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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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.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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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.

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

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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.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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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.

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Posted In: Tax Disputes , Tax Fraud

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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.

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Posted In: California Franchise Tax Board , Tax Fraud

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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.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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Less than 10 shopping days before the Internal Revenue Service (IRS) Foreign Bank Account Report Tax Amnesty ends. September 23rd is the last day that owners of Swiss Bank Accounts, and other foreign financial accounts have to disclose their offshore holdings to the IRS Criminal Investigation Division in order to escape criminal tax prosecution, and take advantage of the lower civil tax penalties being offered by the IRS as part of its Offshore Voluntary Disclosure Program a/k/a offshore tax amnesty.

Those who fess up before that date will not only be spared the possibility of jail time, but will also be eligible for reduced penalties. The normal civil penalties for failing to file a Foreign Bank Account Report, TD F 90-22.1 (FBAR) is the greater of $100,000 or 50% of the balance in the account. The FBAR penalty can be imposed for each year there is a balance in the combined accounts greater than $10,000. The civil tax fraud penalty is 75% of the amount owed. For a more detailed list of possible penalties I have them listed here.

Our tax litigation attorneys are consulting with dozens of clients with offshore bank accounts. If you would like our advice contact Brager Tax Law Group, A P.C.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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UBS has agreed to reveal the names and account information of 4,450 U.S. persons who are owners of UBS Swiss bank accounts who the Internal Revenue Service (IRS) believes have committed tax fraud. Clearly Swiss bank secrecy has more holes than Swiss cheese. The names will be revealed under the following procedure. UBS will notify its customers who are on the list that their names are to be turned over to the IRS. Those Swiss bank account owners who believe that doing so is in violation of Swiss law will be entitled to a decision from the Swiss Federal Tax Authority (SFTA) as to whether the turnover is legal. The Swiss have committed to processing any requests by the IRS so that the first 500 UBS Swiss bank accounts will be turned over within 90 days of the formal request by the IRS to the Swiss, and the last of the Swiss bank account names are to be turned over within one year.

Of course the names of who is on the list has not been disclosed, nor have the criteria for which Swiss bank accounts will be on the list been revealed. No such information is expected for 90 days. Clearly the intent is that some of the Swiss bank account owners who are not on the list, but don’t know they are not on the list will be motivated to participate in the IRS tax amnesty program which closes September 23rd.

Our tax attorneys are counseling many clients on the ins and outs of the IRS voluntary disclosure program. If you have a foreign bank account, and are interested in finding out more, please 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 , Tax Litigation and Tax Controversy

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A Los Angeles, California man pled guilty to one count of failing to file a Foreign Bank Account Form TDF 90.22-1 (FBAR) pursuant to the Bank Secrecy Act 31 USC 5314. This is the fourth person with a UBS Swiss bank account to plead guilty to tax evasion charges. John McCarthy admitted that he skimmed funds from his business, and sent it to an offshore bank account at UBS held in the name of his Hong Kong corporation. According to the plea agreement it was UBS, and his Swiss lawyers who came up with this idea that created all of McCarthy’s offshore tax problems. The IRS found out about McCarthy when UBS turned over his name as part of the criminal tax case against UBS that was resolved earlier this year. The maximum penalty that the Court can impose is five years in prison; a fine of $250,000, or twice the amount of gross gain or loss from the offense whichever is greater. Sentencing hasn’t yet occurred. In addition, McCarthy agreed to civil FBAR penalties equal to 50% of the highest year balance in the account will be imposed, along with a 75% civil tax fraud penalty.

Most interesting to me about the case is that the IRS is reaching lower down the food chain. The amount of the unpaid tax was somewhere between $200,000 and $400,00 spread over a 5 year period. Assuming a 33% tax rate this suggests unreported income of as little as $120,000 per year. While this is hardly chicken feed, it shows the IRS willingness to prosecute medium size tax evasion cases.

If you have a foreign financial account, or any kind of tax problem contact the tax lawyers at Brager Tax Law Group, A P.C.

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

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On Wednesday, the UBS offshore tax evasion case moved one step closer to UBS disclosing the names of persons the IRS believes have committed tax fraud and/or failed to file TD F-90-22.1, Foreign Bank Account Report (FBAR). The IRS announced that it had “initialed a settlement” with the Swiss government to settle the suit seeking the names of 52,000 U.S. persons with offshore UBS bank accounts. The terms of the settlement has not yet been disclosed, but most tax attorneys believe that it will require UBS to provide the names of thousands of Swiss bank account holders. The IRS has said that the terms will not be disclosed until final signatures have been obtained on the settlement, and that could occur as early as next week.

Some tax lawyers speculate that it will be only the names of the largest UBS account holders that will be disclosed, but I tend to disagree. Any settlement would have to provide the Swiss with a fig leaf to argue that they had not compromised their privacy laws. One way of doing this would be to loosen the interpretation of tax fraud under Swiss law, and provide the names of individuals who engaged in some activity suggesting they were covering up the existence of the offshore account. For example, holders of numbered accounts, or accounts held in the name of dummy corporations or trusts, or perhaps dual citizens of the U.S. and other countries who did not use their U.S. passports to open the accounts.

Once the settlement terms have been announced it is unknown how quickly names of UBS Swiss bank account holders will be turned over. However, once the IRS has the names it will be too late for those individuals to participate in the IRS tax amnesty, and receive the benefits of the offshore voluntary disclosure program.

If you have questions about the FBAR tax amnesty or have other tax problems feel free to contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

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

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On Friday it was announced that UBS and the Internal Revenue Service had reached a settlement in the IRS lawsuit against UBS. The lawsuit sought to require UBS to turn over the names of 52,000 U.S persons with Swiss bank accounts at UBS. The IRS believes that the owners of some of these offshore accounts failed to file foreign bank account reports (FBARs), and may also have engaged in tax fraud. Settlement negotiations have been ongoing, and apparently those discussions have focused on how many offshore account holder names will be turned over to the IRS. The terms of the deal have not been announced, and the parties have agreed not to reveal the details at this time. The final settlement papers are due to be filed on August 7th, at which point I expect that the IRS will reveal how many offshore account holders names will be turned over.

This puts the holders of offshore financial accounts at UBS in a precarious position. Once UBS turns over the information those folks will no longer be eligible to make a voluntary disclosure under the IRS tax amnesty program, and will subject the owners of these Swiss bank accounts at risk for the 50% FBAR penalty, possible criminal prosecution for tax evasion, and a pile of other tax problems.

UBS Swiss bank account holders would be well advised to speak with a tax attorney to decide whether or not to participate in the tax amnesty because the window may be closing very shortly.

The former IRS tax attorneys at Brager Tax Law Group, A P.C. are ready to advise offshore bank account holders of their options.

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

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The past few months have been filled with contention from the Swiss government and UBS in response to the Internal Revenue Service’s (IRS) “John Doe Summons,” which seeks to have UBS turn over the names of their US account holders. So far, UBS has been unwilling to provide the names of all but 250 or so Swiss bank accounts holders. UBS officials argue that disclosing names is a violation of Swiss law.

Several days ago Department of Justice (DOJ) filed a legal brief arguing that its summons to obtain offshore bank account information is enforceable under both US and Swiss law. DOJ points out that Swiss secrecy laws provide disclosure exceptions for certain circumstances – such as when providing information to an “authority,” and if approved by a UBS “regulator.” The fact that the law explicitly states there are exceptions, and that a person who violates this law can be exonerated in certain circumstances, leads the DOJ to conclude that Swiss law permits UBS to release the names of US taxpayers with offshore accounts.

Without commenting on the merits, it would seem that those with Swiss bank accounts have two basic choices:

1 - They can wait until the case is resolved, hoping that the IRS loses and UBS Swiss bank accounts remain secret. This option carries the risk of prosecution for criminal tax fraud and onerous civil tax penalties for failure to file foreign bank account reports (FBARs) in the event that the IRS prevails; or

2 - They can come forward now while the IRS still has its tax amnesty program, and protect themselves from criminal tax charges. Before coming forth under the tax amnesty program anyone with an offshore bank account, whether held at UBS or elsewhere, should consult with a knowledgeable tax attorney to determine if a voluntary disclosure is right for them.

