Tax Problem Attorney Blog

In the latest of a string of guilty pleas related to FBAR cases, Dr. Andrew Silva, a Virginia surgeon pled guilty to one count of conspiracy to impede the United States, and to making a false statement. Several interesting points about this tax fraud case.

• Dr. Silva inherited the Swiss bank account from his mother.
• Silva failed to file a Report of Foreign Bank Account, Form TDF 90-22.1 (FBAR), but was charged with other crimes instead.
• Silva met with a Swiss attorney who managed the Swiss Bank Account, and was advised to evade the currency reporting requirements by transporting less than $10,000 at a time to the U.S. Another case of bad advice by a Swiss attorney. Attempting to avoid the currency reporting requirements is a criminal offense known as “structuring.”
• Based upon news reports it appears that the Swiss bank account was held at HSBC . Previously the reported guilty pleas have involved funds at UBS.
• When Silva was told in late 2009 his Swiss bank account would be closed the Swiss banker refused to wire the funds, instead he was given $200,000 in hundred dollar bills which he mailed back to the US in 26 separate packages. These packages were seized by customs. More tax problems exacerbated by accepting at face value the “advice” of a Swiss banker.

For his troubles Silva could be sentenced to up to 10 years in prison, and pay a fine of up to $500,000. Silva has also agreed to forfeit the currency, and pay all of the unreported tax, interest and various penalties.

This case illustrates a classic example of making a tax problem worse by attempting to conceal what has happened. While it is dangerous to speculate without knowing all of the facts it is likely that Silva’s FBAR, and tax fraud violations came to light when he mailed the currency back to the U.S. Had he made a voluntary disclosure of the funds to the IRS, and insisted that his funds be wired to the U.S. it is likely he could have avoided his criminal tax problems.

If you have a foreign financial account call the tax litigation lawyers at Brager Tax Law Group for a consultation.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems , Tax Fraud

Bookmark:

Filing a false tax return in violation of Internal Revenue Code (IRC) Section 7206 can result in deportation of a resident alien, i.e. a green card holder, according to the 9th Circuit Court of Appeals. Kawashima v. Holder (9th Cir. 2010). In a long running case Mr. Kawashima pled guilty to subscribing to a false tax return in violation of IRC Section 7206(1). His wife pled guilty to aiding and assisting in the filing of a false tax return in violation of IRC Section 7206(2).

Generally green card holders can be deported for committing an “aggravated felony.” Tax fraud or tax evasion in violation of IRC section 7201 is specifically defined by the immigration laws as an aggravated felony. Aggravated felonies also include any offence that involves fraud or deceit which exceed a loss to the victim of more than $10,000. The Kawashimas argued that since tax fraud was specifically defined as an aggravated felony Congress meant to exclude all other tax crimes including filing a false tax return. The 9th Circuit disagreed, holding that under the plain language of the statute not only was tax evasion a removable offense, but so was filing a false tax return.

This is just another reminder that the collateral consequences of a criminal tax conviction can reach far beyond the potential prison time.

If you or a loved one has been accused of civil or criminal tax evasion contact the tax lawyers at Brager Tax Law Group, a P.C. for a consultation.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Tax Disputes , Tax Fraud

Bookmark:

The owner of a UBS offshore account has won a lawsuit in the Swiss Administrative Court barring UBS from turning over her name to the Internal Revenue (IRS). The reasoning of the Court was that the only evidence of tax fraud was the failure to submit IRS Form W-9, and this by itself was not sufficient to establish tax fraud, or the like which is a precondition to supplying information to the IRS under the terms of the Swiss Tax Treaty. The Swiss Government has indicated that it will respond to the decision on Jan. 27th.

This leaves the question of how will other UBS offshore account holders, and owners of other Swiss bank accounts at other banks will be impacted. Those individuals who have already made voluntary disclosures to the IRS are not impacted. They have already committed to going forward, and there is no good way to unring that bell.

I expect there will be a good deal of buyer remorse among holders of offshore financial accounts who already entered the voluntary disclosure program. To those I would point out several things. First, everyone’s situation is different. The fact that the failure to provide a Form W-9 is not by itself tax fraud or the like, doesn’t mean that there might be other facts in your case which would constitute tax fraud. Second, in order to dispute the decision of the Swiss Federal Tax Administration (FTA) to turn over bank records would have required the filing of an action in Switzerland. Doing so would trigger the provisions of U.S. law requiring someone who files such an action to serve a copy of the pleadings on the U.S. Attorney General. The failure to do so would be a criminal offense. The lead prosecutor on FBAR (Foreign Bank Account Report) cases stated last year that the IRS intended to prosecute anyone who failed to follow that law.

