An attorney from Houston, Texas has been convicted of tax evasion and conspiracy to defraud the United States due to scheme involving foreign accounts. In total, Jack Stephen Pursley hid $18 million of a former client’s income from the IRS in order to avoid taxation, according to the evidence presented at trial.
The Offshore Tax Evasion Scheme
The $18 million was income received by Southeastern Shipping and held in foreign accounts on the Isle of Man. This income was not reported and no taxes were paid, despite the fact that U.S. citizens must report all of their worldwide income.
The scheme became more complex when it was time to bring the money back into the United States without tipping off the IRS. To accomplish this, the transfers were disguised as stock purchases of a U.S. corporation owned by the client and Pursley.
Pursley reportedly received $4.8 million and a 25% interest in the client’s business in return for his involvement in the tax evasion scheme. Not surprisingly, Pursley did not report this income or pay taxes on it, instead characterizing the funds as non-taxable loans and returns of capital to avoid taxation.
In addition to penalties, interest, and restitution, Pursley may receive up to five years in prison for the conspiracy charge, and five years in prison for each tax evasion charge.
A Warning to Those With Offshore Accounts
This case is an extreme example, but it should be a warning to anyone with offshore accounts or unreported foreign income. The IRS is serious about foreign account reporting compliance. If you have a case involving a lot of unreported foreign assets or indications of tax evasion, the IRS has the power to pursue criminal charges to make an example of you.
At minimum, make sure you understand the basics of foreign asset compliance:
- Report all of your worldwide income on your tax returns.
- File FBARs if you are required to, which generally involves aggregate account balances exceeding $10,000 at any time during the year.
- File Form 8938 if you are required to. A reporting requirement starts at over $50,000 in specified foreign assets on the last day of the year or $75,000 at any time during the year, but the limits are higher if you are married filing jointly and/or live outside the United States.
- Use a qualified tax professional when filing your return to make sure you don’t make any mistakes.
If you have failed to file FBARs or report offshore income in prior tax years, contact a tax attorney to discuss your offshore disclosure options.
Get help with voluntary disclosure of foreign accounts by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best offshore disclosure strategy for your case.