California Tax Law Blog

New Hampshire Man Learns That Even Illegally Acquired Money Must Be Reported

New Hampshire Man Learns That Even Illegally Acquired Money Must Be Reported

| Aug 03 | Audit Representation, IRS | No Comments
New Hampshire Man Learns That Even Illegally Acquired Money Must Be Reported

Most have heard of the term “power of attorney”. It is typically used to describe a grant of authority to another person to handle various scopes of financial affairs. Generally, those that are granted a power of attorney take on the role with care and ensure that they do what is right for whoever granted the right to them. But sometimes the individual that holds the power becomes corrupted and has the ability to siphon money and other assets from their victim. That is precisely what happened in the case of William Richmond, a 59-year-old from Atkinson, New Hampshire

According to several news outlets, Richmond pled guilty last week to three counts of tax evasion with regard to a scheme that allowed him to illegally funnel money from his victim’s accounts into his own. Prosecutors allege that Richmond was granted a Power of Attorney by Richard Piller for the purpose of managing Piller’s affairs while he and his wife were overseas for elongated periods of time. Authorities say that while the Piller’s were gone, Richmond not only stole money from the Piller’s accounts, but also used the currency in those accounts to pay for his own personal expenses.

Being Investigated By Any Government Entity? The IRS Will Be Waiting For You

As the Federal Bureau of Investigation was investigating Richmond for wire fraud, with regard to the theft of the Piller’s money, the IRS Criminal Investigation Division was called in to assist. As it turns out, not only did Richmond steal money, he failed to include the stolen funds as income on his taxes for years 2006 through 2008. This brings up an interesting point: the Internal Revenue Code requires that you report all income from whatever source derived. This means that even money that is obtained illegally must be reported on a person’s tax return. Richmond had previously stated that he had only received interest income during the years in question and purported that he owed no taxes.

Richmond will be sentenced on November 3rd and faces serious time in federal prison. Each count of tax evasion carries a maximum sentence of five years in a federal prison. In addition to the potential 15-year prison sentence, Richmond could also face fines up to $250,000. Finally, it is highly likely that Richmond will be ordered to pay back the money that he stole from the Piller’s as well as the taxes that he evaded, an amount that will likely leave him financially devastated.

The lesson to be learned from this story is that whenever any governmental entity is investigating an individual, the IRS may not be far behind them. The FBI, ATF, and Postal Inspectors know that any money that is made through illegal activity must be reported for tax purposes and any effort to hide the illegally acquired money is likely an act of tax evasion. These entities will take little time to refer the case over to the IRS Criminal Investigations Division.

If you are being investigated for any tax or non-tax related crime that involves the receipt of money from any source that you didn’t claim on your taxes, it is in your best interest to contact an experienced tax attorney as soon as possible. Even if you are able to convince an investigator that you received the money legally, you may have nonetheless committed tax fraud by not reporting it to the IRS.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience assisting taxpayers navigate the complicated processes that involve the IRS and the Department of Justice. Walking into an examination, investigation, or tax litigation without superior representation could be sealing your own fate. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Three More Swiss Banks Agree to Hand Over U.S. Account Information to the DOJ

Three More Swiss Banks Agree to Hand Over U.S. Account Information to the DOJ

| Jul 31 | FBAR Compliance and Disclosure, IRS, OVDI Program, Tax Law Blog | No Comments
IRS and Department of Justice

It has been more than a year since the Department of Justice developed its Swiss Bank Program, but even with the passage of time, financial institutions from Switzerland are still lining up to participate. Today, the Justice Department announced that three more Swiss banks have agreed to the terms of the Swiss Bank Program and will immediately begin handing over sensitive information about U.S. taxpayers to the DOJ and the IRS. With new banks agreeing to participate in the Swiss Bank Program nearly every week, taxpayers in the United States with undeclared foreign bank accounts become more and more vulnerable to devastating monetary penalties and lengthy federal prison sentences.

According to a Department of Justice press release, Mercantil Bank (Schweiz) AG, Banque Cantonale Neuchâteloise, and Nidwaldner Kantonalbank have agreed to the terms of the Swiss Bank Program, the wildly popular deferred prosecution agreement developed by the Department of Justice. Under the terms of the program, each of the banks agree to:

  • Provide a complete disclosure of their cross-border activities;
  • Disclose detailed information associated with any account of which an American is a beneficiary or has signature authority;
  • Provide information in response to treaty requests;
  • Pay any penalties that are appropriate; and
  • Agree to close the accounts of any Americans who do not come into tax compliance in the United States.

Banks that agree to the above terms receive the DOJ’s word that they will not be criminally prosecuted for any activity related to assisting Americans in the hiding of their money overseas. The addition of the three banks to the program expands the number of participating banks to 32. Considering that each of the banks that have entered the program have information on hundreds, if not thousands, of American-held accounts, the banks that sheer amount of information that is flowing into the offices of the IRS and DOJ is staggering.

