California Tax Law Blog

Two Louisiana Criminal Tax Cases Demonstrate That If You Cheat, You Will Get Caught

Two Louisiana Criminal Tax Cases Demonstrate That If You Cheat, You Will Get Caught

| Nov 25 | Criminal Tax Representation, IRS, Tax Law Blog | No Comments
Louisiana Criminal Tax Cases

Two separate cases out of the State of Louisiana that deal with tax evasion and fraud are providing ample proof that those who attempt to cheat the tax system will be apprehended and prosecuted. Taxpayers who find themselves possibly violating tax laws, must understand that being accused with tax fraud or evasion is extremely serious and could be a life-changing event. If you fear that you have violated a tax law or if you are under examination or investigation, you should contact an experienced criminal tax attorney as soon as possible to mitigate any negative repercussions.

According to a Department of Justice press release, Rommel Cordova, 35, of Luling, Louisiana, and Saul Ramirez, 43, of Kenner, Louisiana, each pleaded guilty to one count of willfully filing a false tax return in 2011. Prosecutors alleged that the duo equally owned Skill Labor Provider Inc. (Skill Labor) a business that provided labor services. In pleaded guilty, the Ramirez and Cordova agreed that between 2010 and 2011, they performed various actions that were meant to reduce the appearance that their business was making substantial amounts of money. These actions included cashing checks written to Skill Labor at independent check cashing businesses and significantly reducing the amount of taxable income listed on their corporate income tax return. Both Cordova and Ramirez face a statutory maximum of three years in a federal prison and a fine of $250,000.

In another case out of Louisiana, Tanya Tonette Rivers was arrested for tax evasion stemming from her failure to file state income tax returns from 2010 to 2012. Prosecutors allege that Rivers failed to include over $268,000 in earnings and thus failed to pay the appropriate state income taxes on that amount. Before Rivers was arrested, she ignored several attempts of the state taxing authority to contact her with regard to her tax return discrepancies. She was booked into jail and is awaiting trial.

Both of these cases in Louisiana could have been avoided or the damage that they will cause could have at least been minimized. When a taxpayer receives word that their actions are being called into question by a taxing authority, it is in their best interest to contact a criminal tax attorney as soon as possible. Many taxpayers believe that if they ignore the problem, it will go away or worse, that they can talk their way out of trouble if they are caught. Both of those beliefs are patently false. The IRS and state taxing authorities have one job: to administer and enforce the tax law. They will stop at nothing to ensure that the laws are upheld and those who violate them are brought to justice. Much like ignoring the problem, going up against a taxing authority alone is also a terrible idea. The IRS and state taxing authorities are experts in soliciting incriminating information from taxpayers. They likely have a feel for taxpayers who are trying to talk their way out of a situation and know what questions to ask that will provide the government with enough evidence to win a criminal conviction. An experienced criminal tax attorney can take the helm and help steer your situation off of a dangerous course.

Contact An Experienced Criminal Tax Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers with a myriad of tax-related issues including criminal representation. When the IRS or state’s taxing authorities send their agents, investigators, and lawyers to collect tax monies due and secure convictions, they are sending the very best. Make sure that you have a team of experienced tax lawyers and accountants to zealously advocate for your physical and financial freedom. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Another Foreign Financial Institution Enters the Swiss Bank Program to Obtain a Non-Prosecution Agreement

Another Foreign Financial Institution Enters the Swiss Bank Program to Obtain a Non-Prosecution Agreement

| Nov 24 | Criminal Tax Representation, IRS, Non-Filer Assistance, OVDI Program, Tax Law Blog | No Comments
Swiss Bank Program

For more than two years the U.S. Department of Justice’s Swiss Bank program has provided incentive for foreign financial institutions concerned about potential violations of U.S. law due to cross border banking activities. While the Swiss banks that enter into this program typically receive protections and assurances that they will not face further civil or criminal consequences provided the institution satisfies certain criteria, individuals who may have used the foreign bank do not. For U.S. citizens, taxpayers, and others who may have an obligation to disclose foreign financial accounts, the failure to make these mandatory disclosures can lead to significant offshore tax penalties or even criminal enforcement action if tax evasion is suspected.

Unfortunately for individuals who still have not complied with FBAR and FATCA obligations, the Swiss Bank program and other investments undertaken by the U.S. government means that the risk of detection has never been higher. Taxpayers who have failed to disclose their foreign accounts should immediately contact an experienced tax attorney for guidance as to how he or she can mitigate the penalties he or she faces. To schedule a reduced-rate consultation with an experienced tax professional call the Tax Law Offices of David W. Klasing today by calling 800-681-1295 today.

Maerki Baumann & Co. AG Enters Into Swiss Bank Program

According to allegations advanced by prosecutors with the Department of Justice (DOJ), “Maerki Baumann willfully and actively helped U.S. taxpayers evade their tax obligations and cheat the American public.” Maerki Baumann did not have an American desk until 2001, but the bank’s activities and practices grew quickly after a 2001 establishment of a “Swiss/U.S. Team” and the 2003 hiring of a particular relationship manager who worked with a second relationship manager who would eventually face federal tax charges in 2011.

