Tax Problem Attorney Blog

Credit Suisse’s offices in Germany were raided by German tax officials looking for evidence of tax fraud. According to an article by Judy Dempsey in the New York Times all 13 German branches of Swiss bank Credit Suisse were searched, and it would take weeks for German tax officials to review the seized documents. One can expect that the IRS is watching this development very closely hoping to find evidence of tax evasion, and failure to file Foreign Bank Account Reports, TDF 90-22.1 (FBARs), by U.S. citizens and residents.

It wouldn’t surprise me if the IRS were preparing to file a lawsuit against Credit Suisse similar to the one filed against UBS in the hopes of getting the names of U.S. citizens suspected of tax evasion and failure to file FBARs. If the German tax prosecutors have evidence of tax fraud committed by Credit Suisse bankers, this would add fodder to any lawsuit by the IRS.

As I keep explaining to clients with offshore bank accounts, the FBAR problem is not going away, and it’s a mistake to think that the IRS investigation of offshore financial is limited to UBS, or even Switzerland.

If you would like a consultation regarding how to handle your unreported offshore bank account, or any other tax problem contact the tax litigation lawyers at Brager Tax Law Group.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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In February I noted that two clients with offshore bank accounts at HSBC had been indicted for FBAR (Foreign Bank Account Report) violations and related tax evasion charges. Last week Clare Baldwin reported through Reuters news service that some tax attorneys had been contacted regarding their clients’ undisclosed foreign bank accounts held at HSBC. Apparently letters had come from Department of Justice prosecutor Kevin Downing who has been taking the lead in FBAR prosecutions notifying the tax lawyers that their clients were the target of a criminal tax investigation by the IRS. HSBC moved quickly to distance itself from its clients. A spokesman for HSBC was quoted in the same Reuters article as saying that HSBC “fully supports government moves for appropriate disclosure by its citizens" and "does not condone or assist tax evasion.”

A few days ago Lynnley Browning of the New York Times quoted anonymous sources that;

At least two American clients of HSBC, which is based in London, are aiding federal prosecutors by turning over account details, names of bankers and internal memorandums and other confidential documents regarding HSBC’s offshore private bank, according to one person briefed on the matter.

If the UBS criminal tax prosecution is any guide, this means that over the course of the coming months HSBC will be handing over its clients’ names and account records to the IRS ; at which point they will face the prospect of tax evasion charges, and stiff civil penalties which can range to more than 50% of the balance in the offshore bank accounts.

Clients who have foreign bank accounts at HSBC may still be able to avoid criminal tax evasion charges by taking advantage of the IRS voluntary disclosure policy, and coming forward, but it is clear that time is running out.

If you would like to consult with an experienced tax litigation attorney regarding FBARs, voluntary disclosure, or other tax problems contact the tax lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud , Tax Litigation and Tax Controversy

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Failure to file a Foreign Bank Account Report (FBAR) on TDF 90-22.1 is crime under the Bank Secrecy Act punishable by up to 5 years in jail. Failure to file an FBAR usually goes hand in hand with tax fraud, and other tax problems. There is a common belief that if a person is a senior citizen he is safe from criminal prosecution. While that may have been true in the past, current FBAR and tax evasion prosecutions are breaking that pattern. Seventy six year old Leonid Zaltsberg pled guilty to charges of tax evasion and failing to file an FBAR on July 1, 2010. According to news reports he failed to report $60,000 in income over a six year period on an account with a maximum balance of $2.6 million.

Just in case you read that too quickly let me repeat. Over a six year period Zaltsberg, age 76, failed to report $60,000; that’s $10,000 per year! Granted it’s not pocket change, but we’re hardly talking about a big-time tax evader. According to his daughter as reported by David Voreacos, in Bloomberg News Zaltsberg has bladder and prostate cancer.

This case is a stark reminder to tax lawyers, and CPAs that they can not assume that because the amount of unreported tax is relative small their clients do not have criminal tax exposure. Clients need to be informed of the risks, and the way those risks can be minimized through a voluntary disclosure.

If you have a Swiss bank account, a Hong Kong bank account, or a foreign bank account in any country, and would like to discuss your options, contact the tax litigation lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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Foreign Bank Account Reports (FBAR) on Form TDF 90-22.1 are due in Detroit, Michigan on June 30th. Some CPAs and tax attorneys seem to be relying on an exception contained in IRS Notice 2010-23 which provides that persons who have signature authority, but no financial interest in a foreign bank account do not need to file an FBAR until June 30, 2011. The expectation is that the IRS may publish rules which would permanently exempt such persons from filing an FBAR. That’s fine, but some CPAs and even some tax lawyers believe that persons who are holding money for a foreign resident are allowed to use this exception to avoid filing an FBAR.