The Swiss Bank Program isn’t just used to identify the Swiss banks that will not be prosecuted for their activity in return for their cooperation, the list of participants also assists the Department of Justice and IRS make a determination as to whether the conduct of taxpayers that failed to report foreign accounts was willful or not. When a financial institution comes to terms with the Department of Justice under the Swiss Bank Program, their name is added to the list of Foreign Financial Institutions or Facilitators. Banks whose names are listed are identified by the U.S. government as having assisted Americans hide their monies overseas by either setting up a bank account for them, knowing that they would be using it to keep monies secret or by offering services to help further a taxpayer’s tax evasion activities.

The three new Swiss Bank Program participants assisted Americans set up accounts in Switzerland, establish conduit entities in other countries to avoid unwanted IRS attention, and provided various other services to customers with the promise that the accounts would remain out of the sights of the U.S. government. For their roles in the illegal activity, the three financial institutions agreed to pay a combined $3.14 million in penalties.

Knowing that the foreign banks that enter into the program are required to pay a large penalty may lead Americans to believe that only the financial institutions are at risk. But in reality, the information that the Swiss Bank Program participants are passing along to the DOJ and the IRS could result in repercussions that are far more harmful.

When a taxpayer is found to have failed to declare a foreign bank account, the IRS will make a determination as to whether the conduct of the taxpayer was willful or not. If the taxpayer is found to have unintentionally acted, he or she will face a penalty of 27.5 percent (under the terms of the OVDP). But if a taxpayer is determined to have willfully acted, a penalty of 50% of the highest balance of the foreign account will be assessed. Although the exact definition of “willful” is not particularly clear, one fact is: if a U.S. taxpayer banked at one of the banks that is named on the list of Foreign Financial Institutions or Facilitators, they will be deemed to have acted willfully, regardless of any other factors.

U.S. residents that have signature authority or a beneficial interest in a foreign bank account that has gone undeclared, there is a government program that can keep you out of prison. The Offshore Voluntary Disclosure Program (OVDP) allows taxpayers who come forward with details of their foreign bank account the ability to avoid criminal prosecution. In addition to providing documentation outlining a taxpayer’s tax and financial affairs, the taxpayer is also required to pay any back taxes, interest, and penalties associated with the account. The only catch of the program: the government cannot already be looking into your tax affairs prior to your application to the OVDP. This presents a literal race to the finish – get to an experienced tax attorney as soon as possible and discuss your options before the government decides for you.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience helping taxpayers make important decisions with regard to their undeclared foreign bank accounts. It is only a matter of time until every bank account around the globe is available to the IRS and DOJ for inspection. By the time a taxpayer learns that the IRS has discovered his or her account, it will likely be too late to abrogate the risk of a criminal prosecution that could result in a federal prison sentence. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Three Family Members Sentenced to Nearly 7 Years In Prison For Tax Fraud

Three Family Members Sentenced to Nearly 7 Years In Prison For Tax Fraud

| Jul 24 | Criminal Tax Representation | No Comments
Los Angeles Criminal Tax Attorney

It has been said that there isn’t anything quite as strong as a bond between a parent and their children. Generally, those bonds involve love, spending time with one another, and most importantly, making long-lasting memories together. That is the case for a Pennsylvania family that gathered at the federal courthouse in Allentown, yesterday. But this family outing would likely not produce any laughs, smiles, or fond storytelling, as a father and his three sons were sentenced to a collective six and a half years in a federal prison for tax fraud.

According to a press release by the Department of Justice, Chester A. Bitterman Jr. and his sons, Craig L. Bitterman, C. Grant Bitterman and Curtis L. Bitterman, were all convicted of being a part of a conspiracy to defraud the United States. In addition to the conspiracy charge, Chester Bitterman Jr. was convicted on a count of obstruction of justice.

The Department of Justice said in their statement that the Bitterman’s had been involved in a complex tax avoidance scheme spanning from 1996 to 2005. The illegal activity involved Bitterman Scales, LLC, the family businesses. In order to avoid paying taxes, Chester Bitterman and his three sons contacted representatives from the Commonwealth Trust Company, an entity that specialized the establishment of trust accounts that were used to keep the Bitterman’s personal and business assets out of the view of the IRS. Additionally, the family shifted money between trust accounts and categorized the payments to be for management fees or leases. When Bitterman Scales filed its entity tax return, those sham transactions were included as deductions, effectively nearly eliminating the taxable income of Bitterman Scales.

As the IRS began to levy the business’s bank account, Chester Bitterman instructed the clients of Bitterman Scales to pay for products indirectly and to not funnel any money through the business. Furthermore, he placed phony mortgages on business and personal property in an attempt to prevent the IRS from getting their hands on it. Even after the IRS Criminal Investigation Division had looked into the matter and the DOJ had issued the family members subpoenas, Chester Bitterman made efforts to hide evidence by shipping them to various southwest states.