Federal prosecutors allege that these individuals and others engaged in an array of behaviors in violation of U.S. laws and the U.S. Tax Code. These violations allegedly included:

  • On approximately 35 separate occasions relationship managers traveled to the United States to build or maintain relationships for cross-border banking activities.
  • The financial institution maintained accounts for U.S. individuals who were required to declare the account under U.S. law. The bank knew or had reasons to know that this obligation was not satisfied.
  • The bank would hold mail for U.S. customers to help them avoid detection.
  • The bank provided statements and other documents providing account information that included only the account number and no mention of the accountholder’s identity.
  • The bank allowed U.S. individuals to hold accounts in the name of non-operating foreign entities in Liechtenstein, Panama, the British Virgin Islands, and other jurisdictions.
  • The bank structured transactions to avoid cash reporting laws.
  • Relationship managers arranged communicate with clients through confidential means. One relationship manager arranged to have his client call him for urgent news if a greeting card phrased in a particular way was received.
  • The relationship managers were, in some cases, told by the accountholder that the account was undeclared.
  • The bank offered cash, pre-paid debit cards, and cash cards to clients to conceal transactions.

In all, the actions by the fincial institution involved nearly $800 million in assets.

What Consequences Does the Bank Face?

Per terms of its agreement with the U.S. government, Maerki Baumann has agreed to pay a $23.92 million fine.   Furthermore, and more concerning to those who have yet to make required offshore disclosures, the financial institution has agreed to cooperate with the U.S. government in its efforts to identify U.S. persons who engaged in tax evasion and/or fraud. The bank will comply with all tax treaty requests for information, provide a comprehensive disclosure of all cross-border activities, and report accountholders who refuse to achieve or maintain compliance with U.S. laws and regulations. Furthermore the bank will also provide information regarding all U.S. linked accounts and will disclose financial institutions that accepted or made secret transfers.

Maerki Bauman is the 66th bank to join the Swiss Bank program. The window to engage in OVDP to receive protections against future criminal enforcement is closing.

Rely on Our Experience When Entering OVDP to Address Undisclosed Foreign Accounts

If you have concerns regarding undisclosed foreign accounts, the window to address these problems without facing significant penalties will not remain open forever.  Furthermore, if you bank is identified as a facilitator before you enter into OVDP, an enhanced off shore penalty will apply. Even still, this penalty is preferable to facing potential criminal consequences for tax evasion through undisclosed foreign accounts. To schedule a reduced-rate consultation with an experienced professional from the Tax Law Offices of David W. Klasing, call 800-681-1295 or contact us online today.

Expats & International Travelers: Your U.S. Passport Could Be Canceled if You Fail to Pay Taxes & Owe the IRS

Expats & International Travelers: Your U.S. Passport Could Be Canceled if You Fail to Pay Taxes & Owe the IRS

| Nov 24 | FBAR Compliance and Disclosure, IRS, Non-Filer Assistance, OVDI Program | No Comments
Expats passports may be canceled if you fail to pay taxes

Some people view the ability to travel internationally as a fundamental, Constitutionally protected right that should not be abridged expect when there is no other option. However. Others do not hold international travel in nearly the same regard and believe that a passport is a privilege rather than a right. Regardless as to how one conceives one’s right to travel, the lack of a passport can cause significant issues for an individual and typically results in the inability to travel freely. For many individuals who travel internationally extensively for business or personal reasons, the loss of their passport could result in extensive difficulties and embarrassment.

Unfortunately it appears that Congress is poised to pass a law that would result in the loss of passports for U.S. taxpayers with serious tax deficiencies.  The law in question is, perhaps surprisingly, a highway funding bill. Nevertheless, it appears that a provision in the bill would indeed result in passport revocation or non-renewal for Americans with large tax deficiencies. If the bill passes, it could go into effect as soon as January 2016.

When Would a Taxpayer Lose His or Her U.S. Passport for Unpaid Taxes?

It is important to note that as of this writing the bill has not yet passed, but most observes do expect the provision to pass as part of a highway spending bill in the upcoming days and weeks. In any case, this measure represents the latest escalation in the IRS and U.S. government’s approach to tax enforcement. Here, even if taxpayers file properly and engage in good-faith efforts to address their tax obligations, they can still find themselves without a passport and unable to travel. If the current version of the bill passes, under new section 7345 of the U.S. Tax Code titled Revocation or Denial of Passport in Case of Certain Tax Delinquencies, an individual can lose his or her passport simply for having a tax debt.

Under language in the provision, taxpayers with “seriously delinquent” tax debts will face enforcement consequences. “Seriously delinquent” tax debts appears to mean any tax debt that is in excess of $50,000. The $50,000 is inclusive of all fines, interests, and penalties. As most tax practitioners can attest, $50,000 is not an extreme or inordinate amount of money for a tax controversy. Consider that the penalty for failing to file FATCA could equal 50 % to 100% of your highest account balance. If you have an undisclosed foreign account with a large balance, you could theoretically pass this limit through only a single act on noncompliance. Taxpayers who have failed to pay income tax for multiple years and have incurred significant penalties are also likely to surpass this threshold.

