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Michael Clifford Francis of Alhambra California pled guilty in Los Angeles federal court to one count of subscribing a false income tax return and one count of failing to disclose interests in foreign bank accounts. For his indiscretions, he now faces a maximum sentence of 8 years in prison and a fine of at least $500,000. Additionally, he must also pay the IRS a penalty of 50 percent of his highest foreign account balance, approximately $896,000.
From January 2002 through December 2011, it was learned that Francis had various sums of money in a UBS bank in Zurich, a HSBC Bank on the island of Jersey in the Channel Islands, and a Commerz Bank in Germany. During the investigation Francis admitted that for consecutive years he failed to disclose the accounts entirely and in 2007 he also did not disclose the interest earned from the account in Germany.
In an effort to evade detection, Francis shuttled money into his domestic accounts through structured deposits of less than $10,000. All cash transaction of $10,000 or more are required to be reported to federal authorities. Francis will be sentenced in February.
This latest incident is consistent with the ramped up pursuit of tax evaders with foreign accounts. Moreover, it is clear that penalties for FBAR violations can and do exceed balances in foreign financial accounts. If you learn you were required to file FBARs for earlier years, but you dutifully reported your foreign income related to the accounts, you should file with the advice of counsel the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause. Not knowing of the FBAR filing requirement is reasonable cause. However if even deminimus amounts of foreign income was omitted from your U.S. returns you need legal assistance. Our office has lots of experience in this practice area.