Serious Tax Offenses Can Result In Serious Prison Sentences

Federal District Court Judge James Knoll Gardner handed down the sentences to the four family members yesterday and it wasn’t pretty. Craig Bitterman, 55, received three years in prison, followed by three years of supervised release, and 1000 hours of community service. C. Grant Bitterman, 53, and Curtis Bitterman, 61, both received 21 months in federal prison, followed by supervised release, and community service. The judge allowed Chester Bitterman, 81, to avoid jail time, but sentenced him to three years of supervised release, with six months of the sentence being served under home confinement. Finally, fines were imposed upon all four of the family members.

The Bottom Line: Contact an Experienced Tax Attorney

This story goes to show that the Department of Justice and the federal courts will not look the other way simply because you are older. All of the defendants in this case were over 50 and will likely have a very tough time in a federal prison. Their outcome may have been different if they would have consulted with an experienced tax attorney at the first sign of trouble. Much of the evidence proffered at trial involved activities that were meant to cover up the original wrongdoing. The Department of Justice and IRS will be much less open to working out a deal when a taxpayer takes active steps to conceal their behavior, even after they have been caught red-handed.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have a plethora of experience in assisting taxpayers with every variety of tax issue. Whether it is an audit, an investigation, or full-blown litigation, walking into an IRS meeting without the presence of a skilled and experienced tax attorney is asking for trouble. Ensure that you have effective representation that will zealously advocate for your personal and financial interests. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.  We work aggressively to protect our clients, and to keep them from being sent to prison for tax fraud.

You Can Run But You Can’t Hide From the IRS, DOJ

You Can Run But You Can’t Hide From the IRS, DOJ

| Jul 23 | Criminal Tax Representation | No Comments
Klasing Interpol

School children have played hide-and-go-seek for decades if not centuries. For them, it’s a game that will inevitably end with the hider being discovered, an accomplishment that is celebrated by the finder. It turns out that the Internal Revenue Service and the Department of Justice are very skillful finders. A New York man that had been on the run for nearly 20 years was extradited back to the United States last week, ending one of the longest running games of hide-and-go-seek that the Department of Justice has ever been a part of.

According to a Department of Justice press release, Gideon Misulovin, 58, arrived back in the United States on July 17th and appeared in a New Jersey federal court the next day. It was the same courtroom that he had sat in nearly every day of his trial nearly 20 years ago. In March of 1996, a federal grand jury convicted Misulovin of conspiracy to impede and impair the Internal Revenue Service in their efforts to collect nearly $7 million in unpaid fuel excise taxes, money laundering, as well as a count of wire fraud. In fact, Misulovin attended every single day of his trial except for the last. Then, he was gone.

The charges that were levied against Misulovin stemmed from his business activities in the fuel market. The DOJ said in their statement that the evidence established at his trial showed that he and his business associates sold untaxed diesel fuel between 1988 and 1993. Instead of Misulovin’s business paying the fuel excise taxes to the IRS directly, he set up “burn” entities that assumed the tax liability and then fell off the radar, leaving the IRS without a way to collect the tax. This allowed the defendants in the case, including Misulovin, to keep the excise taxes that were collected from purchasers of the fuel. An undercover team of IRS investigators was able to set up an entity that competed with Misulovin’s company and also gathered incriminating evidence.

Once the District Court in New Jersey realized that Misulovin had skipped town, an arrest warrant was issued and over a year later, the judge presiding over the trial sentenced him in absentia to a ten-year federal prison term and three years of supervised release. In addition to the time behind bars, Misulovin was ordered to pay over $250,000 in fines to the IRS and to the State of New York.

No Matter What, The Government Will Find You

Although 20 years had passed since the Department of Justice last heard from Misulovin, they never stopped searching. His name was distributed to international law enforcement agencies, including Interpol. In August of 2014, Misulovin was stopped at an airport in Greece because of an Interpol Red Notice, an alert that is sent to airports around the world when an international criminal is sought. After an extradition hearing earlier this year, he was finally returned to the custody of the United States. He will now begin to serve out his prison sentence in a federal prison.

 

Foreign Financial Institutions or Facilitators List Rapidly Expands to 29

Foreign Financial Institutions or Facilitators List Rapidly Expands to 29

| Jul 16 | FBAR Compliance and Disclosure, OVDI Program | No Comments
IRS FBAR Tax Lawyer Los Angeles

Late last week, the Department of Justice announced that they had come to terms with two new banks that are taking part in the non-prosecution program offered to Swiss financial institutions. As a result of the agreement, Banque Pasche and ARVEST Privatbank AG will be added to the Foreign Financial Institutions or Facilitators list. The list is a collection of banks that the United States has deemed to have helped U.S. taxpayers hide money overseas. When a bank’s name appears on the list, the IRS will assume that all Americans with accounts at the institution willfully failed to comply with Foreign Bank Account Reporting (FBAR) laws. The severe consequences of the “willful” label are discussed in detail below.

The Proliferation and Popularity of the Non-Prosecution Agreement

As the Department of Justice has closed in on Swiss banks that have assisted U.S. taxpayers set up and keep secret foreign accounts, there was a need for a program that would allow banks to come forward and receive a less-severe penalty for its actions. After several criminal actions were taken against Swiss banks, the DOJ announced their non-prosecution program that allows Swiss banks to admit that they helped Americans create and maintain secret bank accounts, fully disclose their conduct, make available any information requested by the Justice Department, and pay a penalty. In exchange, the United States agrees to not bring criminal charges against the institution.