Third, it would not have been possible to obtain a decision from the Swiss Administrative Court prior to the expiration of the tax amnesty program so if you had filed suit you would have had to take the risk of losing, and incurring higher FBAR penalties.

Fourth, one reason for entering the voluntary disclosure program was so that you could sleep at night. Litigating a tax fraud case in Switzerland is not calculated to induce sleep. Other reasons to enter the voluntary disclosure included the repatriation of funds, and removing them from the grip of greedy Swiss bankers who were charging a fortune for their services, and paying little in the way of interest. Not to mention avoiding leaving the headache of an offshore bank account for your children, and grandchildren to clean up. Leaving the funds in undisclosed offshore bank accounts also would force you to continue to commit tax fraud each year as you file your tax returns, and to violate the Bank Secrecy Act, by continuing to fail to file Foreign Bank Reports (FBARs) each year. Not a pretty picture.

Fifth, this decision obviously doesn’t apply to anyone with offshore accounts outside of Switzerland. The tax treaties with most countries make it much easier for the IRS to obtain information regarding tax evasion.

If you have offshore bank or financial accounts, and you would like advice contact the tax litigation lawyers at Brager Tax Law Group, A P.C.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark:

The Internal Revenue’s (IRS ) tax lien filing polices were in the Taxpayer Advocate’s 2009 Report to Congress listed as the second most serious tax problem facing taxpayers today. This is not a big surprise to those tax lawyers who deal with IRS tax collection problems on a regular basis. I often tell clients that the most difficult objective is to try and get the IRS to release a tax lien prior to making full payment of a delinquent tax liability.

The Taxpayer Advocate’s Report details how the IRS files tax liens without regard to whether or not the taxpayer has assets, and despite the fact that in many instances the filing of a tax lien does not protect the IRS, and only exacerbates the taxpayer’s inability to pay. The Report also points out that the Internal Revenue Manual puts obstacles in the path of their employees who decide not to file a tax lien-- requiring managerial approval, and documentation of any decision not to file a tax lien.

One would only hope that the IRS tax Collection Division takes serious note of the criticisms by the Taxpayer Advocate, and that it not continue to file tax liens as method of punishing taxpayers; however, the IRS responses to the Report make clear that Congressional action will be necessary for any significant tax lien relief.

Taxpayers with tax problems must therefore continue to explore other avenues of relief including offers in compromise, installment payment agreements, audit reconsideration, and bankruptcy to resolve their tax problems.

If you have tax problems call the tax lawyers at Brager Tax Law Group, Inc. for a consultation.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Miscellaneous Tax Information , Tax Debt , Tax Litigation and Tax Controversy

Bookmark:

The California Franchise Tax Board (FTB) has arrested an individual for felony income tax evasion. According to the FTB Phillip Leech was the CFO of In & Out Desighns, Inc. which allegedly earned more than $1.3 million over a three year period, but didn’t file corporate income tax returns. There are a couple of interesting things about this tax fraud case. One is that Leech was apparently not the owner of the corporation; nevertheless because he was the CEO and CFO the FTB pointed out that he had a duty to file the income tax returns, and was charged with tax evasion. The amount of tax alleged to be owed by the corporation was not huge, $122,000, but the FTB still brought a criminal tax fraud case.

Another interesting point is that the criminal tax fraud case was brought only after the FTB issued notices to the corporation requesting tax returns. Sounds like Mr. Leech should have paid more attention to his mail!

If you have a tax problem with the California Franchise Tax Board, the Internal Revenue Service, or another California tax agency call the tax litigation lawyers at Brager Tax Law Group, A P.C.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: California Franchise Tax Board , Tax Fraud

Bookmark:

The IRS has issued a fact sheet on filing Form 90-22.1, Report of Foreign Bank and Financial Accounts (FBARs) to start the New Year. The FBAR fact sheet adds nothing to the sum of our knowledge on FBARs simply stating the obvious. For example, it states:

If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund or other type of financial account, you may be required to report the account yearly to the Department of the Treasury. Under the Bank Secrecy Act, each United States person must file a Form TD F 90-22.1, Report of Foreign Bank and financial Accounts (FBAR), if:

• The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and
• The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Hardly earth shattering. On the other hand these IRS fact sheets are generally intended to provide basic information to individuals unfamiliar with an area of tax law.