If you have a UBS or other offshore bank account and have questions about avoiding tax evasion charges, or would like more information about the IRS Amnesty program, or have any other tax problems, contact the tax litigation attorneys at Brager Tax Law Group, A P.C.

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When the Internal Revenue Service (IRS) released its FBAR tax amnesty FAQs it stated that there would be no standard list of questions asked of foreign bank account holders who made a voluntary disclosure. The Wall Street Journal reported that at least one tax attorney has stated that his clients have been asked 30 standard questions. None of the questions are particularly surprising and are in line with questions our clients have been asked under the IRS’ previous voluntary compliance initiative (VCI). Nevertheless no-one who is filing for the FBAR tax amnesty should consider answering them without a tax attorney present, and maybe not even then. The questions appear designed to probe for signs of tax evasion, or tax fraud, as well assure the IRS that all Foreign Bank Account Reports Form 90-22.1 (FBARs) being filed are accurate. More troubling to tax preparers is that some of the questions are also designed to see if the tax preparer was complicit in the non-filing which could expose him or her to tax preparer penalties, or even criminal tax charges. It seems a CPA or other tax preparer who prepared the original tax returns must consider very carefully whether he has a conflict of interest before he represents that person in making a voluntary disclosure.

According to the Wall Street Journal those questions were:

• Is it your statement that the tax payers are willing to comply with the IRS and make a good faith arrangement to pay all taxes, penalties, fees and interest?
• Where are the funds held regarding the disclosure?
• Do you have any records? If not, whom are you working with at the bank? (Note: If the taxpayer is a UBS client and if they don't have the records, IRS will attempt to assist them in record retrieval).
• When was the account opened?
• How was the account opened?
• Who assisted you with the account opening?
• Who told you about the bank and how to initiate opening of the account?
• Do you have a trust set up relating to the account or the funds?
• How did you deposit money into the account?
• How did you withdraw money from the account?
• Did you have any credit or debit cards associated with the account?
• How did you correspond with the bank? Do you have records relating to the correspondence?
• Who is your current point of contact at the bank?
• Did you ever meet face to face with anyone from the bank? If so, where? When?
• Did you travel outside of the U.S. to conduct business relating to your account and or tax activities?
• Where was your bank statements sent?
• Who has ownership of the account? Is it a joint account?
• What is the source of the funds?
• Do you have tax returns?
• Have you prepared amended tax returns? If so, have you submitted them to the IRS?
• Who prepared your returns?
• When were your returns prepared?
• Did they know about the issues discussed today?
• Did you file FBARs? If not, why not?
• (For those who inherited the account) when did you take control of this account? And, all the related questions a 'yes' answer makes us ask.
• Did you trade US and/or foreign securities with this account? If yes, describe the mechanism for doing that (buy/sell orders, etc.)?
• Did you file returns?
• Do your or have you directly or indirectly controlled any foreign entities? Did you file the required returns for them?
• For UBS clients in particular – Have you been notified that the US requested information relating to your accounts?
• What countries do you have accounts in?

If you have questions about the questions, feel free to contact the tax attorneys at Brager Tax Law Group, A P.C.

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

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The hearing on the John Doe summons enforcement case brought by the IRS to obtain the names of 52,000 UBS clients who may have committed tax fraud through the use of offshore financial accounts has been delayed. The key phrase is MAY have committed tax fraud. Generally, under the terms of the existing treaty with Switzerland, the IRS must have evidence of tax fraud or tax evasion before the Swiss will turn over offshore bank account information. The IRS currently lacks the necessary information.

The hearing which was scheduled to begin on Monday was postponed based upon a joint request by the IRS and UBS in order to give them more time to negotiate a resolution. A status conference has been set for July 29th.

The IRS announced on Sunday that any settlement would require that UBS turn over the information on a “significant number” of individuals with Swiss bank accounts at UBS. According to an article in Timesonline by Christine Seib, there was speculation the IRS would insist on between 7,000 and 19,000 names.

As my readers know, persons subject to U.S. jurisdiction with signature authority over, or a financial interest in, an offshore financial account must report that offshore financial account to the IRS on TD F 90-22.1 Foreign Bank Account Report (FBAR) form.

The key question that remains is whether the announcement suggests that individuals with secret foreign bank accounts should take advantage of the current tax amnesty, or continue to hope that UBS will not be forced to turn over the names.

Given the potential for criminal tax penalties, as well as civil penalties for tax fraud; not to mention an FBAR penalty of 50% of the balance in an offshore bank account, this question can only be answered after consultation with a knowledgeable tax attorney who knows all the facts of your case.

If you would like a consultation with a tax litigation attorney at the Brager Tax Law Group, please give us a call.

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

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The Swiss government has threatened to seize UBS Swiss bank account records that belong to U.S. citizens rather than allow that information to fall into the hands of the Internal Revenue Service (IRS). The Swiss made the statement in a court filing in the UBS summons lawsuit pending in District Court in Miami, Florida.

Does this mean that U.S. taxpayers who have offshore accounts, and who committed tax fraud or tax evasion can sleep more easily at night? Maybe. The Swiss and the IRS are engaged in a high stakes poker game. No one knows how it is going to turn out. Even if the IRS doesn’t get the information in this so-called John Doe summons case there are numerous other ways it can come to the attention of the IRS. For example, most tax fraud comes to light when an unhappy spouse or employee turns informant. Last year the story broke of how a bank employee at LGT in Lichtenstein was bribed by German officials to turn over secret offshore bank account records, which the Germans in turn handed over to the IRS.

U.S. citizens and residents who have Swiss bank accounts at UBS have a lot at stake. Even if they paid the bulk of their taxes they could be liable for Foreign Bank Account Report (FBAR) penalties equal to 50% of the balance in their account.

If you have an offshore bank account at UBS or anywhere else in the world, now is the time to consult a tax lawyer to understand your options, and see if the IRS tax amnesty makes sense for you. If you would like a consultation with the tax litigation attorneys at Brager Tax Law Group, A P.C. please call us.

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

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I have been speaking a lot lately to the Internal Revenue Service’s (IRS) FBAR (Foreign Bank Account Report) tax amnesty hotline to obtain answers to the many practical questions that have arisen under the IRS FBAR Tax Amnesty a.k.a. Voluntary Disclosure Program. One question I have had is, “Where in the country will the civil tax audits under the tax amnesty program take place?” The agent that I spoke with at the tax amnesty hotline told me the current belief among IRS employees is that the tax audits will be centralized. Twenty revenue agents have undergone tax amnesty training in New York, and additional revenue agents will be trained — probably in California.

According to what I was told, the tax amnesty revenue agents have only just begun looking at civil tax audits, and these are for voluntary disclosures that were made before the IRS issued its tax amnesty guidelines. My guess is that voluntary disclosures being filed now will not undergo a civil tax audits by the IRS for another 6 months.

If you are considering a voluntary disclosure under the IRS tax amnesty program, contact the tax attorneys at Brager Tax Law Group, A P.C. for a consultation. No one should consider contacting the IRS without first having spoken with a qualified tax litigation attorney who understands all of the details of your case.

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

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The IRS has just issued new FAQs related to the tax amnesty for failing to file Foreign Bank Account Reports (FBAR). There are 21 new FBAR FAQs. I wanted to make them available as quickly as possible so haven’t had much time to think through all of their implications. However, a major disappointment is FBAR FAQs # 34 and 35. They say that the IRS will not negotiate the 20 percent offshore financial account penalty as part of the FBAR voluntary disclosure process. The IRS says that if any part of the penalty structure is unacceptable, the case will follow the standard audit process. According to the IRS, “At the conclusion of the examination all applicable penalties (including information return and FBAR penalties will be imposed)…” For a recap of potential FBAR and other penalties see my prior post. If the taxpayer disagrees with the imposition of the penalties then the taxpayer may go to the IRS Appeals Division.

