Hiding Income offshore (Essay Sample)

Hiding Income Offshore
Name
Institution
Course
To: Internal Revenue Service
From: Auditor
Date: 21st May, 2014
Re: HIDING INCOME OFFSHORE
The Importance of this Topic
The internal revenue service has highlighted the surging problem for many Americans preferring to hide their income in offshore banks in a bid to evade taxes. Although there are voluntary offshore corporations, many businesses channeling funds into offshore banks do so in a bid to evade the stringent tax system that is evident in the United States. Recent research has revealed that this practice highly reduces the rate of taxes that the American government should be collecting. It is illegal for any individual or business to evade taxes. Other individuals are drawn to offshore banking by several scams developed by dishonest people in a bid to exploit the Americans who are desperate to evade taxes (Martin and Ferreira, 2014).
Impact of Hiding Income in Offshore Banks on the US Business and Accounting Profession
Hiding income offshore is one of the aspects that have presented negative effects on the American business and economy as tax evasion leads to a reduction in the expected tax rates. Research by the IRS reveals that, only about 60% of the expected taxes are collected annually. Individuals and businesses hide income offshore from a great percentage of the remaining 40 because they have developed schemes of evading taxes. Although offshore banking is a legal system that presents certain advantages, when it is done maliciously to evade taxes, it proves to be illegal and may attract serious penalties (p. 25).
The IRS identified the issue of hiding the income offshore as one of the leading tax avoidance mechanisms and also as a catalyst of changing trends exhibited by international banking. The department of justice tax division sought to reinforce measures of ensuring that taxes were paid as expected. Moreover, the seriousness of the issues on the US business and accounting system is evident because of the determination of the IRS to take measures in a bid to persecute illegal offshore banking. Moreover, some of the Americans participating in offshore banking have fallen trap to millions of scams a factor that has led to more losses. According to the US financial policies, it is illegal to accumulate funds in an offshore bank. This is because of the financial implications in terms of taxes that offshore banking may present (p. 28).