IRS Targets Malta Pension Schemes in Criminal Tax Audits and InvestigationsHot Topics, News, Offshore Account Update
Posted in on August 11, 2023
The Internal Revenue Service (IRS) is targeting Malta pension scams in criminal tax audits and investigations. These audits and investigations present substantial risks for targeted taxpayers—including the risk of prison time in some cases.
The IRS is Cracking Down on Tax Avoidance Involving Maltese Pension Plans in 2023 Through Audits and Investigations
Signed in 2011, the U.S.-Malta Tax Treaty arguably opened a loophole that allowed U.S. taxpayers to avoid federal income tax liability by opening a Maltese personal retirement plan, contributing appreciated assets, and then taking staggered tax-free distributions. The federal government sought to erase any questions regarding taxpayers’ liability in 2021 when it entered into a Competent Authority Agreement (CAA) with Malta which states, “U.S. citizens and residents may not claim benefits under . . . the Treaty with respect to . . . a personal retirement scheme established in Malta under the Retirement Pensions Act of 2011.”
The IRS went a step further in June 2023, proposing new regulations that would classify distributions from Maltese personal retirement plans as “listed transactions.” While these regulations are not yet final, they nonetheless send a clear message that the IRS plans to target Maltese pension plan owners in 2023 and beyond.
What U.S. Taxpayers Need to Know About Maltese Pension Plans and Criminal Tax Evasion
In light of these developments, what do U.S. taxpayers who own Maltese pension plans need to know? First and foremost, the IRS is already actively targeting taxpayers in IRS criminal tax audits and IRS tax Malta pension investigations. We anticipate that these audits and investigations will continue well into the future and that the IRS will continue to refine its investigation strategies and allegations as it moves forward.
These audits and investigations will have the potential to lead to criminal charges in many cases. Willful tax evasion is a federal crime, and the IRS does not hesitate to recommend criminal charges when they appear to be warranted. Under the federal tax evasion statute (26 U.S.C. Section 7201), willfully attempting to “evade or defeat any tax” carries up to a $100,000 fine and five years of imprisonment.
Even if criminal charges are unwarranted, taxpayers who improperly use Maltese pension plans to avoid federal tax can face liability for back taxes, interest, and civil monetary penalties. This is true even for taxpayers who relied on the advice of their accountants or fell for Maltese pension scams. While taxpayers may be able to mitigate their liability in these cases, doing so will require the representation of an experienced IRS criminal tax attorney.
Request an Appointment with Virginia Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group
If you have a Maltese pension plan and have questions or concerns about facing IRS scrutiny, we encourage you to contact us promptly for more information. To request an appointment with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752 or contact us confidentially online now.Share This Post