Are Offshore Credit Cards Illegal?
- May 22, 2012
- David Greene
- Comments Off on Are Offshore Credit Cards Illegal?
Americans can do business in any country where allowed by that country. Therefore, having an offshore credit card is not illegal. However, most of these cards are designed to evade income tax and that is illegal. I recently attended a three day tax seminar in Denver, Colorado. One of the speakers there was a high ranking IRS attorney. He told us that the IRS is rapidly increasing enforcement efforts against tax evasion schemes, one of the top being offshore credit cards. They have obtained the records of many of these offshore banks that issue the cards and are tracing the cardholders to see if they have reported the income associated with the cards.
The illegal scheme usually goes like this. The American citizen obtains money “under the table” or through illegal means. Then he transfers the money overseas and funds an offshore credit or debit card with it. He does not report that income on his US income tax return. Then he spends the money by using his offshore card. This constitutes tax fraud.
If one has used an offshore card and has reported the income that was used to fund the card on his income tax return, he is in no trouble and what he has dome is not illegal. However, if that person did not report that income, it is tax evasion.