If you visit our tax blog on a regular basis, you know that our international tax attorneys often discuss cases where taxpayers were assessed civil penalties, were criminally prosecuted, or both for their involvement in offshore tax fraud schemes, such as the four men who were charged with tax fraud in a Panama Papers investigation, or the Los Angeles man who was prosecuted after hiding Israeli bank accounts. You might also have noticed that many of the taxpayers we profile are tax professionals, such as attorneys or tax preparers, who abuse their knowledge of tax regulations to enrich themselves or their clients. For example, as one legal essay discusses in depth, the now-defunct Panamanian firm Mossack Fonseca was instrumental in facilitating the offshore tax planning schemes that were later exposed in the Panama Papers scandal. Using this example, the essay makes a point that “referring lawyers should do more than the minimum,” stating that not only could the attorney “suffer an adverse reputational effect” – but furthermore, that providing referrals for “Aspiring Tax Evaders” makes tax evasion prosecution of the client and the advisor for aiding and abetting income tax evasion a possibility. Be advised that a client facing criminal prosecution will invariably try and reflect responsibility for the crime back on to the advisor that crossed the line for them.
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.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
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