So for example, John opens an account in Israel for his father, Sam, who lives in Iraq. John is a U.S. citizen. Sam has never even been to the U.S. for a visit. The funds in the offshore account belong to Sam, but because the Israeli bank wouldn’t open up an account in Sam’s name unless he comes to Israel, John opens it in his own name, and puts Sam’s funds in the offshore bank account.

The assumption that John falls under IRS Notice 2010-23 is incorrect. John has a financial interest in the account. The definition of financial interest is set forth in the instructions to the FBAR, Form TDF 90-22.1 which states:

A United States person has a financial interest in each account
for which such person is the owner of record or has legal title,
whether the account is maintained for his or her own benefit or
for the benefit of others including non–United States persons. It’s
clear that John must file an FBAR on June 30, 2010 since he
holds legal title.

If you have an offshore bank account contact the tax litigation attorneys at Brager Tax Law Group, A P.C. to discuss your options.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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The Swiss Parliament has decided to allow UBS to turn over the names of its Swiss bank account customers to the IRS. This means that the names of 4,450 UBS customers who are suspected of committing tax fraud, and FBAR (Foreign Bank Account Reports, TDF 90-22.1) violations will be turned over to the IRS by the August deadline. For a recap of the UBS John Doe summons litigation, and the subsequent twists and turns through the Swiss court system look here and here.

For owners of UBS Swiss bank accounts this may be the last chance to make a voluntary disclosure to the IRS, thereby greatly reducing the chances of criminal tax evasion, tax fraud, and willful non-filing of FBARs charges being filed. Making a voluntary disclosure at this point after the tax amnesty deadline has passed will not by itself eliminate harsh civil tax penalties, but is one step in the right direction.

Once the IRS has received an individual’s name from UBS it will be too late to make a voluntary disclosure, and a criminal tax investigation is almost a sure thing.

If you have a foreign bank account at UBS, a Swiss bank account anywhere else, or a foreign bank account anywhere in the world, and would like to learn more about your options contact the tax lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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UBS Swiss Bank account owners who did not make a voluntary disclosure to the IRS last year breathed a sigh of relief when the lower house of the Swiss Parliament voted against amending the U.S. Swiss Tax Treaty to allow the handover of the names of U.S. holders of Swiss bank accounts who are suspected of tax evasion by the IRS. The story has more twists and turns than a John Grisham novel, most of which I have previously blogged about. To summarize briefly:

• A report by a disgruntled ex-employee of UBS led to the indictment of Bradley Birkenfeld a former UBS Swiss banker. Revelations by Birkenfeld led in turn to the indictment of UBS which paid 750 million dollars to the IRS to settle the criminal case. UBS turned over the names of 250 holders of offshore bank accounts.
• 150 of these UBS Swiss bank account owners are under active investigation by the IRS Criminal Investigation Division (CI), and the tax attorneys at the Department of Justice
• Approximately 10 individuals (including some at banks other than UBS) have already pled guilty to various charges including the filing of false documents, failure to file an FBAR, and tax fraud
• The IRS filed a John Doe summons demanding from UBS the names of all its clients who were U.S. citizens or residents
• In high level diplomatic negotiations the case was settled with UBS agreeing to turnover the names of approximately 4,450 UBS Swiss bank account owners.
• A decision by a Swiss Court earlier this year ruled that certain accounts could not be turned over under Swiss law despite the agreement with the IRS
• On June 3rd the upper house of the Swiss Parliament ratified a Treaty amendment which would overturn the Swiss Court decision

Although the Swiss lower house refused to ratify the Treaty amendment things are not over yet. The Swiss lawmakers are expected to go back to the bargaining table to see if the issue can be resolved. Further developments are expected by June 18th—the end of the Swiss parliamentary session.

If you have an offshore financial account, whether it is a Swiss bank account, or an offshore account in another country call the tax litigation lawyers at Brager Tax Law Group, a P.C. to find out about your options.