How Will Tax Enforcement through Passports Work?

While there is still uncertainty regarding the exact mechanisms that will trigger an enforcement action against your passport, it appears that this enforcement action – like most others – will be triggered by the IRS’s filing of a tax lien against you.  Tax liens can be filed by the IRS once the IRS has assessed the tax liability, provided notice of the debt and a demand for the liability, and the taxpayer fails to make timely payment within 10 days. It is expected that the IRS will compile a list of taxpayers owing at least $50,000 in unpaid taxes. The IRS will submit this list to the State Department. The State Department will then refrain from renewing passports of those with significant tax debts. The State Department may even revoke the existing passports of those with tax debts.

This could result in serious complications for many U.S. taxpayers. Consider that many U.S. expats are already struggling under the administrative burden imposed by FATCA and other offshore account disclosure laws. An expat who loses his or her passport will be placed in an incredibly precarious position with no clear good solution. Furthermore, any person who depends on international travel for some or all of their income could face significant difficulties due to this provision. In any case, due to the well-established U.S. right to both domestic and international travel, it is highly likely that this measure will be challenged on Constitutional grounds.

Experienced International Tax Attorneys Handle Offshore & All Tax Filings

American expatriates and international travelers should remain informed about this new law. For some individuals with unpaid tax debts, there is a potential for harsh consequences including the loss of your passport and ability to travel outside of the U.S. The experienced tax lawyers of the Tax Law Offices of David W. Klasing can address these concerns and work to mitigate the consequences of any tax enforcement action taken against the taxpayer. To schedule a reduced-rate consultation at our Los Angeles, San Diego or Irvine law offices call 800-681-1295 today or contact us online.

Court Bars Disbarred Lawyer from Engaging in Further Income Tax Preparation Work

Court Bars Disbarred Lawyer from Engaging in Further Income Tax Preparation Work

| Nov 23 | Criminal Tax Representation, IRS, Tax Law Blog, Tax Preparer Fraud | No Comments
Tax Preparation fraud from debarred attorney

Before engaging with any professional for tax preparation services or for other purposes, taxpayers should always engage in careful due diligence regarding the attorney or CPA. In some instances, it may be obvious that something isn’t quite right. Unfortunately in other cases, some determined individuals will engage in extreme measures to give the appearance of credentialed authority or authorization to practice law or prepare taxes.

Unfortunately for those impacted by a tax preparer who is something other than what he or she purports, the taxpayer is ultimately responsible for the contents of his or her court filings. Further compounding the concerns of a taxpayer who has been taken in by an unlicensed tax preparer is the fact that unlicensed individuals often do not have the same training and experience as legitimate tax professionals. Alternatively, the individual may be an attorney or accountant who lost his or her license due to malpractice or ethical reasons.

San Diego Federal Court Issues Injunction Against Man Who Impersonated California Attorneys

According to a civil complaint filed against Lawrence Preston Siegel, he is a former attorney and CPA who lost his licenses to practice in 1994 and 1997, respectively. His loss of these professional licenses was due to a federal tax evasion conviction. According to   court filings Siegel would not be deterred and would present potential clients with various identities and aliases including the use of the identities “Larry Lave” and “Yehuda Lave.” It is important to note that these identities do not appear to return a result when using the attorney search feature provided on the State Bar of California’s website.  If a potential client had performed his or her due diligence and verified the attorney’s bar registration, the scam would have become apparent. Unfortunately this due diligence was not performed and Mr. Siegel was allowed to draw others into his tax scheme.

The Tax Scheme Also Involved Unsound Tax Advice and Abusive Tax Shelters

Mr. Siegel would typically target high-earners and others with significant amounts of income by making outlandish promises regarding potential tax savings. Unfortunately for the taxpayer, many of the methods advanced by Mr. Siegel constituted tax fraud, tax evasion, or abusive tax structures. The complaint against Mr. Siegel alleges that his promises to potential tax clients include:

  • Siegel incorrectly claimed that Californians could establish a business entity in another state and then treat their California home as an out-of-state office for the Nevada company to secure substantial tax savings by transforming personal expenses into tax deductible business costs.
  • In one e-mail regarding the same scheme, he stated that individuals are entitled to receive tax-free compensation in the form of housing from their out-of-state-company. He further encouraged his clients to secure luxurious properties because “there is an assumption that corporations don’t waste money.”
  • In one particularly egregious situation Siegel attempted to conceal personal expenditures by the taxpayer at various cruise lines, Louis Vuitton, and Tiffany’s by reporting them as aggregated expenses for “medical records and supplies.”

Other acts by Siegel allegedly include preparing customer returns without reviewing the completed return with the taxpayer and submitting it without authorization. Siegel is also accused of attempting to thwart and delay the investigation into his activities by presenting fraudulent documents and making false statements to IRS agents.