It is unfortunate that the IRS has chosen to take this draconian stance with respect to the FBAR amnesty. It makes the decision to come forward much more difficult.

Our tax litigation attorneys are currently advising clients with FBAR problems on how to best proceed. If you would like a consultation contact the tax attorneys at Brager Tax Law Group, A P.C.

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

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The U.S. Treasury has announced an agreement with Switzerland to amend the Swiss U.S tax treaty to allow the U.S. to more easily locate those engaged in tax fraud and tax evasion. The Swiss – U.S. treaty would be amended to comply with Article 26 of the Organization for Economic Co-operation and Development (OECD) Model Income Tax Convention. Treasury Secretary Tim Geithner stated "This Administration is committed to reducing offshore tax evasion to help ensure that all U.S. taxpayers are playing by the same rules. "This treaty will increase our ability to enforce our tax laws and will help bring an end to an era of offshore accounts and investments being used for tax evasion."

The treaty must still be approved by the Swiss Parliament. At this point it is not known what effect this will have on the UBS summons enforcement action in Florida in which the Internal Revenue Service is attempting to obtain the names of over 50,000 UBS customers with offshore accounts who may have committed tax fraud or tax evasion.

If you have a Swiss financial account or other offshore bank account, the deadline is June 30th for filing an FBAR with the IRS. If you need to make a voluntary disclosure under the IRS Tax Amnesty, contact the tax controversy attorneys 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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In an address to the Organization for Economic Co-Operation and Development (OECD) on June 2, 2009, IRS Commissioner Douglas Shulman announced renewed IRS efforts to combat international tax fraud and tax evasion.

Shulman promised to create an inhospitable climate for tax evasion and offshore secrecy by continuing and expanding cooperation with G-20 heads of state, who pledged in unity this April to act against tax havens that impede legitimate tax enforcement. He hopes to enhance information reporting on offshore account holders, increase tax withholding on U.S. citizens with foreign bank accounts in countries deemed "tax havens," double tax penalties for failure to file FBARs, and allow the IRS more time for investigation by increasing the statute of limitations from three years to six years.

The IRS’ effort to eliminate tax fraud and tax evasion is supported by the expansion of President Obama’s 2010 budget. The budget provides funds for increased reporting on cross-border wire transfers, which would allow the IRS to gather information and target individuals who transfer money to and from offshore accounts. Also included is funding for 800 new employees who will deal specifically with international tax enforcement.

In his address to OECD, Commissioner Shulman promised, “If you are a U.S. taxpayer holding overseas assets, you must pay your taxes or we will be very focused on finding you. It’s as simple as that.”

If you have an offshore bank account and have not filed an FBAR, you may wish to consult with a tax attorney at Brager Tax Law Group, A P.C. to understand whether or not you have a tax problem.

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

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In conversations with the IRS Foreign Bank Account Report (FBAR) hotline, I have been told that the IRS plans on issuing a second FBAR FAQ to supplement the first FBAR FAQ which was issued by the IRS only last month. As readers of this blog know, the first FBAR FAQ was issued to answer questions required the IRS Tax Amnesty program for unreported offshore financial accounts. Once the new FBAR FAQ has been issued by the IRS I will be posting a link to it here on our blog.

If you have an offshore tax problem contact the tax controversy lawyers at Brager Tax Law Group, A P.C. to have a consultation which will be covered by the attorney client privilege.

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Posted In: Offshore Bank Account Problems , Tax Debt , Tax Fraud

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Frank L. Amodeo has serious criminal tax problems. The U.S. Department of Justice announced that he has been convicted in one of the biggest employment tax fraud cases in Internal Revenue Service (IRS) history. The penalties for these criminal tax charges exceed 22 years and he will be required to pay a judgment of $181 million dollars.

Amodeo collected federal withholding taxes through his numerous payroll tax companies, and then knowingly neglected to forward this tax money to the IRS. Consequently, he was charged and convicted with five felonies: willful tax evasion (totaling $181 million); obstructing an agency proceeding (by intentionally defrauding the IRS in their attempt to collect payroll tax); and conspiring to commit wire fraud, to obstruct an agency investigation, and to impede the IRS. Amodeo was forced to surrender more than $1 million cash, three homes, several luxury automobiles, commercial real estate, a Lear Jet, and his corporations in attempt to fulfill his outstanding tax debt.

While this may have been one of the larger tax fraud cases on record, people have gone to jail for tax evasion for much smaller cases.

If you have any tax problems, including potential tax fraud or payroll tax problems, contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

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Posted In: Payroll Tax Audits , Payroll Tax Problems , Tax Fraud

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I have been and will be speaking to several CPA firms as well as various California CPA Society groups regarding the tax problems that have been generated by the failure to file Foreign Bank Account Reports (FBARs), TD 90-22.1, and a possible solution through the Internal Revenue Service’s voluntary disclosure program. I have prepared an outline that I have distributed, entitled “FBARs and Voluntary Disclosure”, which is now available on my website. In addition to some of the topics that I have discussed in my blog, the outline references the issues that CPAs, and other non-tax attorneys face when their clients disclose the existence of offshore bank accounts because the information their clients provide is not privileged, and the non-tax lawyer can be forced to disclose these client confidences to the IRS.

If your clients have undisclosed offshore accounts, and you wish to discuss their tax problems call the tax controversy 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 Internal Revenue Service (IRS) has issued FAQs related to its offshore tax amnesty. As I have previously documented on March 23rd, the IRS announced a “tax amnesty” for owners of Swiss and other offshore accounts who failed to file TDF 90-22.1 (Report of Foreign Bank and Financial Account) a/k/a an FBAR. Under the offshore voluntary disclosure program a taxpayer who makes a voluntary disclosure in a timely manner can limit his penalties to 20 per cent of the highest balance in his offshore accounts during the 6 year lookback period, and avoid criminal tax penalties, along with the 75 per cent civil tax fraud penalty. In addition he must pay the income tax due for the last 6 years, plus a 20 per cent accuracy penalty under IRC Section 6662, along with interest.

The terms of the offshore voluntary compliance program as announced left many questions unanswered. Although the FAQs fills in some holes in the offshore tax amnesty program it still leaves gaps. For me the FAQ answers several key questions:

1. How is the 6 year lookback period calculated?

Under the tax amnesty taxpayers are responsible for the 2003 to 2008 tax years.

2. Are “quiet disclosures” acceptable?

No. Taxpayers must make a “noisy disclosure” by contacting the IRS Criminal Investigation Division. Filing amended income tax returns and FBARs is not sufficient.

I will try and post additional information over the next few days.

I would point out, however, that the FBAR FAQs still leaves unanswered the question of whether, under appropriate circumstances, the IRS will negotiate lower FBAR penalties under previously issued FBAR guidelines.

If you have a UBS bank account, or any offshore bank account, and would like further information about the IRS voluntary disclosure program, contact the tax problem attorneys 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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Reuters has reported that the IRS is set to serve summonses on foreign banks to obtain the names of U.S. citizens who may have committed tax fraud and buried the proceeds in Swiss or other offshore bank accounts. As I have previously blogged, the IRS is already involved in tax litigation with UBS seeking the names of 52,000 holders of Swiss bank accounts.

The Reuters revelation is not good news for those with offshore bank accounts who were hoping to keep them secret from the IRS. Even taxpayers who have reported all of the income that was used to fund the offshore accounts are at risk for a 50% FBAR penalty.

We are now reviewing with some of our clients the advisability of taking advantage of the IRS tax amnesty that is available until September 22nd.

If you would like advice on the IRS voluntary disclosure program or any other tax problem contact the tax controversy 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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According to a report on Reuters, UK, Manhattan District Attorney Robert Morgenthau said New York State investigators are looking for more cases like the one in which London-headquartered Llyods agreed in January to forfeit $350 million to the United States and New York in connection with faking records related to clients from Iran.

Morgenthau said he was going to Washington to work on expediting the investigations. Although it appears that the New York investigations are centered on money laundering violations by banks and financial institutions, it is probable that evidence will be uncovered relating to individuals with offshore accounts; and such information will be turned over to the IRS, triggering tax fraud and FBAR violation investigations.