The program has been wildly popular as the remaining Swiss banks that have not agreed to participate come to the realization that it is only a matter of time until the United States discovers their activities and comes down on them with the iron fist that hit Swiss bank Wegelin & CO. a few years ago. In fact, the list of Swiss banks that have agreed to the terms of the non-prosecution agreement now sits at 29, with the addition of Banque Pasche and ARVEST Privatbank AG, the newest banks to cooperate.

Banque Pasche, headquartered in Geneva, helped Americans set up accounts in their branches knowing that the monies would be kept a secret from the IRS. In addition to assisting Americans set up the accounts, Banque Pasche provided services that would prove to be particularly helpful to the American trying to keep their overseas money a secret including hold mail services as well as code names or numbers to reference accounts. These offerings would make it very difficult to establish a paper trail to link the overseas account to its beneficial owner(s) in the United States. Banque Pasche also allowed U.S. account holders to create fictitious nominee entities in Panama and the British Virgin Islands to serve as a conduit between the taxpayer and the bank. Banque Pasche will be required to pay a penalty of $7.2 million under the terms of the agreement.

ARVEST Privatbank AG also set up accounts that it had reason to know were being used to stash hidden money from the IRS. It also provided a wide range of services that made it easier for Americans to ensure that there was no paper trail connecting them with their accounts in the Swiss bank. An example of such a service was a travel debit card that didn’t include an account holder’s name. Much like Banque Pasche, ARVEST helped its American customers set up sham entities in foreign jurisdictions such as Liechtenstein. Under the terms of the agreement, ARVEST will pay a penalty of just over $1 million.

Although taxpayers may read this news and other stories that detail the non-prosecution agreement between the DOJ and Swiss banks and wonder “what does this have to do with me?” this news is of prime importance to anyone with a foreign bank account that hasn’t been declared to the Untied States government. The penalties for being caught with a bank account in a foreign bank that has had a balance of $10,000 or more can be harsh. Furthermore, when the government finds out about the foreign account, they will make a determination as to whether the failure to file an FBAR was willful. If it was, the penalty is increased and the reality of being criminally prosecuted becomes a very real possibility.

The government allows taxpayers that have not yet declared a foreign bank account to avoid some of the high penalties that are associated with the failure to file the required documentation related to an interest in a foreign account. If a taxpayer that enters the Offshore Voluntary Disclosure Program (OVDP) has not willfully acted, they will be subject to a 27.5 percent penalty on the high balance of the account in question. Though, a taxpayer that acted willfully will face a 50 percent penalty on the same amount. If the taxpayer fails to enter the program altogether and takes their chances with the United States finding their account on their own, the taxpayer will face a 50 percent penalty and a criminal prosecution that will likely result in a federal prison sentence. And again, if a taxpayer is found to have banked at one of the financial institutions on the Foreign Financial Institutions or Facilitators list, they will be deemed to have acted willfully.

Thus, every day that a taxpayer with an undeclared bank account wait to take action, the government gets closer and closer to discovering the account on their own and opening a criminal investigation into the matter. Once that happens, it is more difficult to mitigate the penalties, interest, back taxes, and federal prison time. The best move for a taxpayer with an interest or signature authority in a foreign bank account is to seek the advice of an experienced tax attorney.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience assisting taxpayers make the right decisions when it comes to their undeclared foreign bank accounts. When the IRS audits and investigates you, make sure that you have a team of knowledgeable and experienced advocates to stand up for your freedom. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

 

India, U.S. Agree to Share Tax and Other Financial Information

India, U.S. Agree to Share Tax and Other Financial Information

| Jul 14 | FBAR Compliance and Disclosure, IRS | No Comments
India US FATCA FBAR Attorney

Why would India, U.S. agree to share tax and other financial information?  Taxes are one of a handful of issues that drive some groups of Americans apart, politically speaking. But the issue of domestic taxation and information sharing seem to be doing the exact opposite when it comes to the relationship between the United States and other countries. India is the latest country that has come together with the U.S. to enter an agreement that will allow the sharing of tax and other financial information between the nations. The newly formed agreement evidences the need for any taxpayer with a foreign bank account that has gone undeclared to contact an experienced tax attorney as soon as possible to discuss your options.

What is FATCA and why is it so important?

Over the past ten years, the Internal Revenue Service and the Department of Justice have put foreign bank accounts and the legal requirements surrounding them at the forefront of their attention. The Obama administration made sure that one of their first tax-related actions was the proposal and endorsement of the Foreign Account Tax Compliance Act (FATCA) legislation that made its way through Congress and was signed by the President in 2010. Under the terms of FATCA, foreign financial institutions are required to turn over pertinent account information of those U.S. residents who have an ownership interest or signature authority over an account that is kept by the overseas institution. Banks that refuse to turn over such information are subject to a 30% withholding; an amount that nearly every bank is not willing to part ways with.