Aside from these acts, Siegel is also a fugitive from the law in California. He is wanted to answer for 20-criminal counts against him stemming from alleged Medi-Cal fraud and other fraudulent activities. Siegel did not appear for his proceeding regarding the tax matter and a permanent injunction was entered against him prohibiting him from providing any further tax advice, preparation services, or guidance.  However, if the prosecutor’s claims are accurate, it is certainly possible that Mr. Siegel is operating under a new alias and with a new scheme. Taxpayers seeking guidance regarding a suspected tax scam advanced by a tax preparer should consult the Department of Justice’s page on tax schemes and scams.

Rely on Our Experience when Addressing Tax Preparer Fraud

The tax professionals of the Tax Law Offices of David W. Klasing are proud to help taxpayers address the consequences of being taken in by an unscrupulous tax preparer. We can work to address any IRS concerns or a tax audit as you come back into compliance with the U.S. Tax Code.

Furthermore, the IRS and DOJ aggressively pursue tax preparers who appear to be involved in compromising positions or situations. While such action is necessary to protect the public trust in the tax system and licensed professionals, there are some innocent tax preparers who can get swept up in the fervor to root out fraud. We can also defend CPAs and tax attorneys accused of wrongdoing or other improprieties.

To schedule a reduced-rate tax consultation with an experienced tax professional call our firm at 800-681-1295 today or contact us online. We have offices in Los Angeles, San Diego, & Irvine and are proud to also serve the surrounding communities in Los Angeles and Orange County.

Recent Partnership Audit Rules Change

Recent Partnership Audit Rules Change

| Nov 18 | Audit Representation, IRS, Non-Filer Assistance, Tax Law Blog | No Comments
Partnership Audit

Recent Partnership Audit Rules Require Existing & New Partnerships to Reconsider Long-Held Assumptions

Recently I had a California client that was being pursued for non-filed CA returns on a Nevada Partnership with significant assets in California.   California real estate, California Property Management Company and California partners.   California levied against the partnership assets potentially showing California early adoption of the federal changes.

It has been something of a long-held dirty secret for the IRS that its ability to audit partnerships has been severely lacking. The agency has endeavored and audited under the same audit rules for more than 30 years since they were drafted back in 1982. As such, they were probably long overdue for a significant overhaul. However, changes in the national economy – perhaps motivated by individuals realizing that IRS partnership audit protocols were lacking – have resulted in a trend towards selection of the partnership entity. In 2012, there were more than $7.5 trillion in assets held by large partnerships of more than 100 members. Furthermore, two-thirds of large partnerships have more than 1000 direct or indirect partners.

Thus, it has been clear that for a number of years that the IRS was not effectively examining or auditing partnerships. However, new rules that make a fundamental break with the traditional handling of partnerships have been passed as part of the Bipartisan Budget Act that became law on November 2, 2015 with President Obama’s signature. This new handling of partnerships will undoubtedly result in significantly more stringent review of filings and requires existing partnerships to consider how the new rules will affect the economic arrangement.

New Rules To Effectively End Pass-Through Tax Treatment for Large Partnerships

Traditional tax treatment of a partnership requires pass-through handling of the entity. While pass through entities can be particularly complex and difficult to understand and pierce, the underlying concept is relatively straightforward. The partnership entity itself was previously not subject to federal tax. Rather, the entity’s losses, gains, and other financials are passed through to the partners per the terms of the partnership agreement. The partners then file their own personal taxes and are supposed to pay any assigned tax liability incurred through the partnership. This system was causing excessive difficulties for the IRS resulting in an abysmal audit rate for partnerships that one GAO study pegged at just .08 percent of partnerships.

Under the new rules, a number of changes would be made regarding the handling of partnerships and the IRS’s powers during a tax audit. To begin with, under the new rules the IRS is permitted to conduct an audit at the partnership level rather than auditing each and every partner and then attempting to glean a comprehensive picture from these component parts of the entity. Furthermore, if a tax deficiency is detected during an audit, the partnership entity itself will be able to be held liable for the unpaid tax debt. Audit rates should increase under the new rules.

Aside from these changes, individual partners will lose at least some of their current ability to affect change in the audit process. This is because individual partners are no longer audited. Rather, the audit of the partnership itself is administered by a “partnership representative.” Actions taken by the representative are likely to bind partners and reduce the options they may have moving forward.

How Can Existing and Potential Partnerships Address these Audit Changes?

The good news is that the new partnership rules do not go into effect until the 2018 tax year. This means that there is still ample time to engage in careful analysis as to how these changes may affect your entity. Furthermore, most partnerships of 100 or fewer partners will have the option to opt-out of the new rules provided that all of the partners are individuals, C corporations, S corporations or estates of deceased partners. Furthermore, partnerships that are investment funds with other partnership investors are ineligible to opt-out. Other qualifying partnerships may choose to issue adjusted Schedule K-1’s to all partners within forty-five days thus making each member of the partnership responsible for the corresponding amount of tax deficiency.