If you have an offshore financial account, and would like to have your questions answered call one of the tax lawyers at Brager Tax Law Group, A P.C. for an appointment.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark:

The Swiss Federal Administrative Court ruled that the order to UBS by the Swiss Financial Market Supervisory Authority (FINMA) to turn over the names of 250 United States UBS customers accused of committing tax fraud or tax evasion was illegal. The decision may be appealed to the Swiss Supreme Court. You will remember that early last year UBS turned over the names of 250 of its U.S. customers with offshore accounts; the IRS Criminal Investigation Division (CI) reportedly began investigations of about 150 of those persons for potential tax evasion, and failure to file Foreign Bank Account Reports (FBARs). Several of those persons already have pled guilty to criminal tax charges.

If the decision is upheld many U.S. persons will no doubt argue that any prosecution of them on the basis of evidence provided illegally is tainted. Whether that argument will fly remains to be seen. For a copy of the court’s decision (in German) click here: Download file 1 Download file 2 Download file 3 Download file 4 Download file 5 Download file 6

Swiss tax attorneys have been quoted as saying that the court’s order will have no effect on those 4,450 names being turned over pursuant to the agreement entered into between UBS, and the IRS last August.

If you have offshore bank accounts, and still have not decided whether to make a voluntary disclosure contact the tax attorneys at Brager Tax Law Group, A P.C.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark:

I lifted my nose up from filing Foreign Bank Account Reports (FBARs), talking to clients with offshore financial accounts, and filing for tax amnesty under the IRS Offshore Voluntary Disclosure program long enough to notice a speech that Senator Carl Levin had given in mid-September on the topic of offshore tax havens. Senator Levin has been battling against tax fraud committed through the use of offshore financial accounts for many years, and in the last year or two his ideas have been gaining more traction. The text of his speech is available here. A few highlights are worth repeating:

• Liechtenstein and Switzerland have reversed decades of resistance and agreed to enter into Tax Information Exchange Agreements in line with the model agreement developed by the Organization for Economic Cooperation and Development (OECD). Both countries have already initialed such agreements with the United States and other countries.

• G-20 leaders signaled a new willingness to take action against uncooperative tax havens, the changes made by Liechtenstein and Switzerland set off a chain reaction in other bank-secrecy nations. Places like Luxembourg, Austria, Andorra, Monaco, and others also pledged for the first time to share tax information and cooperate with international tax enforcement

• Offshore tax abuse needs to be taken into account when developing international trade policy. Specifically, there ought to be a policy against rewarding trading partners that refuse to adopt the growing global consensus against tax evasion. The nation of Panama, for example, hopes to conclude a free trade agreement with the United States in the near future. But at the same time, after pledging in 2002 to negotiate a tax information exchange agreement with the United States, Panama is stonewalling. The United States should insist that Panama and other nations agree to tax information sharing before extending to them the advantages of a free-trade agreement.

Clearly the pressure is mounting on secrecy jurisdictions, and as I have said before whether your offshore account information will find its way to the IRS immediately is unknown, and unknowable. Nevertheless the handwriting is on the wall, and in five or ten years from now the ability to commit tax fraud by hiding funds in an offshore bank account will probably be a quaint curiosity that you can tell your grandchildren about.

In the meantime, if you have offshore financial accounts you have less than two weeks, until Oct. 15th, to enter the IRS tax amnesty program.

If you would like advice and assistance from our former IRS tax lawyers call Brager Tax Law Group, A P.C. to arrange a consultation.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark:

Yesterday I started a blog post subtitled Why 70% of a Foreign Bank Account Is Better Than 100% of No Foreign Bank Account. It included three reasons why, if you have offshore financial accounts, filing for tax amnesty by the Oct. 15th may be a good idea. It doesn’t matter if your offshore bank account is at UBS, or some other foreign financial institution. Today I have listed three more reasons:

1. Legally “Launder” Your Offshore Funds.

If your money is an offshore financial account it is difficult to spend in the United States. Banks keep copies of offshore wire transfers, and are required to report suspicious transactions to the Internal Revenue Service (IRS). If you bring cash back to the United States in excess of $10,000 you must declare it. Over the years people have come up with many methods of bringing the money back to the U.S., including credit cards tied to their offshore bank accounts—some have gone to jail. Any actions to hide the existence of the foreign bank accounts, e.g. moving them one from one country to another, or investing the funds in offshore real estate to avoid the reporting requirements could be construed as money laundering subjecting you to further criminal penalties.