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Posted In: Offshore Bank Account Problems , Tax Fraud , Tax Litigation and Tax Controversy

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A couple of weeks ago I was at the ABA Tax Section Meeting which as I mentioned previously gathered tax lawyers from around the country. Since I spent most of my time at meetings involving FBARs (Foreign Bank Account Report TD F90-22.1), I missed another meeting. It turns out that (according to published reports) Janet Johnson, the Internal Revenue Service deputy division counsel for criminal tax stated that that the IRS Criminal Investigation (CI) unit would subpoena accountants in criminal tax cases. By itself that’s hardly surprising since criminal tax attorneys have known for many years that IRS special agents routinely interview the tax preparer, and the accountant can wind up as the lead witness against his own client.

The part that was surprising was that she stated the government would issue a grand jury subpoena even to a Kovel accountant, i.e. one that was retained by a tax attorney for the purpose of assisting the tax attorney in advising the client.

In an ominous note Johnson stated , “Whether or not that accountant comes to testify can be very serious for the accountant. The grand jury may decide he is part of the problem.”

If you have a tax problem, or are a CPA who has a client with a tax problem feel free to contact the tax lawyers at Brager Tax Law Group, A P.C. for a consultation.

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Posted In: Miscellaneous Tax Information , Offshore Bank Account Problems , Tax Fraud , Tax Litigation and Tax Controversy , Tax Preparer Penalties

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According to Kevin Downing, a senior tax attorney of the U.S. Department of Justice, the U.S. government expects over the next couple of years to bring somewhere between 4,000 and 7,000 more cases against wealthy individuals committing tax fraud through offshore bank accounts, in addition to the UBS cases.

According to Reuters, Downing made the announcement in a lecture in Singapore last week. Along with a DOJ team, he is currently touring a number of Asian cities including Singapore, Hong Kong, Beijing and Shanghai, meeting with financial and tax regulatory bodies and bankers to discuss cross-border criminal tax prosecutions.

He stated that since the start of the U.S. crackdown on tax evasion, money has moved from Switzerland to the Caribbean and Asia. In addition, some clients with offshore financial accounts are choosing to take cash from Swiss Bank accounts and carry it by hand back to the United States, in an attempt to avoid an electronic trail, only to be caught by U.S. law enforcement officers . Of course if your bring back more than $10,000 in cash into the U.S. it must be declared on Treasury Form 4790. Civil and criminal tax penalties for failure to make the declaration can run to $500,000 not to mention imprisonment for ten years.

“When they go in and close their accounts, they are picking up brand new $100 bills…that are coming in $100,000 shrink-wrapped bundles. Guess what? We can trace that money,” Downing said, adding such cash would be forfeited.

According to published reports, German and French authorities are getting in on the action as well. Germany is offering to pay for data from whistleblowers on clients of Swiss banks who may be committing tax fraud. France has said it has sensitive data belonging to potential tax evaders as well. While Downing declined to say whether the Justice Department was investigating any other foreign banks, U.S. tax attorneys are sure it’s only a matter of time before banks in other countries come under the type of scrutiny exercised in the UBS FBAR cases.

If you would like information about your options regarding disclosing a foreign bank account, contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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I just returned from an ABA meeting of tax lawyers in Washington, D.C. It seemed like all of the tax attorneys (or at least the tax litigation attorneys) could find nothing to talk about, but Foreign Bank Account Reports, i.e. TDF 90-22.1 (FBARs),voluntary disclosures, and offshore bank accounts. Over a period of two days I spend at least 8 hours in formal meetings with other tax lawyers talking about FBARs, and more hours over drinks and food talking about FBARs. The main theme was that the rules surrounding tax amnesty are being enforced more harshly than many tax attorneys had hoped would be the case. A few highlights of what I heard, the good, the bad, and the ugly:

• 225 revenue agents have been assigned to conduct civil tax audits in voluntary disclosure of offshore bank account cases
• IDRs (Information Document Requests) can be expected in most offshore bank account cases within the next few weeks
• The goal of IRS management is to close a “substantial portion” of the tax audits by the end of 2010
• IRS has started to identify taxpayers who made quiet voluntary disclosures of their offshore bank accounts, and these cases will be worked as “full blown” civil tax audits—meaning these taxpayers are potentially subject to multiple 50% FBAR penalties
• It is too soon to tell how post Oct. 15th voluntary disclosures will be treated for civil tax purposes—speculation continues to center on 25 to 35 per cent
• IRS has rolled out a “third generation” IDR which the IRS believes is more streamlined
• Basis issues will be negotiable, i.e. if basis information is unavailable revenue agents will likely accept reasonable alternatives, e.g. value security as of 1/1/2003
• Even if a timely 2008 FBAR was filed, if the highest offshore bank account value was in 2008, the 20% penalty will be calculated based upon 2008 value
• Revenue Agents do not “currently” have the authority to waive de minimus violations – there is no such thing as being half pregnant.

