We have all heard of outsourcing, but normally we think of big corporations who move their manufacturing overseas or call centers somewhere in India, where everyone complains they can’t understand the person on the other side of the telephone.
So, what happens when that gets reversed? You are now being outsourced to – by a company from Europe or even India. This happens more than you realize, especially when a company wants to add an “American” touch to their marketing.
Remember, as a US Citizen, you are taxed on worldwide income. That means all your income is taxable – even if you don’t receive a 1099 or W-2 from the employer. Even if you are paid in cash “under the table,” it is still taxable income. At this point, you might be thinking, but how will the IRS even know?
Do you really want to take that chance? Under Audit, income that is found to have been received but not reported can be considered tax fraud, which not only comes with a penalty, but can also mean jail time. The IRS can base this on your lifestyle – not just what is in your checking account. If they feel your income can not sustain the lifestyle you live, and you can’t prove other non-taxable money such as an inheritance, then you can bet you are going to be charged with fraud. This is how they brought down Al Capone – it was not for contracted killings or breaking prohibition – it was for tax fraud.
If you have a foreign bank account things can get even more serious and can mean penalties of $10,000.00 or more for not reporting the account! The key is take responsibility for all your income; both foreign and domestic; while finding legal deductions from that income.
Tax planning is always important but when foreign income is involved it becomes even more so – schedule an appointment so we can discuss those accounts you’ve been keeping in the Cayman Islands, before the IRS contacts you about them!