Although most banks would likely acquiesce to the demands of the U.S., many don’t have a choice. The U.S. State Department has been quite busy in their efforts to enter into information sharing agreements with foreign countries. Under these intergovernmental agreements (IGA’s), the foreign country will agree to require that the banks within its jurisdiction hand over the necessary American account information to the IRS. Under some of the agreements, the information will be sent directly to the IRS and under others, the information will be sent to the tax authority of the foreign country, which will then be sent to the Service. Even countries that the United States has had some diplomatic problems with as of late, like Russia and China, have enacted legislation to allow their banks to comply with the FATCA requirements.

The IGA’s also have one other variable: whether the responsibility to send tax information to the other signatory is reciprocal. Some countries agree to send tax and financial account information to the United States for nothing in return (other than the avoidance of the 30% withholding of their country’s banks that operate in the U.S.). Many countries are also in search of tax information of their own residents that reside in the United States and have ensured that the IRS will send such information to them. This is the case with India. Recently, the Indian government has been struggling to keep their taxpayers honest as many taxpayers fail to report off-the-book payments that they have received, also known as black money. The agreement between the U.S. and India would see both countries sending tax information to the other.

How is information sent between countries?

The information sharing requirements under FATCA presented a challenge to all of the financial institutions involved: how to get the American account information to the IRS. Luckily, the United States did all of the heavy lifting and developed the IRS information data exchange: an online system that allows foreign banks to send account information to the Service electronically after a short registration process.

For taxpayers that still maintain an interest in a foreign bank account, this news is particularly important. The IRS and DOJ’s efforts to retrieve information from foreign banks are matched in their efforts pursuing the strict enforcement of Foreign Bank Account Reporting (FBAR) laws, domestically. Under the FBAR requirements, U.S. residents are required to disclose any interest in a foreign bank account that has had a balance of $10,000 or more. Taxpayers that fail to declare their interest in such an account face penalties that could approach or exceed the balance of the underlying account, itself. Furthermore, if a taxpayer is found to have willfully failed to disclose the existence of account, they will face additional penalties as well as a criminal prosecution that often leads to time in a federal prison.

Although the IRS has been tough on taxpayers that haven’t been honest about their interests in foreign bank accounts, they have established a way to come clean. The Offshore Voluntary Disclosure Program (OVDP) allows taxpayers with undeclared foreign bank accounts to disclose the existence of their foreign account interest, pay any back taxes, interest, and program specific penalties in exchange for the government agreeing to not criminally prosecute the taxpayer. Though a taxpayer should consult with an experienced tax attorney before making any decision regarding their foreign bank account, the OVDP allows taxpayers to avoid some of the harshest penalties of being caught with an undeclared foreign bank account.

The OVDP has one major catch: it is unavailable to taxpayers that are being investigated or audited by the IRS for any tax matter. Thus, if one of the financial institutions that is participating in the FATCA information data exchange sends your account information to the IRS, they will likely open an investigation to determine whether your foreign account had been reported. At that point, it is likely that it is too late for the OVDP.

The fact that India, U.S. agree to share tax and other financial information continues to send a clear message: there are no safe havens left in the world.  The tax and accounting professionals at the Tax Law Offices of David W. Klasing have a plethora of experience in representing and advocating for taxpayers at all stages of the tax planning and controversy process. From determining whether the OVDP is the right avenue for a taxpayer, to representation during an investigation, or full-blown litigation, the team at the Tax Law Offices of David W. Klasing is ready to zealously advocate for you. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Statute of Limitations Can’t Save Taxpayer Charged with FBAR Offenses

Statute of Limitations Can’t Save Taxpayer Charged with FBAR Offenses

| Jul 11 | Criminal Tax Representation, FBAR Compliance and Disclosure | No Comments
criminal FBAR tax expsorue attorney Los Angeles

Even folks that don’t have any higher level tax or legal education are likely to be aware of the concept of a statute of limitations. It is the basic idea that there is a limit placed on those trying to bring an action in court. Statutes of limitations govern the timing of both civil and criminal matters and can vary from one year to being non-existent, meaning that an action will never be time barred. In the realm of tax law, the statute of limitations serves as a helpful constant for tax professionals to advise their taxpayers. But a new development regarding the statute of limitations for criminal tax enforcement and Foreign Bank Account Reporting laws have some tax experts and taxpayers concerned.

In general, the government has six years to bring a criminal action against a taxpayer who is being accused of committing a tax crime. For example, if a taxpayer were to file a false tax return, the statute of limitations begins to run when the return is filed and will expire six years later. Thus, the government has six years to discover the illegal activity and bring an action against the taxpayer without running afoul of the time bar. Though according to a federal court in New York, this isn’t always the case. In U.S. v. Canale, the United States District Court for the Southern District of New York ruled that a conspiracy to defraud the United States charge was not time-barred because the original offense occurred more than six years before the charges were brought.

