April 2010 Archives

HSBC Offshore Bank Account Holders Indicted

April 23, 2010,

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.

Seven UBS Clients Charged with Hiding over $100 Million in Secret Swiss Bank Accounts

April 16, 2010,

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.

UBS Swiss Bank Account Owner Pleads Guilty to Failure to File Foreign Bank Account Reports (FBARs)

April 15, 2010,

Former UBS Swiss bank account owner Harry Abrahamsen, a New Jersey resident, became the third former UBS client charged this year when he admitted in court that he concealed almost $800,000 in Swiss bank accounts and pleaded guilty to failure to file a Foreign Bank Account Report, Form TDF 90-22. 1 ( FBAR) for the calendar year 2005. Abrahamsen stated that he established an offshore company with the assistance of a Swiss lawyer and Swiss banker in order to hide these offshore financial accounts from the IRS. According to the Justice Department, he funded his accounts with $1.3 million in false and inflated expenses paid by his printing company to a Swiss company.

Abrahamsen faces as long as five years in prison when he returns to court for sentencing on July 27th, along with a fine of $250,000. He also agreed to pay taxes and interest, as well as a 50 percent FBAR civil penalty on the highest balance of his accounts. It is not clear whether he will also have to pay a 75% civil tax fraud penalty. Based upon the amounts disclosed in public documents the taxes and penalties will probably exceed 100% of the amount in his Swiss bank account.

UBS turned over data to the U.S. on Abrahamsen as part of its deferred-prosecution agreement. Had Abrahamsen made a voluntary disclosure to the IRS, it is possible he could have avoided his criminal tax problems.

If you have a Swiss bank account or other foreign financial account call the tax litigation lawyers at Brager Tax Law Group, A PC for a consultation.

Part-Time Bookkeeper Not an Independent Contractor

April 14, 2010,

In a recent worker classification ruling SS8 2010030006 the IRS held that a part-time bookkeeper/general office worker was an employee and not an independent contractor. Generally the existence of an independent contractor relationship is based upon a 20 factor common law test set forth in Rev. Rul. 87-41, 1987-1 CB 298. Some of the factors the IRS took into account were:

The worker performed services at the payor’s place of business as well as her own home
The payer provided all office supplies including telephone, fax machine etc., although the worker provided her own computer, and accounting software.
The bookkeeper was paid hourly
The worker did not receive any benefits
The worker provided services for a period of about 2 years.
The payer’s had obtained a state ruling that the worker was an independent contractor.
The payer and the worker had an oral agreement whereby the worker agreed to independent contractor status
The worker was trained by the payer on some of its proprietary software.
The worker did not hold herself out as being in an independent business.

As a tax attorney who has been through many payroll tax audits I know it can be difficult to prove that a worker is an independent contractor to the satisfaction of the Internal Revenue Service or the California Employment Development Department (EDD).

Nevertheless payers who are subject to a payroll tax audit have a variety of defenses including the so-called safe harbor provisions of Section 530 of the Revenue Act of 1978. This underused provision of the law allows for workers who fail the 20 factor common law test be treated as independent contractors provided the following requirements are met:

1. For federal employment tax purposes the payer never treated the
individual as an employee for any period, nor did it ever treat workers holding
substantially similar positions as employees;

2. All federal tax returns (including Form 1099) are filed on a basis
consistent with the taxpayer's treatment of the individual as not being an
employee; and

3. A reasonable basis existed for classifying the individual as an independent
. Reasonable basis includes:

a. Reliance on judicial precedent or revenue ruling;
b. Previous IRS tax audit;
c. Long-standing recognized practice of a significant segment of the
industry; or
d. Any other reasonable basis.

If your company is contacted by the EDD or the IRS for a payroll tax audit or any other tax problem call the former IRS tax attorneys at Brager Tax Law Group, A PC.

Another Round of Offshore Bank Account Tax Fraud Cases Begins

April 8, 2010,

In a move designed to remind people of their duty to report offshore bank accounts and file Foreign Bank Account Reports (FBARs), federal prosecutors are beginning another wave of UBS tax evasion prosecutions just ahead of the April 15 tax-filing deadline. This newest wave reportedly includes accounts significantly larger than in previous cases. One tax lawyer has been quoted as saying that his client’s Swiss bank account held between $10 and $50 million.

In a separate announcement on Monday, April 5th, IRS Commissioner Doug Shulman said the IRS is still sifting through 15,000 records on foreign bank accounts that it received from individuals who took part in the IRS tax amnesty program. The IRS is looking for patterns in the records to identify other offshore banks and advisors that helped individuals hide funds in foreign financial accounts, and may have committed tax fraud. That area will be “the next wave” of the investigation, according to Shulman. Some tax attorneys have speculated that HSBC and Credit Suisse are the next ones on the IRS hit list.

Although the IRS tax amnesty program for unreported offshore income ended in October, it is not too late to make a voluntary disclosure of your offshore bank accounts, and possibly avoid criminal tax fraud charges. For more information contact the tax attorneys at Brager Tax Law Group, A P.C.