Morgenthau's biography highlights that as a U.S. Attorney, he prosecuted tax fraud cases.

If you have an offshore bank account, you should contact a tax litigation attorney to discuss the current IRS "tax amnesty" before the deadline in September passes.

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

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According to a report in the New York Times by Lynnley Browning, the Internal Revenue Service (IRS) has announced in a press release that is has applied for permission to serve a John Doe Summons on First Data Corporation. First Data is a leading processor of credit card payments. The information sought by the IRS is expected to be used to identify businesses that have opened offshore bank accounts, and directed the card processor to deposit the proceeds in these offshore accounts. Even if the merchant didn’t use the account to commit tax fraud, the merchant would still be required to file an FBAR form with the IRS.

Clients often ask me something like, “How will the IRS know that I have put my funds in a Swiss bank account?” I usually respond, “I don’t know for sure, but what I do know is if they find out you are not going to be happy with what happens next.” Even assuming that the IRS doesn’t get the information directly from the foreign bank this summons is just one example of the IRS obtaining data in ways which might not be immediately apparent to the casual observer.

I have previously blogged about the tax amnesty for holders of offshore accounts. This new lawsuit is yet another reason why those with offshore accounts need to consult with a tax attorney to determine whether or not a voluntary disclosure makes sense.

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Posted In: Offshore Bank Account Problems , Tax Fraud

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On April Fool’s Day, with no apparent sense of irony, the Internal Revenue Service (IRS) filed a criminal tax complaint against Steven Michael Rubinstein, an accountant, but apparently not a Certified Public Accountant (CPA), charging him with one count of filing a false tax return pursuant to Internal Revenue Code Section 7206(1). According to the criminal complaint, Rubinstein failed to disclose that he had an interest in, or signatory authority over UBS Swiss bank accounts. Apparently this is the first criminal tax fraud case the IRS has filed involving a UBS Swiss bank account holder.

As readers of this blog know, holders of offshore bank accounts with a balance of over $10,000 are required to disclose the existence of the account on Form 1040, Schedule B. In addition, owners of such accounts must file a Form 90.22-1 (aka an FBAR) separate from the tax return. Failure to file an FBAR is a separate crime. Rubinstein’s name was turned over to the IRS by UBS pursuant to the deferred prosecution agreement that it entered into with the IRS. Although only the 2007 tax year was charged, according to the criminal complaint, Rubinstein had a Swiss bank account at least since 2001. The complaint does not indicate whether or not Rubinstein failed to declare income, other than the income generated by the Swiss Bank account itself. However, at some point there was at least $3 million in the offshore bank accounts, and perhaps more.

The filing of the tax fraud charges illustrates the potential dangers of waiting too long to file a voluntary disclosure with the IRS. According to an article in the New York Times by LYNNLEY BROWNING there are 100 open tax fraud investigations in the UBS matter.

If you have tax problems including an offshore bank account call the tax lawyers at Brager Tax Law Group, A P.C.

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The other day I blogged about the new Internal Revenue Service (IRS) tax amnesty for holders of Swiss and other offshore bank accounts who make a voluntary disclosure. I called it a “break.” Upon further reflection I think that the tax amnesty is a blunt instrument rather than the scalpel that was needed. Consider these two examples:

Mr. E.Z. Going sold his business six years ago, paid tax on the sale, and put the proceeds of $1,000,000 in a Swiss bank account because he was concerned about potential lawsuits against him, and he had been told that putting your assets in an offshore bank account will help protect assets from frivolous lawsuits. Each year he has trading losses, and over the next six years he loses about $300,000. In addition, over that period he withdrew another $100,000 to pay for his daughter’s college education, leaving $600,000. He didn’t give too much thought to mentioning the existence of the account to his Certified Public Accountant (CPA) since he was losing money, not making money. If he makes a voluntary disclosure, E.Z. Going will be subject to a penalty of $200,000—20% of the high balance in the account.

In contrast take a look at Mr. Tax Fraud. Mr. Tax Fraud owns a restaurant, and every year for the past six years he has skimmed a little over $150,000 per year in cash, and not reported it on his tax return. Instead he travels several times each year with the cash in a suitcase to Switzerland. Mr. Tax Fraud has been advised by his friendly UBS banker to set up a trust in Lichtenstein to further disguise the ownership of the offshore bank account. Each year the Swiss bank account earns some interest, and as a result by 2008 he has $1,000,000 in the account. If he makes a voluntary disclosure Mr. Tax Fraud will pay the same $200,000 penalty.

In addition, Mr. Fraud will have to pay the back taxes (which Mr. E.Z. Going has already paid in a timely manner), plus interest, and a 20% penalty on the additional tax due. However, Mr. Fraud has skated on the 75% tax fraud penalty, as well as other penalties related to the non-filing of Forms 3520. Furthermore, he dodged potential penalties for the transporting currency, and failure to file the appropriate reports. Mr. E.Z. Going was never at risk for any of these tax penalties. Clearly, Mr. Tax Fraud is getting a much better deal.

It is very unfortunate that the IRS has failed to take into account these very different circumstances in structuring its tax amnesty.

Determining how to proceed in light of the new tax amnesty definitely requires a tax lawyer to avoid making a bad situation worse.

If you would like help with your offshore bank accounts, or other tax problem contact the tax litigation 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 Internal Revenue Service (IRS) has issued guidelines for resolving the civil tax penalties related to offshore bank accounts for individuals who make voluntary disclosures. Generally it will require:

• Payment of all taxes and interest for the previous six years.
• Assessment of an accuracy penalty under Internal Revenue Code Section 6662 or a delinquency penalty for all years
• An FBAR penalty of 20% of the highest account balance during the six year period.

In the case of inherited accounts, or other accounts that the taxpayer did not cause to be opened the penalty may be reduced to 5% if other qualifications are met.

Under the settlement initiative taxpayers will not be assessed tax fraud penalties under IRC Section 6651(f) or IRC Section 6663. These tax fraud penalties are 75% of the unpaid tax. In addition the taxpayer would not be liable for the full amount of the FBAR penalties which can equal to 50% of the account balance per year!

This offer is only open to taxpayers who make voluntary disclosures by September 23, 2009. Taxpayers must fully cooperate with the IRS in any civil or criminal investigation in order to take advantage of these terms. Taxpayers can expect detailed questions from the IRS regarding how they came to open their offshore bank accounts, and will be required to name names. We expect that the IRS will use this information to open tax audits of taxpayers who do not come forward.

One area that will need to be evaluated is whether or the IRS will offer the favorable settlement terms to taxpayers who unbeknownst to the taxpayer have already been outed. Normally if the IRS is already aware that a taxpayer has a foreign bank account any subsequent disclosure will not be considered a voluntary disclosure, and could still leave the taxpayer open to both civil and criminal tax penalties.

We are working with our clients to initiate and perfect voluntary disclosures to the IRS where appropriate. If you have an offshore bank account, or any other tax problem contact the California tax lawyers at Brager Tax Law Group, A P.C.

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The Internal Revenue Service (IRS) has moved to revoke Marion Barry’s probation. In late 2005, Marion Barry, former mayor of the District of Columbia, pled guilty to criminal tax charges of failing to file a tax return in violation of Internal Revenue Code Section 7203. He was sentenced to three years probation, and as a condition of said probation was ordered to file his tax returns. Nevertheless, Marion Barry failed to file his 2005 income tax return. In 2007, the IRS moved to revoke his probation, but the Court denied the government’s motion since the judge ruled that there was no proof that the failure to file was willful. According to the IRS, Barry subsequently promised to file his returns, but continued to fail to do so.

The IRS has now filed a new motion to revoke Barry’s probation since not only has he failed to file his 2005 return, he didn’t file his 2007 return either. In response to these allegations Barry has responded that he has been on dialysis, and that he has been too distracted to focus on his tax returns. According to an article on MSNBC.com Marion Barry finally filed his 2007 tax return on Feb.17, 2009. No mention of the missing 2005 return. In an interview with Bruce Johnson of WUSA9 News Barry called the federal prosecutors “vicious” and said they would “do anything to get at him.” Take a look at the video for more of what Marion Barry had to say about his tax problems.