According to a press release by the Department of Justice, Peter Canale, along with his brother Michael and others conspired to defraud the United States when they attempted to conceal inherited monies that had been kept by a relative in an undeclared foreign bank account. The inheritance occurred in the year 2000 and in 2005; Canale and his brother caused others in Switzerland to set up secret bank accounts with the intent to hide the inherited funds from the United States. Finally, each year that Canale filed his tax returns, he declared that he did not have ownership or signature authority in any foreign bank accounts.

What is ironic is that foreign inheritances are not ordinarily even taxable in the U.S. as the U.S. cannot legally assert taxing jurisdiction (Nexus) over a nonresident alien (foreigner).  All that is required as long as the inheritance is not of U.S. real estate or U.S. situs assets, is a form 3520 reporting where the inheritance is greater than $100,000 dollars in a given tax year.  If Mr. Canale would have complied with the income tax reporting and information laws they never would have had a problem.

When the IRS Criminal Investigations Division caught up to Canale, they investigated the matter and referred him to the Department of Justice for prosecution. When he he was facing a myriad of federal charges including the conspiracy charge, Canale’s defensive argument was simple: the statute of limitations on the conspiracy to defraud the United States should have began running when he caused the foreign bank accounts to be established. But the District Court ruled otherwise. In their ruling, the court stated that when dealing with conspiracy, the statute of limitations begins to run at the last overt act in furtherance of the conspiracy and that when Canale declared that he had no interest in a foreign bank account on his taxes each year, he was performing such an additional overt act.

For taxpayers like Canale that have monies in undeclared foreign bank accounts, this news should not be taken lightly. Individuals who set up foreign accounts that are meant to hide money from the IRS can no longer rely on the six-year statute of limitations. Each year that a taxpayer declares that they don’t have ownership interests in a foreign bank account; he or she is extending the statute of limitations on the underlying crime.

In the end, the ruling in Canale provides the government with more muscle that will be used to bring down the hammer on taxpayers that continue to maintain undeclared bank accounts overseas. The Department of Justice has no qualms with seeking lengthy prison sentences or crippling fines and penalties where offshore income tax evasion is concerned but for taxpayers that want to avoid some of the harshest of the consequences associated with being caught with an undisclosed foreign bank account, the IRS has established the Offshore Voluntary Disclosure Program. Under its terms, a taxpayer can avoid prison or hefty monetary repercussions by coming clean and paying a reduced penalty, back taxes, and interest. But the OVDP is only available to those taxpayers who are currently not under investigation or audit for any tax matter.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience in assisting taxpayers with a myriad of tax matters including participation in the OVDP. As we mentioned before, once the IRS opens an inquiry into your affairs, there is little that can be done to avoid the threat of criminal prosecution. Ensure that you have the most experienced tax professionals on your side when you step into the ring with the IRS: contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Breaking: Another Bank Has Agreed to Turn Over American Account Information, IRS Known Banks List Grows to 27 Institutions

Breaking: Another Bank Has Agreed to Turn Over American Account Information, IRS Known Banks List Grows to 27 Institutions

| Jul 07 | FBAR Compliance and Disclosure, IRS, OVDI Program | No Comments
IRS FBAR OVDP IRS Known Banks List Attorney

Here at the Tax Law Offices of David W. Klasing, we make it a point to keep our readers up to date with all of the important tax news and developments that come across our desks. One of the big issues that we have been covering has been the quickly expanding “known banks list”. It is a list that taxpayers would prefer didn’t exist. The worst part about it: it is growing rapidly and the chance that taxpayers with undeclared foreign bank accounts will be affected by the list also continues to grow.  As you will read below, another week has brought another addition to the known banks list and more worry to taxpayers around the nation.

What is the IRS Known Banks List?

The known banks list use is two-fold. First, the list, established by the IRS, denotes the banks that have agreed to terms with the Department of Justice. Under the agreements, foreign banks agree to fully cooperate in any United States investigation that involves matters related to that particular financial institution. Furthermore, the banks agree to fully divulge their cross-border activities and provide a full and detailed accounting of all of their U.S. based clients. This should alarm taxpayers that have a foreign bank account that has not yet been disclosed to the IRS as your name and account information will be sent to the feds under the agreement. Finally, participating banks agree to pay any fines or penalties associated with their activity.

In exchange for their cooperation and payment of penalties, the Department of Justice will agree to not levy a criminal prosecution against the bank. In the last few years, the DOJ has not been afraid to threaten or actually follow through with the prosecution of foreign banks. Because of the show of force by the U.S., Swiss banks have been much more willing to do whatever it takes, including handing over your personal information, to keep their doors open and their executives out of prison.

The second use of the known banks list is to establish willfulness on the part of the taxpayer. When a taxpayer is being investigated for potentially violating the Foreign Bank Account Reporting laws, which require taxpayers that own accounts with more than $10,000 report such account to the IRS, the investigator will make a determination as to whether the taxpayer’s nondisclosure was willful or not. If the action was willful, the taxpayer will face a penalty of 50 percent of the highest balance in the account for the tax year being investigated and will also be subject to criminal charges that can carry federal prison sentences.

