Be Wary of Seeking – or Recommending – a Foreign Tax Planning Service that Bends IRS Rules

Published by David Klasing at February 20, 2019

5 Reasons Tax Advisors Should Think Carefully Before Providing a Referral to an Offshore Service

CPAs and tax attorneys can be criminally charged – and professionally sanctioned – for helping a client to engage in a tax crime. (In fact, this occurs so frequently that tax preparer fraud made the IRS’ “Dirty Dozen” list of top tax scams for 2018.)

However, even if the tax professional does not directly assist with fraud, he or she may inadvertently enable tax evasion by providing referrals without fully considering the issues involved, prompting the essay’s author to argue that “lawyers should adhere to higher standards” when directing clients toward international tax planning services.

To support this point, the author offers five reasons why tax lawyers, CPAs and EAs should rethink “doing the minimum,” and instead, take a more comprehensive approach:

“The Rules Could Be Interpreted More Broadly” – As the essay points out, the IRS and Department of Justice enforce compliance and prosecute tax offenders aggressively, suggesting that these agencies might “try to argue that the lawyer meets the relevant mens rea standard” (i.e. acting “willfully”), especially if the attorney “knows or has reason to

know that the taxpayer intends to commit tax evasion” overseas.

“The Applicable Rules Could Change” – By way of example, the essay cites potential plans in the United Kingdom to “sanction middlemen for being ‘enablers of noncompliant behavior,’” suggesting that other countries might consider or enact similar rules.
“The Referring Tax Advisor Might Inadvertently Do More than Mere Referral” – The essay points out that if “the referring advisor continues to advise the client on other matters,” he or she will be in greater danger of penalization.
“Adverse Reputational Consequences Could Apply” – As the essay acknowledges, the mere “perception of wrongdoing can taint everyone associated,” regardless of whether “wrongdoing” has in fact occurred. This could spell serious, possibly fatal damage for a tax professional’s career or practice.
“Referring Aspiring Tax Evaders Does Facilitate Tax Evasion (Even If No Sanction Applies)” – The essay notes that, regardless of whether any sanctions or criminal liabilities actually arise from a questionable referral, the tax advisor has, nonetheless, “facilitated tax evasion” for the client. As the author argues, the referring advisor “abdicates legal responsibilities by connecting the aspiring tax evader with another tax advisor who may not share the same values and who may instead assist the aspiring tax evader with its illicit objectives.”

California Criminal Tax Defense Lawyers Representing CPAs and Tax Preparers

CPAs and EAs and other tax advisors with criminal tax exposure are in urgent need of competent criminal tax defense representation. At the Tax Law Office of David W. Klasing, our legal team possesses extensive experience representing defendants charged with tax evasion and related offenses. If you are a tax preparer who is concerned about criminal liability or a potential investigation, contact us right away for a reduced-rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295.

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