It will be interesting to see if his tax lawyers are able to convince the judge not to revoke his probation.

If you have tax problems contact the tax lawyers at Brager Tax Law Group, A P.C.

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UBS AG, has agreed to pay $780 million in order to avoid prosecution for conspiring to commit tax fraud in violation of 18 USC 371. UBS entered into a deferred prosecution agreement. The exhibits are here and here. As part of the deferred prosecution agreement, UBS admitted that it participated in a tax fraud scheme, and that UBS bankers facilitated U.S. taxpayers in establishing accounts at UBS in a way intended to conceal the U.S. taxpayers’ ownership in the accounts. It appears that the amount of the settlement might have been higher, but for the current financial crisis, and the input of the Federal Reserve Bank of New York.

Most importantly, for U.S. clients concerned about their own exposure for tax evasion, or tax fraud, UBS agreed to provide the identities and account information of some of its United States clients. The exact scope of the disclosure is set forth in a letter between UBS and the Department of Justice, but that letter is under court seal. Ominously, the information filed against UBS referred to some of the 20,000 U.S. account holders as “unindicted co-conspirators.”

It seems clear that not all of the names of U.S. account holders are being turned over. The agreement does not end the summons enforcement action pending against UBS requiring it to disclose offshore bank accounts of U.S. clients. Indeed, the agreement provides that UBS is not prohibited from continuing to assert its defenses in the summons enforcement proceeding. There has been some speculation that UBS is only turning over the names of about 250 clients that are known to have committed “tax fraud or the like” under Swiss law.

The deferred prosecution agreement provides for UBS’ continuing cooperation with the government in any criminal tax investigation, tax fraud or tax evasion case, or any other civil or criminal proceeding brought by government in connection with the Internal Revenue Service (IRS) investigation into offshore accounts.

The good news is that IRS Commissioner Doug Shulman has been quoted as saying that: “People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process." This suggests that despite the fact that the wolf is at the door the IRS may still consider a filing at this stage to be a voluntary disclosure that could stave off criminal tax charges.

If you have an offshore bank account, you can contact the tax lawyers at Brager Tax Law Group, A P.C. to help determine if a voluntary disclosure makes sense for you.

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According to a report on CNBC.com the Senate Permanent Subcommittee on Investigations will be holding further hearings on the Internal Revenue Service (IRS) attempts to obtain the names of thousands of UBS clients who may have committed tax evasion through the use of Swiss Bank accounts. The hearing is scheduled for Feb. 24th, and the Subcommittee will announce on Feb. 20th the names of the witnesses who have been asked to testify.

As we noted in a previous post, in June of last year a judge in Miami, ordered UBS to turn over a list of its American clients who held offshore accounts at UBS. Although UBS said it would cooperate almost 8 months later the records have not been turned over. Apparently the IRS is trying to ratchet up the pressure on UBS to turn over its records.

Taxpayers who have Swiss bank accounts, whether at UBS or elsewhere are well advised to consult with a knowledgeable tax attorney to determine whether or not they should consider turning themselves in to the IRS pursuant to its voluntary disclosure program in the hope of avoiding tax fraud or tax evasion charges.

If you have an offshore bank account, and need advice contact the tax litigation attorneys at Brager Tax Law Group.

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According to Reuters News Service, criminal tax charges have been filed by the Internal Revenue Service (IRS) against Professional Golfer Jim Thorpe. The information that was filed with the District Court in Orlando, Florida alleges that Jim Thorpe failed to file or pay his taxes for 2002, 2003 and 2004. According to the IRS during those 3 years Thorpe’s taxes totaled about $1.5 million on income of over $5.2 million. Failure to pay taxes or file an income tax return is a violation of Internal Revenue Code Section 7203, punishable by 1 year in jail. In addition, the IRS alleged that for one of the years Thorpe failed to file his corporate income tax return. Thorpe could go to jail for seven years if convicted on all 7 counts.

Thorpe has pled not guilty and his attorney released a statement saying that he did not willfully violate the tax laws. It is true that mere negligence will not result in tax evasion or tax fraud charges. However, from the IRS filing it appears that the IRS has some strong evidence that Thorpe didn’t just overlook his tax problems. The IRS says that it had investigated him once before for possible criminal tax violations in the mid-90s, and he got off the hook by claiming he got confused because he had two accountants and thought they were filing the returns. Also his accountant had advised him of the need to pay estimated taxes, but he only paid in a few thousand dollars. While he wasn’t paying his taxes he was spending money like water—including the purchase of a $2 million home. Most juries don’t like to hear that, and getting him off the hook will be a tough job for his tax attorney.

It is worth noting that one of the witnesses against Thorpe will likely be his accountant, and of course there is no accountant-client privilege in criminal tax cases. One reason why those with potential tax fraud problems should not be giving sensitive information to their accountants.

If you have civil or criminal tax problems call the tax attorneys at Brager Tax Law Group, A P.C.

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According to a report published by Tax Analysts, Assistant Attorney General Nathan Hochman, announced at a recent American Bar Association (ABA) meeting that the Internal Revenue Service (IRS) and the Department of Justice will be aggressively pursuing businesses with payroll tax problems. Hochman, who is the head tax lawyer for the Tax Division of the Department of Justice, said in tough economic times employers try to save money by not paying their payroll tax liabilities. He also noted that while in the past payroll tax problems have been handled on a civil basis that the IRS is now bringing criminal tax evasion charges, and that judges are handing out harsh sentences. I have previously blogged about the Easterday case in which Jack Easterday was sentenced to 30 months in prison for payroll tax fraud. Apparently there are more criminal payroll tax fraud cases to come.

If your company has payroll tax problems, or you have concerns about tax fraud or tax evasion please contact the tax lawyers at Brager Tax Law Group.

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Bernard Kerik’s tax problems have not stopped. The former New York City police commissioner was indicted on December 2, 2009 on charges that Kerik “corruptly obstructed and impeded, and attempted to obstruct and impede, the due administration of the Internal Revenue laws.” This second indictment supersedes the previous indictment filed November 8, 2007. Among the acts cited in the indictment are filing false federal tax returns, taking fraudulent deductions, failing to report income, and providing false information to his accountants. Kerik has pled not guilty.

According to an article in the Washington Post Kerik had been trying to fend off charges of tax evasion and tax fraud for many months.

Kerik, former US interim minister of interior Iraq, rose to fame in 2004 as President Bush’s nominee to replace Tom Ridge as the Secretary of Homeland Security. After it was discovered he employed an illegal immigrant as his children’s nanny, he withdrew from the nomination process.

If you have tax problems contact certified tax specialist Dennis Brager.

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According to a report in the Wall Street Journal the Internal Revenue Service (IRS) now believes that the number of UBS clients who hold offshore accounts is higher than the 17,000 originally reported. The IRS believes that UBS helped these clients commit tax fraud by helping them hide their income from the IRS. According to the article UBS is in talks with the Department of Justice to avoid possible felony indictments by paying a penalty in the rage of 1.2 billion dollars.

UBS become front page news when a former UBS executive told the IRS that UBS routinely advised its customers that they weren’t required to disclose their Swiss bank accounts to the IRS. Of course that was a bad bit of advice which could expose people to tax evasion and related charges since U.S. citizens are required to make a disclosure of their offshore bank accounts in two places. First, on Schedule B of their Form 1040 in response to question 7a “At any time during 2008, did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?” Second, holders of foreign bank accounts must report their existence on Form TDF 90-22.1.

In July 2008 a District Court judge in Miami granted an IRS summons to turn over the records with the names of US taxpayers who requested their accounts be kept hidden from the IRS. Clearly such records would be part of a chain of evidence that the IRS could use to bring tax evasion charges. UBS has yet to turn over the records, and according to the Journal the IRS is considering whether to ask the judge for an additional order forcing the turnover of the records.