The Critical Nature of an IRS Willful Determination for FBAR Violations

A willfulness determination is generally made by analyzing all of the facts and circumstances surrounding the taxpayer’s situation. There are several factors that go into a determination of willfulness but if the taxpayer being investigated has used one of the banks that appear on the known banks list, willfulness is imputed on the taxpayer. In those circumstances the IRS and DOJ take the position that a taxpayer has willfully failed to disclose their foreign account if they failed to disclose a foreign account that has come forward and entered into a non-prosecution agreement with the DOJ and have admitted to helping taxpayers keep their money hidden.

According to a Department of Justice press release, Privatbank Von Graffenried AG entered into a non-prosecution agreement last week and their name was quickly added to the IRS known banks list. The addition signifies that any taxpayer that U.S. taxpayers with undeclared accounts at Privatbank Von Graffenried are at risk and should seek the counsel of an experienced tax attorney. At this point, it is only a matter of time until the Swiss bank’s listing of U.S. account holders is sent to the Department of Justice and the IRS for investigation. The addition increases the number of financial institutions on the known banks list to 27.

The IRS Known Banks List Affects the OVDP

Many taxpayers have heard of the Offshore Voluntary Disclosure Program (OVDP) and believe that if they just wait until they are audited by the IRS, that they can enter the OVDP and pay any necessary penalties or fees. But that is simply not the case. As soon as a taxpayer is under audit or investigation for any tax issue, the OVDP is not available and the taxpayer is left open to criminal prosecution. Because of timing restrictions placed on the disclosure program, it is vital that a taxpayer consult with a tax attorney as soon as they can to ensure that they still qualify for admittance into the program.

Contact an Experienced IRS FBAR and OVDP Tax Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experienced assisting taxpayers make sense of their obligations, rights, and options under the FBAR laws as well as providing a myriad of other tax and accounting services. When the IRS and Department of Justices comes knocking, they do so with highly trained lawyers and investigators. Meet them with your own team of lawyers and accountants who have a plethora of experience in defending and protecting the rights of taxpayers and their best interests. Contact the Tax Law Offices of David W. Klasing today for a reduced rate consultation.

 

Florida Man Sentenced to 27 Years For Tax Crimes, Other Federal Offenses

Florida Man Sentenced to 27 Years For Tax Crimes, Other Federal Offenses

| Jul 02 | Criminal Tax Representation | No Comments
income tax fraud handcuffs

A few months ago, we brought our readers a story that detailed the criminal activity, prosecution, and eventual sentencing of Rashia Wilson, a tax cheat who dubbed herself the “Tax Fraud Queen”. She was behind a scam that involved her acquiring stolen identities, filing false refunds with the social security numbers of her victims, and receiving refunds associated with the returns that were fraudulently filed. She was originally sentenced to 21 years in prison but an appellate court judge overturned her sentence. Nevertheless, the trial court chose not to reduce her sentence and re-sentenced Wilson to the same 21-year prison term on remand.

For tax professionals, the sentence came as a surprise. On many occasions, the IRS and Department of Justice will threaten prison sentences that exceed 20 years, but those defendants who are sentenced for tax fraud see less than 10 years behind bars (which is still a long time). Just as the Wilson’s criminal activity came to an end, it appears that her reign as tax fraud queen has as well.  The identify thief who touted that she would never be caught and even challenged prosecutors to indict her appears to have lost her claim to fame last week when James Lee Cobb III was sentenced to 27 years in a federal prison for illegal activities that included identify theft and tax fraud.

Recent 27-Year Sentence Crowns a New IRS Tax Fraud King

The new Tax Fraud King, if you will, was involved in a scheme that seems strikingly similar to Rashia Wilson’s. Cobb was able to steal over 7,000 different social security numbers from various medical facilities including a VA hospital. Once he had the social security numbers in hand, he filed false tax returns using the false identities and received nearly $3 million in refunds. In addition to finding the plethora of stolen records at his home, authorities that were executing a search warrant found two firearms, including an assault rifle.

According to a Department of Justice press release, Cobb pleaded guilty to a myriad of charges including identify theft, wire fraud, and illegal possession of a firearm. At the time of his arrest, Cobb was under supervised release stemming from a prior federal firearms conviction. His prior criminal history could have played a part in his lengthy sentence. That being said, a taxpayer doesn’t have to be found with loaded weapons or have prior felony convictions to be sentenced to a 20+ year prison term. Rashia Wilson is a prime example that a mix of arrogance and tax crime can completely ruin your life.

