For Taxpayers Going Offshore, Which Consultants to be Wary of

For Taxpayers Going Offshore, Which Consultants to Avoid

For Taxpayers Going Offshore

Our international tax law team specializes in representing U.S. persons such as U.S. Citizens, Lawful Permanent Residents, and other foreign residents across the globe with international tax-related issues. One main focus our firms handles is expatriation, which is the process for a U.S. citizen or Long-Term Lawful Permanent Resident who wants to formally renounce their U.S. citizenship or terminate their long-term lawful permanent resident status. Oftentimes, one of the key motivations for wanting to go offshore is for tax minimization purposes — or at least the perceived tax benefits of going overseas. Unfortunately, oftentimes taxpayers get goaded (read: swindled) into paying tens of hundreds of thousands of dollars in offshore consultancy fees for non-legal, non-tax marketers to assist them with moving their assets overseas. While it may seem like a good idea, it isn’t — and we have been contacted by many taxpayers who have lost hundreds of thousands of dollars or more trying to put these false strategies into play.

It is important to note that the United States does not make it that easy for taxpayers to simply go offshore, especially when they have businesses and other entities. Likewise, taxpayers who expatriate may have six-and seven-figure exit taxes which makes the resulting net effective tax benefit zero, if not negative.

An Example of What to Avoid

Peter is a Lawful Permanent Resident (10 Years) and also a citizen of a foreign country. The country in which Peter is a foreign citizen is a treaty country. He wants to avoid paying U.S. tax on his worldwide income, so he wants to move overseas to a country that is not the foreign country he has citizenship. He realizes that he should reach out to experienced legal professionals, but during his research, he comes across individuals who claim to be ‘offshore experts’ and can help him reestablish himself overseas, acquire properties, and reduce taxes to nearly zero. Against his better judgment, he schedules a consultation and decides he is going to pay this individual a significant amount of money to help him accomplish his goal.

In the end, not only does the plan not work, but the marketing professional he hired does not have the experience nor the right connections to get the job done. Peter is out $35,000, with nothing to show for it.

Beware of ‘Shiny’ Marketing Materials

You have worked very hard for your money and there are many online shysters who are more than willing to take your money from you if you let them. Everybody wants to pay fewer taxes, but does that mean that you should trust someone you have never met on YouTube, who has no credentials that you can verify, and whose only selling point is that they moved overseas themselves and renounced their U.S. citizenship (which you cannot confirm either) with your seven-to- eight-figure net worth?

This is not a good idea.

There is a reason why tax lawyers spend years learning their craft, including obtaining additional advanced law degrees (LLM) and Board-Certified Tax Specialist Status.

Anyone can go on YouTube and record themselves rambling on about wanting to move to a country that has no tax, why you should buy several golden visas, and how to avoid the long arm of the IRS — but there is a big difference between someone yammering about it online vs actually knowing what needs to be done.

Be Careful What You Read Online

The first thing to keep in mind is that unless a person is licensed as an Attorney, a CPA, an Enrolled Agent, etc. then chances are they do not have the significant amount of experience necessary to help you plan your offshore journey. Likewise, if they are not licensed in any particular state with any credentials, how can you check their credentials?

How do you know they are even using their real name?

You have no way to confirm they are who they purport to be. Oftentimes, claiming to be an offshore expert is nothing more than a marketing ruse, where these non-licensed professionals prey upon your goal of paying less tax by constantly going on YouTube talking about:

• • • Why being a U.S. citizen is bad (without explaining all the benefits there are to it for many taxpayers)

    • Rattling off small ‘tax-free’ territories (but failing to mention the roadblocks for you to move there or why no one moves there).

    • Which passports are the best (without explaining that these passports are only the ‘best’ for some people)

    • Summarizing legal strategies (but they have no legal experience and constantly get the information all wrong).

    • Turning $1 into a gazillion dollars with offshore investments (with no real strategy in place)

What Services Are These Companies Really Offering?

In reality, all these companies are really doing is taking your money and then sending you on a wild goose chase across the globe.

Recently, and especially after COVID, we have had several individuals reach out to us letting us know they feel like they have been duped into purchasing tens of thousands of dollars worth of offshore consultancy fees, which led them nowhere. They come to us being in a much worse situation than they were in before they started.

When they purchased the generic offshore consultancy fee package, it includes strategies for countries that no person would want to invest significant amounts of money into — and does not account for their U.S. person status, CFC, Subpart F, GILTI, PFIC, etc. — or what to do about the more complicated issues of corporate inversions, and three-way treaty agreements.

In addition, after signing the agreement to go offshore, these companies do not perform much of any of the work that they were signed on to do. And, the taxpayer is left having to use whichever attorney or CPA (if any) that the company refers them to — and oftentimes these tax professionals have little to no true experience in offshore compliance, and they just tend to be the attorneys that charged these offshore companies the least amount of money for their services. That way, the company that offered you the consultancy services can pocket the most amount of your payment as profit.

If You are a USC or LTR, You Must Research ‘Expatriation’ First

If you are either a U.S. citizen or a long-term lawful permanent resident, then you have to go through the detailed process of formally renouncing your U.S. citizenship or terminating your lawful permanent resident status to avoid U.S. taxes. Until you do so, you are still considered a U.S. person for tax purposes. No matter how many golden visas you acquire, no matter how many new shiny passports you purchase, and even if all of your income is generated from overseas — until you formally expatriate from the United States, you are still subject to the same taxes you were subject to when you lived in the United States.

Be Cautious with Your Money

Of course, sometimes there are strategies taxpayers can use to try to reduce their US taxes. Usually, for there to be a significant reduction, it will require the taxpayer to make very substantive changes to their business or US person status, and that may not be something that the taxpayer wants to do. If it is, then the taxpayer should work with experienced tax and legal counsel to develop the plan and put it into action.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax and specifically IRS offshore disclosure and expatriation.

Contact our firm today for assistance.