I have mentioned before the possibility of avoiding tax evasion and tax fraud related charges by making a voluntary disclosure to the IRS, but it appears that the window of opportunity to do so may be narrowing soon.

If you would like to discuss your tax problems with a tax litigation attorney please call Brager Tax Law Group, A P.C.

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A Las Vegas real estate broker pleaded guilty to tax evasion and impersonating an IRS Agent on September 29, 2008 before U.S. District Judge Roger L. Hunt. Michael Sabo owed approximately $95,000 in federal income tax and several tax liens had been placed on real property he owned. In order to release the tax liens, Sabo pretended to be an IRS Agent and signed and filed fraudulent tax lien releases with the Clark County Recorder’s Office. In response to the filing of false tax lien releases, the County released three tax liens from the property totaling $97,000. Sabo was able to avoid payment of his federal taxes and sold the property.

Sabo faces up to three years in prison and a $250,000 fine for impersonating an IRS Agent and up to five years in prison and a $250,000 fine for tax evasion.

If you have been accused of tax evasion contact the IRS tax attorneys at Brager Tax Law Group, A P.C.

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The U.S. Senate Committee on Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations released its report Tax Haven Banks and U.S. Tax Compliance detailing widespread facilitation of tax evasion by UBS and LGT. LGT Bank, a leading Liechtenstein financial institution that is owned by and financially benefits the Liechtenstein royal family.

According to the report LGT allowed U.S. citizens to maintain billions of dollars in assets in accounts not disclosed to U.S. tax authorities; advised U.S. clients on the use of complex offshore structures to hide their ownership of assets, and arranging client accounts and assets to avoid reporting requirements that would otherwise disclose the accounts and assets to U.S. authorities. According to the report millions if not billions of dollars of income may have gone unreported, resulting in massive tax fraud. One technique was to set up a Liechtenstein trust to disguise the true ownership of the funds. Under U.S. tax law, the IRS generally views Liechtenstein foundations as foreign trusts.

U.S. persons with an interest in a foreign trust, including a Liechtenstein foundation, are required to disclose the existence of the trust to the IRS by filing Forms 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and 3520-A (Annual Information Return of Foreign Trust With a U.S. Owner). Form 3520 is due on or before the 90th day (or such later day as the Secretary may prescribe) after a reportable event. Internal Revenue Code § 6048. Form 3520-A must be prepared by the trustee and provided to trust beneficiaries to be filed with their returns by March 15 of the following year (assuming the trust has a calendar year-end). Trustees must supply copies of the Foreign Grantor Trust Owner Statement and the Foreign Grantor Trust Beneficiary Statement to the U.S. owners and U.S. beneficiaries by the same deadline. While the Internal Revenue Code requires the trust to file the form, it also makes the U.S. owner responsible for ensuring that the form is filed and the required information furnished to U.S. owners and U.S. beneficiaries. The reporting obligations under Forms 3520 and 3520-A must be met even if a foreign government can impose penalties for disclosing financial information. See Internal Revenue Code, § 6677(d)(imposing tax penalties for failure to file a form 3520 or 3520-A even if a foreign jurisdiction would impose a civil or criminal penalty for disclosure). For more on the tax penalties for not reporting ownership of offshore accounts see our prior post.

Owners of foreign bank accounts or trusts may wish to consider attempting to avoid tax fraud charges through the IRS' voluntary disclosure program.

If you have tax problems contact the IRS tax attorneys at Brager Tax Law Group, A P.C.

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Australian actor Paul Hogan, better known as Mick Dundee from the popular Crocodile Dundee movies, apparently has tax problems in Australia. He recently filed a motion in the Central District of California to fight a move by the Australian Tax Office (ATO) to have the Internal Revenue Service (IRS) collect information about his personal finances.

The IRS issued five summonses to three U.S. banks for transaction information on Paul Hogan’s personal and business accounts from 1997 through 2006. Tax attorneys for Hogan claim the summonses are not authorized under the U.S.-Australian income tax treaty and the summonses have not been issued for an authorized purpose under Internal Revenue Code section 7602. Hogan claims none of the businesses in question operate with or in Australia and that he was a resident of the United States six out of the nine years under investigation.

The ATO began their investigation in 2006 after reports surfaced that Hogan and his business partner John Cornell committed tax fraud in Australia by hiding millions of dollars in film royalties in offshore trusts and companies they owned in Chile and the Netherlands Antilles.

Hogan currently lives in Santa Barbara, California and plans on returning to Australia this fall to film a movie. In an interview with Australia’s Network Ten, Hogan jokingly said, “I’ll be arrested the minute I land on the shore, of course, but I have a gun; so be warned.”

If you have tax problems contact the IRS tax attorneys at Brager Tax Law Group, A P.C

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Swiss banks have long held a reputation for being the place to go for secrecy. The mystique may, however be crumbling. Last month a District Court judge in Miami, Florida granted an Internal Revenue Service John Doe summons request. The court ordered UBS to turn over records with the names of US taxpayers who requested their accounts be kept hidden from the IRS. Undoubtedly the IRS believes that these taxpayers may have committed tax evasion by failing to report income. U.S taxpayers who have foreign bank accounts are generally required to report income from those accounts on their U.S. tax returns. In addition, they are required to declare the existence of these offshore bank accounts on their tax returns, and they are required to file Form TDF 90-22.1. Failure to file the Form TDF 90-22.1 can result in both criminal tax penalties, and civil tax penalties. The criminal tax penalties can result in a fine of not more than $ 250,000, or five years in prison, or both. 31 U.S.C. 5322(a).

The IRS has long had a voluntary disclosure program which provides some assurances to taxpayers who wish to go confess their sins to the IRS, before the IRS knows they have comitted tax fraud . It is questionable whether taxpayers who are clients of UBS meet the requirements of the voluntary disclosure program. Nevertheless there still may be room for avoiding tax evasion charges.

Still the civil tax penalties can be quite onerous. For willful violations occurring prior to October 23, 2004, a penalty not to exceed the greater of an amount equal to the balance of the account at the time of the violation (not to exceed $100,000) or $25,000.

For willful violations occurring after October 22, 2004, the maximum penalty is increased to the greater of $100,000, or 50 percent of the amount equal to the balance of the account at the time of the violation. 31 USC 5321(a)(5).

If you have questions regarding the IRS voluntary disclosure program, or have any other tax problems, contact the IRS tax attorneys at Brager Tax Law Group, A P.C.

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Michael Fuller, an accountant from Florida, and Carl Perry, a food broker from Greenville, South Carolina, were sentenced on May 5, 2008 in federal court for tax evasion. Fuller was found guilty by a jury in July of 2007 and Perry pleaded guilty in May 2007 for conspiracy to defraud the United States pursuant to 18 U.S.C. 371. United States Circuit Judge William Wilkins sentenced Fuller and Perry to twelve months and one day in prison and three years probation, respectively.

Fuller and Perry committed tax evasion during a period from the late 1990's till 2001. According to the Department of Justice, Perry used offshore accounts and other entities, which were set up by Fuller, to hide income from the Internal Revenue Service (“IRS”). A credit card was also set up with another offshore bank which was funded with Perry’s untaxed income. Fuller filed false income tax returns and other documents with the IRS to hide their tax evasion scheme.

If you have been accused of tax evasion contact the Southern California tax lawyers at Brager Tax Law Group, A P.C.

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Apparently there must be a lot of money in tacos. Karl James, a former owner and operator of more than 50 Taco Bell franchises in Southern California and Arizona, was sentenced to serve 36 months in jail and three years of supervised release months for bankruptcy fraud and tax evasion. James was also ordered to pay $1,121,829 to creditors who were victims of the bankruptcy fraud and $1,169,957 to the Internal Revenue Service (IRS) for unpaid taxes.

James, president and CEO of Golden West Tacos, Inc., pled guilty to charges of bankruptcy fraud and tax evasion on October 19, 2005. According to a press release issued by the Department of Justice, James' tax fraud involved failing to report over $3 million in diverted corporate funds on his personal income tax returns. James concealed the transactions by moving company assets to other company accounts and accounts in the name of others.

