White collar crimes are becoming increasingly sophisticated as the world becomes ever increasingly flat. Creating an off shore company, used to be done exclusively by high net-worth individuals in order to avoid taxes. Nowadays, with companies sprouting up left and right, like createoffshorecompany.com, more and more business owners are creating offshore companies. In many instances, bankers, lawyers, and accountants, are helping business owners setup this companies in order to hide money from tax authorities. In a test done in October, 2013, hidden cameras were installed in Canada and Barabados, listening in on offshore service providers. More than half of the offshore service providers tested, gave advice that wouldn’t stand up to scrutiny.
One of the schemes involved a Canadian-Swiss banker and his plan for hiding undeclared cash in Switzerland using a method that, a panel of experts consulted by CBC News, said is virtually “untraceable.”
“He [is proposing] the most untraceable method,” said one insider, who used to run one of Canada’s largest offshore banking companies. “He is making the wiring of funds redundant. You don’t have to carry a suitcase of cash.… This is money laundering,” he said after reviewing the video footage.
While creating a tax shelter, via an offshore company, is not illegal, it all depends on what you’re doing. Tax shelters can be a great asset, because they help reduce your taxable income. The best tax shelter, is to use sound tax planning strategies, and think of your business as a way to rightfully reduce taxes. This is contingent upon you keeping good records, such as receipts, checks, in order to ensure the proper write-off’s can be made.
If you use an offshore company in order to avoid taxes, you may subject to an investigation by the IRS. If the IRS suspects criminal intent, they may deploy the Criminal Investigation Division. The CID conducts a thorough investigation, and has the right to contact friends, employers, co-workers, neighbors, and even the spouse, of the suspected criminal. They can even tap your phone lies. In order to prove convict you, the IRS will attempt to prove that you knowingly attempted to defeat/evade the tax system.
Tax evasion is a broad category, and includes cheating on taxes owed to the government. This is a felony, and carries up to 5 years in prison, and or, fines up to $250,000. Filing a false tax return occurs when a taxpayer has listed false information on the tax return as a fact. This is also a felony, and can carry up to a 3 year prison sentence, and/or up to $250,000 in fines.