Even if opting out of the new rules is not possible due to the entity size, structure, or for other reasons the new rules provide for a number of opportunities to reduce the amount of tax owed. An experienced tax attorney can provide on-point guidance about how certain assumptions, exemptions, and allotments in the new law can create a more favorable tax treatment for a large partnership.

Rely on Our Business Entity Experience When Facing Uncertainty Regarding a Partnership

While the new legislation will not take effect for a number of years, the time to start planning for these changes is now. Existing partnerships must consider how these new rules will affect the entity and if opting out is a viable alternative. Furthermore, individuals in negotiations to create a new partnership should consider these changes at the outset of entity formation. The experience CPAs and tax lawyers of the Tax Law Offices of David W. Klasing can provide individualized, strategic guidance regarding business entity tax planning. To schedule a reduced-rate consultation with an experienced attorney call 800-681-1295 or contact us online today.

OC Attorney Facing Tax Evasion & Wire Fraud Charges Enters Guilty Plea

OC Attorney Facing Tax Evasion & Wire Fraud Charges Enters Guilty Plea

| Nov 17 | Criminal Tax Representation, IRS, Tax Law Blog | No Comments
Attorney facing federal prison sentence

In some cases business owners and others with a good reputation in the community and high-standing among colleagues and peers can come under suspicion of committing serious crimes and felonies. In certain instances these charges may be found to be unfounded or the product of a mistake. However, in other circumstances the explanation for the missing funds, unpaid taxes, or concealed accounts is not so innocent despite the individual’s previously sterling reputation.

The fact is that some professionals come to believe that their reputation and achievement puts them beyond suspicion. They believe that they can engage in improper actions, take money and assets that do not belong to them, and shortchange the government on tax and other obligations without arising suspicion. Unfortunately for those who hold this assumption it is not supported or well-founded and history is rife with examples of people caught and convicted despite professional achievement. People who believe that they can violate the law based on their reputation alone are likely to soon find themselves facing serious charges.

Orange County Attorney Charged with Tax & Wire Fraud

Attorney Stephen Young Kang was arrested at Los Angeles International airport while boarding a plane to Seoul, South Korea. Prosecutors charge that Stephen Young Kang of Newport Beach embezzled at least $8 million in investment funds provided by clients. Furthermore, prosecutors believe that Kang used the ill-gotten gains to finance a lifestyle beyond his means. Kang allegedly purchased high-end luxury items and paid personal expenses with the embezzled funds.

According to information presented by prosecutors in the indictment against Kang, Kang engaged in fraud against one of his clients, Ottogi America, Inc. The company had originally retained Mr. Kang to investigate and facilitate the purchase of additional real estate in the vicinity of its Gardena distribution center. Prosecutors state that Ottogi transferred approximately $3.7 million to Mr. Kang from October 2012 through March 2014. Mr. Kang was instructed to use the funds to purchase the property. However, he did not use the funds for the intended purposes. Prosecutors state that Mr. Kang redirected these funds from his attorney trust account to other accounts under his control. Once transferred, he allegedly used the funds to purchase luxury goods, for commercial ventures, and to satisfy existing debts.

Mr. Kang is also accused of committing other instances of fraud. The FBI reports that Mr. Kang also entered into an attorney-client relationship with a couple seeking EB-5 visa legal guidance. EB-5 is a type of immigration visa that permits wealthy foreigners to secure a green card in exchange for a qualifying investment into a U.S.-based commercial venture that creates or preserves at least 10 full-time jobs. Prosecutors charge that Kang accepted $1 million from the couple that Mr. Kang was supposed to invest. However, Kang is accused of using the funds to cover other personal and business expenses. Kang also apparently engaged in a scheme utilizing a life insurance policy.

In the tax evasion matter, Kang admitted that he failed to file a tax return in 2013 and used corporate accounts to further conceal income and assets. Kang admitted to receiving at least $1.5 million in income that he failed to report and worked to conceal.

Orange County Attorney Enters Guilty Plea on Tax & Wire Fraud Charges

On Thursday, November 12, 2015, Mr. Kang entered a guilty plea before a United States District Court judge. As part of a plea deal, Mr. Kang agreed to enter a guilty plea to wire fraud and tax evasion charges. When sentenced, Mr. Kang faces up to 45 years in federal prison. He is scheduled to be sentenced in February 2016. In light of the guilty plea U.S. Attorney Eileen M. Decker stated, “Attorneys owe their clients a special duty of loyalty and trust that is fundamental to our legal system. The Department of Justice will defend this principle by holding responsible those who violate this duty of loyalty for their own personal gain.” The FBI has stated that it believes additional fraud victims may exist in California, Texas, and South Korea. The agency encourages any person with further information regarding the fraud to contact the FBI’s Los Angeles Field Office.

Facing Serious Tax Charges? Rely on Our Experience

The tax professionals of The Tax Law Offices of David W. Klasing are experienced tax attorneys and CPAs who can work to mitigate the tax consequences you face. To schedule a reduced-rate consultation at our Los Angeles, Irvine, or San Diego law offices call 800-681-1295 today or contact us online.