If you have a foreign financial account call the tax litigation lawyers at Brager Tax Law Group, A P.C. to get more information on voluntary disclosures and FBARs.

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Posted In: Offshore Bank Account Problems , Tax Debt , Tax Disputes , Tax Fraud , Tax Litigation and Tax Controversy , Tax Preparer Penalties

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Disbarred New York attorney Kenneth Heller was among 7 UBS clients charged a few weeks ago with failing to file Foreign Bank Account Reports, TDF 90.22-1 (FBARs), and tax evasion as a result of failing to report his Swiss bank accounts to the IRS. The case would be just one more in a string of FBAR and tax fraud criminal tax cases, but something in the complaint caught my eye. Some of the records that the IRS Criminal Investigation Division used to prepare its tax fraud case against Heller were obtained from Heller’s tax preparer—both documents and through an interview of the tax preparer. The records included instructions to the tax preparer to go to Switzerland to review the offshore bank account records. There was also a letter from the tax preparer to Heller reminding him that he had to report the income from the Swiss bank accounts.

This illustrates a vital point that as a tax controversy lawyer I remind clients about all the time. In a criminal tax case many times the first witness is the client’s tax preparer. There is no accountant client privilege in a criminal tax fraud case! Had these communications been between Heller and his tax attorney it is likely that the attorney-client privilege would have shielded them from IRS . While the IRS might have been able to bring a tax evasion case without the tax preparer the statements by the tax preparer will no doubt be extremely damaging.

If you have a tax problem including unreported offshore financial accounts contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud , Tax Preparer Penalties

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Last week I blogged about 7 UBS clients with Swiss bank accounts who were indicted by the Department of Justice for a variety of criminal tax offenses including failure to file Foreign Bank Account Reports (FBARs) and tax evasion. On the same day, Mauricio and Leon Cohen, father and son real estate developers were also arrested in New York. (Proving the old adage that the family that commits tax fraud together stays together) .The government alleged the two evaded taxes and failed to account for $45 million.

The difference is, these two were not clients of UBS, but instead had offshore financial accounts with HSBC, Europe's largest bank, according to a source with knowledge of the case. This could signal the shift that many tax attorneys have suspected was coming. Up until now all the FBAR indictments had been of UBS clients, but there are U.S. citizens with unreported offshore accounts all over the world. I fully expect the IRS to go after other Swiss banks, and then expand to other countries. The IRS is currently sifting through all of the information they received as part of last year’s tax amnesty program for offshore account holders, looking for patterns that implicate other offshore banks and financial institutions. It's only a matter of time before there are more tax evasion prosecutions of offshore bank account owners at a variety of financial institutions.

If you would like information about whether or not making a voluntary disclosure of your offshore bank account is a wise choice, contact the tax attorneys at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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The FBAR indictments just keep coming. The Department of Justice announced April 15th the filing of charges against seven individuals who collectively hid more than $100 million from the IRS by using sham companies to conceal their ownership of secret Swiss bank accounts held at UBS AG.

The defendants are variously charged with conspiracy, tax fraud, criminal tax offenses, and/or willful failure to file a Foreign Bank Account Report, Form TDF 90-22.1 (FBAR). Those defendants charged with willful failure to file FBARs may be subject to a civil penalty of up to 50 percent of the value of the accounts for each year the accounts were not disclosed.

Two defendants, Jules Robbins and Federico Hernandez, pleaded guilty to separate criminal charges and agreed to pay civil penalties of $20.8 million and $4.4 million, respectively.

Two additional defendants surrendered on the 15th, one is expected to surrender on the 19th, and two others remain at large.

It’s apparent the IRS purposely chose today to announce these new indictments. IRS Criminal Investigation Chief Victor S.O. Song stated, “Today is the deadline to file a U.S. tax return, and those Americans who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t. For those still hiding in this shadowy world of secret offshore accounts, it is time to come in and get right with your government or face stiff criminal and financial penalties.”

If you’d like information about making a voluntary disclosure of your offshore bank accounts, contact the tax lawyers at Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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