If you have been accused of tax fraud or tax evasion contact the Southern California tax lawyers at Brager Tax Law Group, A P.C.

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The Internal Revenue Service (“IRS”) is alleging a massive tax fraud scheme by two European bankers. They have been indicted by a federal grand jury for conspiracy to defraud the IRS pursuant to 18 U.S.C 371. According to the indictment among other things Bradley Birkenfeld, a former USB banker and US citizen, and Mario Staggl, a Liechtenstein citizen and resident, assisted an unnamed United States real estate developer in evading United States income taxes on approximately $200 million of assets held in offshore bank accounts.

The defendants allegedly committed tax fraud by falsifying Swiss Bank documents, by falsifying IRS Forms W-8BEN, by failing to issue IRS Forms 1099, by failing to prepare IRS Forms W-9, and by failing to adhere to the terms of the Qualified Intermediary Agreement with the IRS. The Qualified Intermediary Agreement was a voluntary agreement made between the Swiss Bank and the IRS in 2001 to which the Swiss Bank agreed to identify and document any customers who received reportable United States source income, as well as file appropriate tax documents with the IRS. This agreement was a departure from previous Swiss Bank secrecy laws which concealed bank information for US clients from the IRS. The defendants helped their US clients conceal their ownership of the accounts therefore evading the Swiss Banks obligation to report that information to the IRS.

According to the press release issued by the Department of Justice Tax Division the defendants marketed their services to wealthy United States clients by claiming that Swiss and Liechtenstein bank secrecy was impenetrable and could help their clients evade United States income taxes. The conspirators allegedly assisted their US clients in preparing false IRS documents, advised their clients to destroy any records of offshore bank accounts, and facilitated the filing of false IRS tax returns.

I would imagine that all of their clients are now meeting with their tax attorneys to see if they qualify for the IRS voluntary disclosure program so they can avoid criminal tax evasion charges.

If you have concerns about exposure to tax fraud schemes call the tax lawyers at Brager Tax Law Group, A P.C.

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The 7th Circuit Court of Appeals refused to dismiss tax fraud charges leveled by the Internal Revenue Service (IRS) at the owner of a small business. United States v. Greve, 490 F.3d 566 (7th Cir. 2007). The case illustrates the perils of representing yourself in a civil tax audit involving significant omissions of income because one never knows when a civil tax audit can turn into a criminal tax problem. The facts were that Mr. Greve operated a snow plow business, and prepared his own tax returns. In preparing those tax returns he omitted a portion of his income. When the tax audit began he proceeded to confess his sins to the IRS tax auditor, but at the same time withheld significant information from her. In addition, he apparently provided false documents to the IRS in the course of the tax audit. To top it off he transferred his home into a trust shortly before the tax audit began.

After the tax audit was part-way done Greve got around to hiring a tax lawyer. The court’s opinion does not disclose whether the tax attorney had experience handling criminal tax problems. The tax attorney met with the IRS agent, and apparently received assurances that the tax audit would be “wrapped up pretty quickly” once certain requested documents were turned over. Behind the scenes, however, the IRS agent was meeting with the Tax Fraud Coordinator, and plotting a criminal tax case. After he was indicted, Greve attempted to have evidence supressed on the theory that his cooperation had been induced by false promises that if he cooperated the matter would be resolved without a referal to the IRS’ Criminal Investigation Divsion (CID). The Court did not see it that way. Although the IRS agent failed to inform Greve that she was considering referring the case for referral to CID the Court held she was not required to do so.

The Greve case illustrates a classic eggshell tax audit, and how treachorous the waters are for those who have omitted signficant income from their tax returns who are picked for a tax audit. For anyone in that situation representation by a skilled tax lawyer is critical.

If you have been picked by the IRS for a tax audit contact the tax lawyers at Brager Tax Law Group, a P.C.

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A Southern California tax return preparer, Matthew Carl Berry, was convicted of one count of conspiracy to defraud the IRS pursuant to 18 U.S.C 371, and three counts of filing false federal income tax returns. According to the indictment among other things Berry prepared false documents to be used in IRS tax audits. According to the press release issued by the Department of Justice Tax Division’s criminal tax attorneys, Berry prepared fraudulent tax returns by claiming mortgage interest deductions for taxpayers who did not own homes. Berry faces up to 5 years imprisonment, and a fine of up to $250,000 for the conspiracy conviction, and another three years for the criminal tax convictions for filing false income tax returns. Berry could also be subject to civil tax preparer penalties pursuant to Internal Revenue Code § 6694.

If you have concerns about exposure to criminal tax fraud penalties or civil tax fraud penalties contact the tax dispute lawyers at Brager Tax Law Group, A P.C.

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David Szen, the former traveling secretary for the New York Yankees, was sentenced on April 4, 2008 to 2 years probation for tax crimes. Szen was also ordered to pay a tax debt of approximately $10,285 in taxes, plus tax penalties and interest, as well as a fine in the amount of $7,500. Szen had waived his right to indictment and plead guilty to one count of filing a false tax return pursuant to Internal Revenue Code § 7206(1). It is likely that Szen will have additional civil tax debts.

According to the IRS, Szen while an employee of the New York Yankees, failed to report tip income of approximately $53,350 on his individual income tax returns for the tax periods 2001 through 2005. The tips came from unidentified players and coaches ranging from a few hundred to $10,000.

Sven took a leave of absence from the Yankees in July of 2007 pending the investigation by the Internal Revenue Service (IRS) Criminal Investigation Division and was later fired by the Yankees after pleading guilty.

According to the New York Post, the IRS has been investigating possible tax evasion by Major League Baseball clubhouse employees who pocket large, under-the-table tips from players for doing various nonbaseball related errands. The investigation took full swing after investigators noticed a large discrepancy in the amount of tips to clubhouse workers players claimed as tax deductions versus the amount of tip income clubhouse workers reported. The gap between deductions and nonreported tips ranges from around $100,000 to over $1 million per team.

If you have been accused by the IRS of tax fraud or tax evasion contact the Southern California tax lawyers at Brager Tax Law Group, A P.C.

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Tax lawyers from the Department of Justice are seeking to enjoin two tax return preparers from representing anyone before the Internal Revenue Service (IRS) , acting as tax preparers or engaging in any other tax related conduct. The IRS complaint also seeks an injunction barring the tax preparers from engaging in conduct which is subject to the tax preparer penalties of Internal Revenue Code § 6694. The injunction was requested pursuant to Internal Revenue Code § 7407 and Internal Revenue Code § 7408.

According to the IRS complaint the tax return preparers committed tax fraud by filing fraudulent tax returns, and fraudulent amended tax returns claiming deductions for bogus mining development costs. Interestingly the IRS complaint alleges that 7 of the customers who had fraudulent tax returns prepared were NFL football players. The IRS complaint does not reveal the names of the players, and there is no indication in the complaint that the players knew that tax fraud had been committed.

If you are a tax preparer who has been accused by the IRS of tax fraud, tax evasion or violation of the tax return preparer penalty rules under Internal Revenue Code § 6694 contact the Southern California tax lawyers at Brager Tax Law Group, A P.C. Our tax lawyers represent clients throughout California, including Orange County, the Inland Empire, San Bernardino County, and Riverside County including the cities of Newport Beach, Laguna Beach, San Juan Capistrano, San Clemente, Mission Viejo, Laguna Niguel, Laguna Hills, Dana Point, Huntington Beach, Long Beach, Costa Mesa, Anaheim and Santa Ana.