List of Financial Foreign Institutions or Facilitators Swells to 65

List of Financial Foreign Institutions or Facilitators Swells to 65

| Nov 17 | FBAR Compliance and Disclosure, IRS, OVDI Program, Tax Law Blog | No Comments
Foreign financial institutions list

As the holiday season approaches, productivity appears to slow as the world prepares for family get-togethers, work parties, and much needed breaks from work. But over at the Department of Justice, it appears that U.S. prosecutors and investigators aren’t taking any breaks. In fact, their recent activity shows that they are ramping up operations to identify, investigate, and prosecute Americans for violations of Foreign Bank Account Reporting (FBAR) laws. This recent activity should act as a warning shot for taxpayers with undeclared foreign accounts. Those taxpayers should consider speaking with an experienced tax attorney as soon as possible.

According to a Department of Justice press release, yet another Swiss bank has voluntarily entered into the Swiss Bank Program. The Swiss Bank Program is an initiative by the Department of Justice aimed at increasing the number of banks that are willing to hand over documents to U.S. authorities that could incriminate Americans with regard to undeclared foreign bank accounts. In a nutshell, the Swiss Bank Program provides participating Swiss financial institutions with a non-prosecution agreement in exchange for the banks’ cooperation in the American war on hidden foreign bank accounts.

Under the program, banks are required to:

  • Make a complete disclosure of their cross-border activities;
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
  • Cooperate in treaty requests for account information;
  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

Standard Chartered Bank (Switzerland) SA, en liquidation (SCB Switzerland), the newest member of the Swiss Bank Program, is a private bank with a sole office in Geneva and is solely owned by Standard Charter PLC, a large British banking institution. According to the DOJ, SCB Switzerland knew or should have known that American customers were violating domestic bank secrecy laws (FBAR). Furthermore, the DOJ asserts that SCB Switzerland assisted U.S. account holders in their attempt to hide their Swiss account(s) by withholding statements that would have been dispatched to the U.S. addresses of the account holder. If statements were sent, no identifying information other than the account number would be included to achieve secrecy. Lastly, SCB Switzerland accepted false W-8BEN documents that asserted that the beneficial owners of certain accounts were non-U.S. citizens. When SCB Switzerland discovered that the documents were false, they continued to provide services to those clients for at least two years. In addition to providing near-unfettered access to SCB Switzerland’s account records, they will pay a penalty of over $6 million.

FBAR laws require that U.S. residents disclose the existence of an interest in a foreign bank account with a balance of $10,000 or more. If a taxpayer is found to be in violation of FBAR laws, the IRS will determine whether the taxpayer “willfully” failed to declare their foreign bank account. If so, the case is handed off to the Department of Justice for prosecution. Although there isn’t an exact definition of “willful” available to the public, the government has said that a customer of a bank that has entered the Swiss Bank Program will be considered to have willfully violated the law. When a bank, like SCB Switzerland, enters the program, their name appears on the IRS List of Financial Institutions and Facilitators. With this latest agreement between SCB Switzerland and the DOJ, that list will grow to 65 Swiss banks.

The OVDP May Be An Option

If you were a customer of SCB Switzerland or any other foreign institution, you may be able to take advantage of the Offshore Voluntary Disclosure Program (OVDP). The OVDP is a program set up by the IRS that allows taxpayers to avoid criminal prosecution by coming forward and disclosing your previously undeclared foreign bank account. But the program has a catch: if the government has already opened an investigation into your affairs (FBAR-related or otherwise), you may be ineligible to participate or receive the maximum protections of the OVDP. Only an experienced tax attorney would be able to determine your ability to take advantage of the OVDP.

It is easy to see that the U.S. government is relentlessly pursuing those who have violated FBAR laws and banks that have assisted them. If you are an owner of (or have signature authority over) a foreign bank account that hasn’t been declared to the government, it is only a matter of time until your bank or financial institution comes forward and trades your information for “get out of jail free” card. It is in your best interest to act quickly and consult with a tax attorney as soon as possible.

Contact an Experienced Tax Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers with a myriad of tax issues, including participation in the Offshore Voluntary Disclosure Program. The potential life-altering effects of a prosecution and conviction for Foreign Bank Account Reporting violations are too great to try and fight the Government alone. The IRS and DOJ will send their best to obtain a conviction. Ensure that you have a team of zealous advocates to meet them. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Renowned Public Servant Sentenced to Prison on Tax Fraud Charges

Renowned Public Servant Sentenced to Prison on Tax Fraud Charges

| Nov 17 | Audit Representation, Criminal Tax Representation, IRS, Tax Law Blog | No Comments
Prison sentence for Georgia public servant

Each week, we attempt to bring our readers the most pertinent news with regard to tax legislation, administration, and adjudication. Frequently, we post stories about taxpayers who engage in tax fraud and are sentenced to prison because of it. There are likely some readers who believe that those who receive jail time for tax fraud are rare exceptions and that the government wouldn’t spend taxpayer dollars to prosecute and seek jail time for every individual that is believed to have violated the law. But as the recent sentencing of a civil rights champion has demonstrated: it doesn’t matter who you are, if you have committed a tax crime, you will go to prison.