If you participate in the offshore tax amnesty program you will then be able to bring the money back to the U.S., and enjoy the fruits of your labors. Or if you wish, you can continue to invest it abroad—it’s your choice.

2. Avoid Passing Along Your Tax Problems When You Die

No one lives forever. If you continue to have foreign financial accounts when you pass on you will bequeath all of your tax problems to your children and your spouse. For example, the foreign bank accounts must be declared on your estate tax return. Leave them off, and your executor has committed tax fraud. Put them on the return, and expose the estate to years of back FBAR penalties at the 50% rate, potentially wiping out your entire legacy. In addition, if your children and/or spouse become owners of your foreign bank accounts upon your death they will now have to report those foreign bank accounts, or face the same set of tax problems that you have now.

3. Sleep Better At Night

The one question that clients ask most frequently is “What are the chances I will get caught?” It is also the one question I can’t answer. The IRS has promised to devote significant resources to finding everyone who has an offshore financial account. I can safely say they won’t. Whether or not you will get caught no one knows. Nevertheless, the potential consequences of getting caught are so severe you have to ask yourself is it worth even a 5% chance of going to jail and losing everything to save some money. My answer is “no.”

Your answer may differ, but you need to think about it, and have an answer before October 15th. After all, who would have thought five years ago that almost 5,000 people who had been made promises of iron clad secrecy by the Swiss would now have their foreign bank accounts turned over to the IRS?

If you have a foreign financial account, and would like to discuss your situation with our former IRS tax attorneys please contact the Brager Tax Law Group, A P.C.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark:

Why 70% of a Foreign Bank Account Is Better Than 100% of No Foreign Bank Account (Part I)

Clients sometimes ask why they should take advantage of the IRS Offshore Voluntary Disclosure Program. In it’s frequently asked questions regarding offshore financial accounts the IRS provided an example of what could happen to someone with a foreign bank account of $1million in 2003 that earns $50,000 per year who hasn’t filed Foreign Bank Account Reports, TD F 90-22.1 (FBAR). That person could, if they didn’t apply for tax amnesty, could incur taxes, penalties and interest of well in excess of $2.3 million. If the IRS determined that the non-reporting was due to tax fraud, the amount would be much higher. Under the tax amnesty, the amount due would be $386,000 plus interest. Nevertheless some people don’t want to file for tax amnesty. If the IRS example doesn’t convince you here are six more reasons.

1. Avoid Going to Jail

The failure to file an FBAR can result in criminal penalties of five years in jail and a fine of $250,000 or both for each year the FBAR is not filed. It is the policy of the Department of Justice to ask the court to impose actual prison time; probation is very rare in tax cases. If you are a CPA, a lawyer, or a doctor in addition to going to jail you will lose your license to practice so when you get out you will have difficulty finding a job. If you are not yet a citizen of the United States as a convicted felon you could be deported, or your ability to become a citizen could be impacted.

2. It’s Cheaper Than You Think.

The person in the IRS example pays about $386,000 on $ 1,300,000 of income if he participates in the tax amnesty. In the IRS example the first million dollars was earned prior to 2003, as a result that one million dollars is never taxed. Had the amount been properly reported tax of $455,000 would have been paid (assuming a 35% tax rate). If the unreported income prior to 2003 was greater the savings are greater. For example, assume $3,000,000 of unreported income prior to 2003, and the same amount of interest earnings between 2003 and 2008. The amount paid pursuant to the tax amnesty will increase to $786,000. However, had the income been properly reported the tax that should have been paid would have been $1,155,000. Not a bad deal when you think about it.

