February 11, 2009 - Phil Hodgen

How will the IRS ever find out?

A cautionary morality play for the wiser ones of you in the audience.

I get many people coming into the office asking for help. They have (or want to have) money in offshore accounts, foreign trusts, corporations, what have you.

Some of them say “Well, how will the IRS ever find out?” (Meaning “Can I lie and get away with it?”). We don’t do business. Lying is a great tax shelter, and you don’t need to pay me to make it work. It works extremely well until it doesn’t work anymore.

Attached to this post is a PDF of a recent Bankruptcy Court case against one Gary Krause. Apparently the U.S. Trustee and the IRS believe that Gary should pay up $3 million or so, and that it is parked offshore. Gary tossed the Fifth Amendment about, but he’s in trouble. There’s a court order telling him to do certain things.

I don’t know the man, I don’t know what he did. But I do know that he is now in a position of “Your money or your life.” He’s going to face jail time for contempt of court if he doesn’t do what the Judge says he should do.

You can view the full decision here: US v Gary Krause.

No doubt Mr. Krause believed in secrecy, cleverness, or something. And no doubt some trivial mistakes tripped him up and made his scheme visible. It is always thus.

Money? Or prison? Pay the tax or risk time in prison for tax evasion? It’s not a hard decision.

Foreign Business Activities in the USA US Real Estate Investments Voluntary Disclosure