According to reports of several news outlets, Representative Tyrone Brooks, 70, who served in the Georgia House of Representatives for over 35 years, was sentenced to serve a year and a day in a federal prison for tax fraud and wire fraud. U.S. District Judge Amy Totenberg handed down the ruling last week. Brooks, who had dedicated his life to public service, had been involved in politics for over 55 years prior to his resignation in 2015.

At trial, prosecutors showed that Brooks made material misrepresentations when soliciting for donations that were purportedly going to be used to fund programs that Brooks had set up to help underprivileged children learn to read in Georgia. He told potential supporters that the programs were wildly successful and that they needed additional funding to grow. In reality, federal prosecutors showed that most of the funding for the literacy program had gone to pay for Brooks’ personal expenses. Prosecutors and the judge both agreed that although Brooks was not living an extravagant lifestyle on the dime of those who donated to the program, he had not used the funds for the purposes that he had represented.

The defense team for Brooks had argued that he was the victim of poor bookkeeping. They based their defense strategy on the premise that the professionals hired by Brooks had commingled the funds of the literacy program to such an extent that it was impossible for him to decipher what were personal funds and were funds meant for his charitable program. Federal prosecutors took the position that bookkeeping blunders weren’t to blame and that Brooks had compounded his problems by making patently false statements to potential donors.

Federal Judges Don’t Go Easy on Anyone

When the federal judge sentenced Brooks, she recognized his extensive career in public service. But in doing so, also stated that probation was not appropriate in this case. Her consideration of Brooks’ contributions to the community and reluctance to allow him to serve out his sentence at home goes to show that no matter who you are, if you have committed a federal tax crime, a stay in a federal prison is likely in the cards for you. Brooks is set to appear in front of Judge Totenberg again later this year to determine how much restitution he will be ordered to pay, which will likely be more than $250,000.

If your affairs are being scrutinized by the IRS or state taxing authorities, it is in your best interest to contact an experienced tax attorney as soon as possible. Even if you believe that you can talk your way out of an investigation, it is highly likely that you will end up talking your way into a federal or state prosecution. The IRS and state taxing authorities send their very best investigators and prosecutors to do battle. They know what questions to ask to solicit incriminating responses. Only an experienced tax attorney can provide a buffer between you and the government.

Contact an Experienced Criminal Tax Attorney

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers with various types of tax issues. Whether you are being audited, investigated, or prosecuted, our knowledgeable and highly effective team is ready and willing to zealously advocate for your physical and financial freedom. Don’t go up against the government alone. Contact the Tax Law Offices of David W. Klasing today at (800) 681-1295 or online for a reduced-rate consultation.

Santa Barbara Winemaker Charged with Tax Fraud, Other Crimes

Santa Barbara Winemaker Charged with Tax Fraud, Other Crimes

| Nov 16 | Audit Representation, Business Transaction Taxation, Tax Law Blog | No Comments
Winemaker charged with tax fraud

Central and northern California are places particularly known for their ability to make amazing wines and areas like Napa have transformed into a formidable rival of Paris, in the industry. Something that the area is not well known for is financial crime. But that didn’t stop a Santa Barbara-area winemaker from trying to get the trend started. Now, he is facing criminal charges and potential time in prison. It is a wake up call to anyone who is being investigated for any tax crime.

According to several news outlets, Christian Garvin, 41, was arrested earlier this month on charges of embezzlement and tax fraud. Prosecutors allege that he stole more than $1 million and transferred the funds to a bank account that he opened with a name similar to the Oreana Winery, the Solvang winery that he partially owned.

Garvin owned ten percent of the winery and handled the day-to-day operations of the business. The other owners were business partners in Los Angeles. When the Southern California investors initially became suspicious, they believed that Garvin had only embezzled approximately $200,000, but after an investigation by the Santa Barbara Police Department’s Property Crimes Unit, the Santa Barbara District Attorney’s Office, and the California Franchise Tax Board, they leaned that over $1.2 million had been funneled away from the business. In addition to the theft, Garvin is accused of filing false tax returns for eight years, ending in 2013.

If the allegations against Mr. Garvin are proved true, he will likely be sentenced to a significant stint in a California prison. Furthermore, the charges that he is currently jailed on are not federal and only represent alleged violations of federal law. If Garvin violated state law by fraudulently preparing his state tax return, it is completely possible that he also committed federal tax fraud by lying on his federal return. A federal investigation could land him in a federal penitentiary after his time in a California state prison.

Whether They Are State or Federal, Tax Fraud is a Serious Accusation

As evidenced by the story above, allegations of tax fraud are not joke. A small investigation by the California Franchise Tax Board or other state authorities can snowball into a full-blown criminal investigation that can turn into an avalanche of criminal prosecutions and an extended stay behind bars.