Ensure That You Don’t Suffer the Same Fate: Contact an Experienced Tax Attorney Today

Short of making sure that you do not commit any tax crimes in the first place, the best way to ensure that you don’t spend a good portion of your life in prison for a tax offense conviction is to seek the help of an experienced tax attorney at the first sign of trouble. Many taxpayers believe that they will be able to talk their way out of an IRS examination or even an investigation by the IRS Criminal Investigation Division. When a taxpayer sits across the table from an experienced IRS agent or investigator without their own legal representation, the IRS will likely be able to obtain all of the incriminating evidence that they need to move their investigation forward. This is because taxpayers are usually not keen on the methods and tactics used by the IRS. In the end, taxpayers will find that instead of talking themselves out of an audit, they have talked their way into a criminal investigation.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing are trained and have extensive experience in the practice of representing taxpayers in audits, investigations, and even civil and criminal litigation. The IRS and Department of Justice will make sure that their lawyers and experienced staff are doing everything that they can to be victorious, you should do the same. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Another Bank Added to IRS Known Banks List, More U.S. Taxpayers In Jeopardy

Another Bank Added to IRS Known Banks List, More U.S. Taxpayers In Jeopardy

| Jul 01 | FBAR Compliance and Disclosure, IRS | No Comments
Another bank added to IRS known banks list

Early last month, we broke the news that the IRS had updated their known banks list to include five more financial institutions. In a move that should concern any taxpayer that is an accountholder of an overseas bank account that has not yet been disclosed to the federal government, the IRS has added yet another bank to the list. The constant additions to the known IRS banks list are evidence of the changing mentality of foreign financial institutions on the issues of bank secrecy and the threat of international criminal prosecution.

What is the IRS Known Banks List and Why is it Important?

The known banks list is compiled by the IRS and represents a collection of financial institutions that is known by the Untied States to help American taxpayers set up and maintain secret bank accounts and in some circumstances, keep them hidden from U.S. government officials. Foreign banks are generally added to the list when they have entered a non-prosecution (also known as a deferred prosecution) agreement with the Department of Justice. Under the terms of those agreements, the bank agrees to fully comply with the United States in their effort to investigate Americans that hold undeclared accounts overseas.

When a taxpayer is found to have failed to disclose their foreign bank account to the IRS, the penalty associated with the failure the penalty is generally 27.5 percent. But when a taxpayer is found to have acted willfully, the penalty is increased to 50 percent of the high-balance of the account. If the account was or is established at one of the institutions on the known banks list, the taxpayer’s actions are deemed to be willful and the higher penalty is applied.

Although some of the banks participating in the program have shown discontent for the terms, most have come to realize that they are in no position to bargain. The prosecution and threat of criminal action against several Swiss banks has demonstrated that the United States is taking the issue very seriously and that they are willing to take nearly any action to see the enforcement effort through. With the lack of leverage, banks in Switzerland and beyond can either jump on the ability to avoid prosecution by participating in the program or risk being uncovered and prosecuted; a course of action that some banks have tried and has caused at least one bank to shut its doors for good.

According to a Department of Justice press release distributed last Friday, Ersparniskasse Schaffhausen AG entered into a non-prosecution agreement and the bank has been added to the known banks list. The addition brings the full list of known banks to 26. The updated list is included below:

    1. UBS AG
    2.  Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
    3.  Wegelin & Co.
    4.  Liechtensteinische Landesbank AG
    5.  Zurcher Kantonalbank
    6.  swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
    7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
    8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
    9.  The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
    10.  The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
    11.  Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
    12.  Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
    13. BSI SA (effective 3/30/15)
    14. Vadian Bank AG (effective 5/8/15)
    15.  Finter Bank Zurich AG (effective 5/15/15)
    16.  Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
    17.  MediBank AG (effective 5/28/15)
    18.  LBBW (Schweiz) AG (effective 5/28/15)
    19. Scobag Privatbank AG (effective 5/28/15)
    20. Rothschild Bank AG (effective 6/3/15)
    21.  Banca Credinvest SA (effective 6/3/15)
    22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
    23. Berner Kantonalbank AG (effective 6/9/15)
    24.  Bank Linth LLB AG (effective 6/19/15)
    25.  Bank Sparhafen Zurich AG (effective 6/19/15)
    26. 26. Ersparniskasse Schaffhausen AG (effective 6/26/15)

 

With the Foreign Account Tax Compliance Act (FATCA) in full effect, taxpayers are too left with few options as to whether they should get clean with the IRS. FATCA’s online information data exchange has provided the IRS with a constant stream of account information from sources around the world. For taxpayers who are interested in avoiding criminal prosecution under the Foreign Bank Account Reporting laws through the Offshore Voluntary Disclosure Program (OVDP), the information data exchange poses a huge threat. If the IRS receives information about a taxpayer’s foreign bank account and begins to investigate the lead, the taxpayer is no longer eligible to participate in the OVDP. Further, even if the IRS is examining your tax affairs for an unrelated issue, the OVDP is unavailable.

Contact an Experienced IRS Tax Attorney Today

If you have an undisclosed foreign bank account, it is in your best interest to contact a tax attorney to assess your options. The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience helping taxpayers make the right moves to keep their physical and financial freedom. Attempting to handle an undisclosed foreign account on your own is not only risky financially; one wrong move could land you in prison as willfully failing to disclose a foreign account is a criminal offense. Allowing a tax attorney zealously advocate for your interests is the best first step toward a positive outcome. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

 

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