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February 10, 2010

  • IRS Investigates Offshore CC Payments, Pt.3
      The tip of the iceberg.

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    The U.S. Internal Revenue Service (IRS) isn't ready to back off just yet on companies sending debit and credit card payments to foreign banks. The agency continues to believe that a significant amount of offshore credit card revenue is being reverted back to the states and not being reported to the IRS. The practice of incorporating businesses in a foreign country while based in the U.S. began several years ago as the World Wide Web become more inviting. Many offshore credit card payments started out with less reputable companies such as pornography and gambling. These businesses have grown significantly and can be found in early every state of the union.

    The success of previous businesses in dodging federal income tax has invited more mainstream businesses. These businesses include health and beauty aids, vitamins, loans, and travel. Credit card processing companies say they have individuals that are completely dedicated to arranging IRS compliant foreign accounts for businesses that are based in the U.S. Many of these businesses turn to offshore accounts because they say U.S. banks see them as high risks. Many of the companies experience high credit card charge backs; something banks aren't very fond of.

    Nevertheless, the IRS believes the underlying motivation to send credit card processing offshore is to avoid paying taxes. Some believe that other than to avoid paying taxes, there is no other benefit to crossing borders to bank. The IRS has had some success over the past few years in shutting down some business that they found illegally routing payments, but they know they have only touched the tip of iceberg. The U.S. government's strong arm has made it a priority in fighting companies who have set up offshore accounts or the purposes of tax evasion. Last March they have even gone so far as to offer a reduction in penalties and taxes to any company who comes forward and admitting to tax evasion through offshore accounts. The IRS remains confident that they will win the fight.

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