California resident Teymour Khoubian was indicted by a federal grand jury for allegedly impeding the internal revenue laws, filing false returns, submitting fraudulent reports and lying to a federal agent.
According to the Department of Justice’s press release, Khoubian filed returns for six consecutive years (2005-2010) that did not report his financial interest in multiple Israeli and German bank accounts, nor the interest income he earned from those accounts. Khoubian is also alleged to have filed a false 2011 tax return that underreported the interest income he earned from his Israeli accounts and continuing to fail to disclose that he held an account in Germany.
Khoubian purportedly had $20 million hidden in offshore accounts at the time he falsely claimed the Earned Income Tax Credit on his tax returns. In addition to filing false tax returns and FBARs, Khoubian allegedly provided his German bank with a copy of his Iranian passport and a residential address located in Israel to prevent the bank from disclosing the account to the IRS. He also allegedly sent a letter to Bank Leumi falsely claiming he was living in Iran when he actually resided in Beverly Hills, California.
If convicted, Khoubian faces a maximum sentence of three years in prison for corruptly endeavoring to impede the internal revenue laws and each count of filing a false return. He faces an additional five years in prison for each count of filing a false Report of Foreign Bank and Financial Accounts (FBARs) and each count of making a false statement. His sentencing is scheduled for November.
Earned income tax credits (EITCs) are refundable tax credits for working individuals and couples (particularly those with children) who make a low to moderate income. The amount of EITC benefit depends on a recipient’s income and number of children. In order for a person or couple to claim a person as their qualifying child, they must meet certain relationship, age and residency requirements.
Earned income is defined by the United States Internal Revenue Code as income received through personal effort. Wages, salaries, tips, earnings from self-employment and disability payments through a private employer’s disability plan are all examples of earned income. Typically, working families with an income of approximately $35,000 to $50,000 (depending on the number of children) are eligible to claim federal EITC. One need not have a tax background to understand why Khoubian was not entitled to claim EITC benefits. With $20 million hidden in offshore accounts, his income was a far cry from “low-to-moderate.”
To add insult to injury, the rationale behind the earned income credit is for the government to provide an incentive for poor people to work rather than merely exist on public assistance (welfare). The credit ordinarily results in a refund of taxes beyond what the taxpayer paid into the system, which defined another way, is income redistribution from the rich and middle class to the poor.
As mentioned above, Khoubian is alleged to have filed false 2012 and 2013 Reports of Foreign Bank and Financial Accounts forms (FBARs) with the U.S. Department of Treasury that concealed his German account. Under the Internal Revenue Code, an annual FBAR must be filed with the Treasury whenever a taxpayer has an interest in, or signature authority over, a foreign financial account valued at more than $10,000 anytime during the calendar year. Taxpayers should keep in mind that the FBAR filing requirement also applies to foreign accounts with non-monetary value (such as an insurance policy) of more than $10,000.
Taxpayers consistently try to avoid or evade U.S. income taxes by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Insurance plans, foreign trusts, wire transfers, credit cards and employee leasing schemes are among the other commonly used tax evasion methods.
In recent years, the IRS has increased its monitoring of taxpayers suspected of being involved in abusive offshore transactions. If you think you might be required to file an FBAR, it is crucial that you speak with a tax attorney to determine your past and present compliance requirements. Failing to file an FBAR comes with severe penalties. The willful failure to file will cost you a minimum fine of $100,000 or half the value of the foreign account, whichever is greater in addition to potential applicable criminal charges. Even an inadvertent failure to file comes with a minimum $10,000 penalty.
All tax crimes have a severe impact on our society. Governments need sustainable funding for social programs and public investments to promote economic growth and development. These programs provide health, education, infrastructure and other amenities necessary to achieve a common goal of a prosperous, functional and orderly culture. Former U.S. Supreme Court Justice Oliver Wendell Holmes said, “Taxes are what we pay for a civilized society.” When Americans commit tax crimes, they violate the social contract between citizens and the economy and law abiding taxpayers consequently wind up paying more than their fair share.
State and federal tax requirements can present a number of challenges to American taxpayers. Americans with an un disclosed interest in foreign financial accounts or unreported foreign income generating assets or businesses could especially benefit from working with an experienced Criminal Tax Defense Attorney. The Tax Lawyers, CPAs and EAs at the Tax Law Offices of David W. Klasing have decades of experience working with California, U.S. and International taxpayers on a wide variety of domestic and international tax topics. Whether you simply need help preparing your foreign tax and information returns, or are facing a domestic or foreign audit or criminal investigation, our tax professionals are ready willing and able to help. Call our offices at (800) 681-1295 or contact us online to schedule a reduced-rate consultation today!