12 million inheritance in a secret Swiss account. The father never reported the account to the IRS. The beneficiaries had two options. First, they could report the assets and pay the expected tax bill. Second, they could continue to hide the asset and attempt to avoid the tax obligations.
The children chose to hide the account. They took proactive steps to attempt to continue to avoid reporting the presence of the account to the IRS. The IRS found out and charged the beneficiaries with various tax crimes. Ultimately, the children plead guilty to criminal tax evasion charges. In addition to paying the government over $4 million in restitution, the beneficiaries could face prison time.
Beneficiaries and others left with difficult tax obligation questions are wise to seek legal counsel
Dealing with the tax obligations that come with foreign assets is not an easy prospect. As a result, those who find themselves dealing with a foreign account that may not have been properly reported to the IRS are wise to contact an attorney experienced in this niche area of the legal world to discuss your options.