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Sometimes taxpayers want to be “creative” in filling out IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). Stephen Miller got too creative, and he was found guilty of tax evasion in violation of Internal Revenue Code § 7201. He was sentenced to 46 months imprisonment. The conviction was upheld by the Court of Appeals. United States v. Stephen Miller (No. 06-11078) (5th Cir. 2008). Miller, who owed the Internal Revenue Service (IRS) about 2 million dollars filed an offer in compromise with the IRS in which he stated he had insufficient assets and income to pay the tax debt. The IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) he filed stated he only had $40,000 in assets including an IRA with a balance of $25,000. What he didn’t tell the IRS was that he had withdrawn $1,000,000 from his IRA, and transferred it offshore. When the IRS asked about the money taken out of the IRA he responded that the money had been used to pay off a loan Euromex Leasing Corporation in the Isle of Mann. As it turned out Euromex was a shell corporation controlled and formed by a financial planner that Miller consulted to hide his money from the IRS. And how did the IRS find out that it was all a lie? Simple, the financial planner turned Miller in when he wound up with his own tax fraud problems with the IRS.

If you have tax debts and don't want to be convicted of tax evasion call the tax attorneys at Brager Tax Law Group, A P.C.

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Posted In: Offers in Compromise , Tax Debt , Tax Fraud

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A jury found a Colorado man guilty of failure to pay federal payroll taxes pursuant to IRC § 7202 and of filing false payroll tax returns pursuant to IRC § 7206(1). He was, however, acquitted of charges of tax evasion. Failure to pay IRS payroll taxes carries a penalty of up to 5 years in prison, and/or a $10,000 fine per count. Filing false tax returns, including false payroll tax returns carries a penalty of not more than 3 years in federal prison, and/or a $100,000 fine per count.

Like all employers Crabbe was required to file payroll tax returns, and to withhold income income taxes, social security taxes and Medicare taxes from employee paychecks, and to pay those amounts over to the IRS. When he failed to do so he exposed himself to both criminal tax liability, and to the trust fund recovery penalty (TFRP) as well. Once Crabbe has been sentenced it is likely the IRS will go after him to pay the unpaid payroll taxes. In general, responsible corporate officers who willfully fail to pay payroll taxes become personal liable pursuant to IRC § 6672 to pay those taxes. While many business owners get stuck paying corporate payroll taxes out of their own pocket, not too many go to jail for failure to pay. Nevertheless the case is a reminder that in appropriate situations the IRS can and does criminally prosecute people for failure to pay.

If you have payroll tax problems contact the tax attorneys at Brager Tax Law Group.

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The Franchise Tax Board (FTB) announced that it has filed tax evasion charges against a Diamond Springs, California couple who failed to file income tax returns, and failed to report all of their income from their painting businesses on their California State income tax returns for four years running. According to the press release issued by the FTB the total tax, penalty and interest due is relatively small– $29,000. Nevertheless it is possible that they could be sentenced up to 12 years in jail. The couple was booked into the El Dorado County, California jail.

Clients sometimes ask me whether failing to file tax returns is tax fraud or tax evasion. There is a common belief that it is better not file a tax return at all rather than file an incorrect one. While it is true that at the federal level the IRS Criminal Investigation unit generally prosecutes failure to file cases as misdemeanors that is not always the case. Furthermore, as this press release illustrates the FTB can and does prosecute failure to file a tax return as a felony.

Some clients, and their CPAs also sometimes believe that because the amount of tax owed is small they don’t have to worry about tax fraud charges. While it is certainly true that the larger the amount owed the more likely criminal tax evasion charges become this prosecution demonstrates that even small amounts of tax can result in tax fraud charges being filed by the FTB.

It also illustrates that taxpayers who have not filed in the past or who have filed improper tax returns should consult with a tax attorney to determine whether a voluntary disclosure of the previous problems should be made to the IRS and/or the FTB.

If you could be facing charges of civil or criminal tax fraud contact California tax lawyer, and California Certified Tax Specialist Dennis Brager.

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Posted In: California Franchise Tax Board , Tax Fraud

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In September 2006 Ron Isley, lead singer of the Isley Brothers, was of convicted five counts of felony tax evasion and one count of willful failure to file his income tax returns. According to the Internal Revenue Service (IRS) at trial it proved that between 1997 and 2001 Isley evaded payment of $3.1 million dollars of income tax debts. The District Court sentenced Isley to 37 months in federal prison despite the fact that Isley had a series of health issues including kidney cancer, diabetes and a recent stroke. Isley appealed his tax fraud conviction, and earlier this month the 9th Circuit upheld his sentence. According to one article Isley is currently incarcerated at a federal prision in Indiana, and he has a projected release date of April 2010. Isley’s tax problems don’t end there. In addition to serving his time in prison Isley will be expected to liquidate his assets to pay his tax debts.

If you have tax problems call us at Brager Tax Law Group, A P.C

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Posted In: Tax Fraud

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On January 8th the Supreme Court heard oral arguments in the criminal tax appeal of Michael Boulware. The case involved the return of capital theory in criminal tax evasion cases. To make a long story shorter, Boulware was convicted of tax evasion in violation of Internal Revenue Code § 7201. Basically, he took money from his closely held corporation, and didn’t report it as income on his personal tax return.

In the District Court he argued that the funds he received were a return of capital he had invested in the corporation, and therefore were not income, and thus there was no tax deficiency. Of course if there was no tax due Boulware could not be convicted of tax evasion. The District Court precluded Boulware’s evidence on this point, and he appealed to the Ninth Circuit Court of Appeals. The 9th Circuit upheld conviction.United States v. Boulware, 470 F.3d 931, 933 (9th Cir. 2006).

The Ninth Circuit’s view was that a defendant in a criminal tax evasion case must show at the time the payments were made by the corporation there was a contemporaneous intent that they be a return of capital. This is despite the fact that the Ninth Circuit admitted that in a civil tax case there is no requirement of contemporaneous intent. The Second Circuit has ruled that no such proof of intent is required. United States v. D'Agostino, 145 F.3d 69, 72-73 (2d Cir. 1998); United States v. Bok, 156 F.3d 157, 162 (2d Cir. 1998). The Supreme Court agreed to hear the case to resolve the conflict.

The Ninth Circuit’s opinion in Boulware, which is based on it’s previous holding in United States v. Miller, 545 F.2d 1204 (9th Cir. 1976). Despite the fact that Miller has been on the books for over 30 years its implications are quite shocking. It appears that under the Ninth Circuit’s decisions Boulware could be go to prison, and yet ultimately the U.S. Tax Court could conclude that he owed no taxes. This leads to another question. Generally the sentencing guidelines are based upon the tax loss to the government. If there is no civil tax loss to the government shouldn’t the sentence be very low? Apparently not since Boulware was sentenced to 51 to 60 months on tax evasion and conspiracy charges.

Stay tuned to find out what the Supreme Court decides.

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Posted In: Tax Fraud

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The Internal Revenue Service (IRS) has issued FS 2008-10 warning taxpayers about tax fraud by tax preparers. The IRS points out that while most tax return preparers are honest a few are not, and that taxpayers need to be careful when choosing a tax return preparer. While it may seem like a tax preparer who’s willing to break the rules may save you some money in the long run it’s the taxpayer not the tax preparer who will pay the additional taxes, plus penalties and interest. As the IRS points out tax evasion or tax fraud is a felony punishable by years in prison, and a $250,000 fine.

A few of the IRS suggestions for finding a reputable tax preparer include:

Avoid preparers who base their fee on a percentage of the amount of the refund.

Review your return before you sign it and ask questions on entries you don't understand

Find out the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared

The IRS also states: “Reputable preparers will ask to see your receipts.” Here we have to disagree with the IRS. Many reputable tax return preparers DO NOT ask to see receipts; nor are they required to. Recent guidance, by the IRS with respect to tax return preparer penalties pursuant to Internal Revenue Code Section 6694 confirms this. See IRS Notice 2008-13. While it may be helpful for a tax return preparer to look at some of your receipts to get a sense of whether you are doing a good job with your recordkeeping looking at all your receipts will in most cases land you with a bill larger than necessary.

Brager Tax Law Group, A P.C. represents taxpayers who have had tax returns prepared improperly. We also represent tax return preparers including attorneys, CPAs and enrolled agents who have been accused of preparing improper tax returns for their clients. For more information contact California tax attorney Dennis Brager.

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Posted In: Tax Disputes , Tax Fraud

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