Warner, chief executive of Ty Inc. and creator of the famous Beanie Babies, pleaded guilty to federal tax evasion earlier this month after being accused of hiding tens of millions of dollars in secret offshore accounts over eleven years.
Starting in 1996, Mr. Warner hid income in a secret offshore bank account at UBS, a Swiss-based financial services company. In 2009, UBS admitted to helping U.S. taxpayers hide money abroad. UBS settled with the United States by agreeing to pay $780 million and provide the IRS with the identities of certain account holders.
The case against Mr. Warner is an example of the recent crackdown by the U.S. government on undeclared offshore accounts that has intensified greatly. The U.S. is in the process of eliminating offshore tax havens. Earlier this year, Switzerland’s oldest bank, Weglin & Co., pleaded guilty in New York to helping Americans hide $1.2 billion from the IRS. And just this month, Bank Frey & Co. became the second Swiss bank to close its doors as the United States increases pressure on foreign financial institutions for abetting tax evasion. Bank Frey is one of the 14 Swiss banks under investigation by the Department of Justice for aiding U.S. taxpayers in avoiding taxes, and is thus ineligible for simplified procedures to settle such accusations. For more information regarding this tax compliance program that was recently agreed to by the IRS and Swiss Federal Department of Finance, please see our blog posting here:
The Special Agent in charge of the Internal Revenue Service Criminal Division in Chicago had the following advice for taxpayers: “We encourage taxpayers to think of the serious consequences, including criminal penalties, for willfully presenting false information on the federal tax returns. All taxpayers must honor their obligation to report all of the income and pay all of the taxes they owe.”
When Ty Warner is sentenced next year, he may face up to five years in prison. He also agreed to pay a civil penalty of $53.6 million for failure to file a Foreign Bank Account Report (FBAR). This is the largest offshore-account penalty ever reported, which demonstrates how serious the U.S. is taking undeclared foreign accounts. Multiple taxpayers have now been charged in federal court in Chicago of hiding foreign accounts from the IRS at UBS and other overseas bank accounts.
Be aware that Form 1040, Schedule B lists questions that must be answered about foreign bank accounts. If you have a foreign bank account, there are special rules that apply and additional forms must be filed.
If you have foreign bank accounts that have not been disclosed to the IRS, we can help!