If you are being investigated by any taxing authority or by law enforcement with regard to financial crimes, you are at risk. It is in your best interest to contact an experienced tax attorney who has extensive experience in representing clients in criminal investigations and litigation.

Consult With an Experienced Tax Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing leverage their comprehensive knowledge and experience in both law and tax accounting to provide a truly individualized and effective plan of attack to ensure that everything is done to maintain your personal and financial freedom. Contact the Tax Law Offices of David W. Klasing today at (800) 681-1295 or online for a reduced-rate consultation.

IRS Guidance on FBAR Penalties May Permit Reduced Penalties for Willful & Nonwillful Violations

IRS Guidance on FBAR Penalties May Permit Reduced Penalties for Willful & Nonwillful Violations

| Nov 13 | FBAR Compliance and Disclosure, IRS, OVDI Program, Tax Law Blog | No Comments
FBAR Penalties

Many individuals with undisclosed foreign accounts are justifiably concerned about their failure to comply with the annual obligation to file FBAR (Report of Foreign Bank and Financial Accounts). Each year individuals holding a financial interest in or signature authority over certain foreign financial accounts must file FinCEN Form 114. Covered accounts include foreign mutual funds, trusts, bank accounts, brokerage accounts, and many other foreign financial accounts. For individuals who have failed to comply with this obligation either willfully or inadvertently, harsh penalties can apply. The U.S. government has invested significant resources in offshore tax enforcement providing the IRS and Department of Justice with international tax data from more than 100 nations.

For individuals concerned about facing FBAR penalties due to potential ineligibility for OVDP or for other reasons, recent IRS guidance found in IRS Memorandum SBSE-04-0515-0025, Interim Guidance for Report of Foreign Bank and Financial Accounts (FBAR) Penalties sets forth the possibility for reduced FBAR penalties. However, the penalties you face are discretionary so it is important to have an experienced tax attorney, such as the lawyers of the Tax Law Offices of David w. Klasing, who can advocate and negotiate with the IRS on your behalf.

Penalties for Willful International Account Disclosure Failures

Penalties for willful violations of FBAR are particularly severe. Willful FBAR penalties can be imposed at the greater of $100,000 or 50% of the aggregate of the highest account balance. Prior to this guidance, the IRS could apply the penalty for every year where the violation occurred.  Thus, if an account was not reported for three years – 2011, 2012, and 2013 – a penalty was imposed for each year. As such, penalties could frequently exceed the value of the original account.

However, the new guidance states that there is, essentially, a cap on the damages that can be imposed. In most cases, penalties will be “limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination.” Yearly penalties are assessed by a formula “based upon the ratio of the highest aggregate balance for each year to the total of the highest aggregate balances for all years combined.” The yearly penalty may not exceed the maximum penalty limitation in 31 U.S.C. § 5321(a)(5)(C).

Consider this example provided by the IRS. For a taxpayer with unreported high aggregate balances of:

  • $50,000 (2010)
  • $100,000 (2011)
  • $200,000 (2012)

Under the new guidance the penalty would be 50% of the highest aggregate balance ($200,000) equaling a penalty of $100,000. Prior to the release of this guidance it was possible for penalty to have equaled $175,000 assuming that the examiner had assessed a 50% penalty for each year.

The guidance does state, “Examiners may recommend a penalty that is higher or lower than 50 percent of the highest aggregate account balance.” Thus, attorneys have room to negotiate a penalty down since the guidance affirms that the IRS must “clearly state the years for which it was determined that an FBAR violation was willful” and that IRS examiners “must fully develop and adequately document in the examination work papers their analysis regarding willfulness.” While there is the risk an examiner could recommend a more severe penalty, the penalty can never exceed “100 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination.”

Penalties for Nonwillful Foreign Account Reporting Noncompliance

There has also been significant discussion over the potential for the IRS to impose multiple FBAR penalties when several accounts went undisclosed. If a $10,000 penalty is applied for each unreported account, liabilities quickly add up. Under the guidance, such an approach will not become a reality for most taxpayers as examiners in most cases should recommend a single penalty for any year where required FBAR disclosures did not occur. Furthermore, the penalty for any single year cannot exceed $10,000. The examiner is also provided discretion to impose a single penalty of up to $10,000 despite multiple years with nonwillful FBAR violations. However, for certain cases, examiners “with the group manager’s approval after consultation with an Operating Division FBAR Coordinator” may work to impose a separate penalty for each unreported account and year. The careful guidance of an experienced tax attorney throughout the FBAR process can reduce the likelihood that an examiner finds such action necessary.

Rely on Our FBAR Experience

If you have undisclosed foreign accounts and have been contacted by the IRS, the experienced attorneys of the Tax Law Offices of David w. Klasing can work to mitigate the situation and consequences you face. To schedule a reduced-rate consultation at our Los Angeles, Irvine, or San Diego offices call 800-681-1295 today or contact us online.

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