3. Avoid Committing Perjury in 2010

Every year when you file your income tax return you are required to answer whether or not you have a foreign bank account. If you answer no you have committed the felony of filing a false tax return punishable by 3 years in jail, and a fine of $100,000. Up until now some people could reasonably say that they didn’t understand the requirement, or that their accountant hadn’t asked them about it. When the time comes to file your 2009 tax return in 2010 you can be sure that your accountant will be asking about your offshore accounts. Some accountants may require you to sign a statement that you don’t have a foreign bank account in order to protect themselves. After this year it will be much more difficult to argue that you were ignorant of the law—even if it is true.

Closing the offshore account now won’t help. If an offshore financial account has more than $10,000 in it at ANY TIME during 2009 it must be reported in 2010.

Three more reasons tomorrow.

In the meantime if you have tax problems including an offshore financial account call the tax attorneys at Brager Tax Law Group, A P.C. for a consultation.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark:

The IRS announced that the Offshore Voluntary Disclosure program granting tax amnesty to those who failed to file Foreign Bank Account Reports, Form TD-F 90-22.1 (FBAR) has been extended. The new deadline for filing a request to participate in the Offshore Voluntary Disclosure program is Oct. 15th. The prior deadline for participating in the Offshore Voluntary Disclosure program was Sept. 23rd.

The IRS had previous announced in March of this year that individuals and entities who had an interest in offshore bank accounts, and who had failed to file FBARs who voluntarily came forward, and notified the IRS of the existence of their offshore financial accounts would qualify for a reduced penalty regime. Normally the penalty for failing to file an FBAR on Form TD-F 90-22.1 can result in a penalty equal to the greater of $100,000 or 50% of the balance in the offshore account. In addition, non-filers of FBARs could be subject to criminal tax penalties, as well as a civil tax fraud penalty of 75% of any taxes that were owed. For more details on potential penalties please review our earlier post.

The IRS has said it extended the deadline in response to the requests of numerous tax attorneys and other tax professionals who requested additional time. The IRS stated that there would be no further extensions of the deadline for the Offshore Voluntary Disclosure program.

We here at Brager Tax Law Group, A P.C. were happy to see the IRS extend the deadline for this tax amnesty program since we are still hearing from clients who have only recently become aware of the FBAR filing requirements.

If you would like to consult with one of the tax lawyers at Brager Tax Law Group, A P.C. please call our office for a consultation.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems , Tax Fraud

Bookmark:

Having spoken to hundreds of individuals who have offshore bank accounts, or who have clients with offshore bank accounts, or relatives with offshore bank accounts, or even a “friend” with an offshore bank account there are certain questions which continue to recur. I thought it would be helpful to answer a few of them today, and a few more over the next week.

Q: If I don’t apply for tax amnesty how will the IRS find out about my Swiss bank account.

A: The short answer is: Maybe they will, maybe they won’t, but the consequences of the Internal Revenue Service (IRS) finding out are very severe, and you have to decide whether you can live with that. Non-reporting of foreign bank or foreign financial accounts can result in criminal prosecution resulting in 5 years in jail, and a $250,000 fine.

Q: Can’t you tell me anything more about how the IRS will find out about my secret Swiss bank account if I don’t enter the IRS offshore voluntary disclosure program?

A: Many people engaged in tax evasion get caught when their ex-spouse, or a disgruntled employee turns them in. It never ceases to amaze me how two people who once loved each other have absolutely no qualms of seeing their ex go to jail. Others get caught by random tax audits. Then of course there was the case of LGT bank where the German government bribed a Liechtenstein bank official to turn over the names of hundreds of its clients. The names of a number of U.S. citizens on that list made its way to the IRS; and who would have guessed even two years ago that UBS in cooperation with the Swiss government would have been handing over almost 5,000 names of supposedly secret Swiss bank accounts?

Q: Does the IRS really put people in jail for not filing Foreign Bank Account Reports TD F 90-22.1 (FBARs)?

A: Up until recently there have been very few prosecutions related to offshore bank accounts. In the last few months the IRS has stepped up the number of cases with four guilty pleas. The IRS says it has about 150 cases of offshore tax evasion involving UBS Swiss bank accounts being looked into by its Criminal Investigation Division. I expect that many of those cases will end with criminal tax prosecutions.

If you would like more answers to your FBAR questions you can seek advice from the former IRS tax attorneys at Brager Tax Law Group, A P.C.

Posted by Dennis N. Brager | Permalink | Email This Post

Posted In: Offshore Bank Account Problems

Bookmark: