In 2013, the Internal Revenue Service (IRS) assessed a $1.2 million fine against Beverly Hills dermatologist Letantia Bussell, who failed to report financial interests in a Swiss account on her 2006 federal income tax return. When Bussell failed to pay the fine, she was sued by the government. Bussell proceeded to appeal, and, despite confirming her own willful failure to report foreign income, presented several arguments as to why the fine was nonetheless inappropriate. Perhaps unsurprisingly, Bussell was ultimately unsuccessful. Her case should serve to remind taxpayers that disclosing offshore accounts and foreign assets is of the utmost financial and legal importance, as the alternative is being heavily fined and potentially incarcerated.
In February 2002, the Los Angeles Times published an article recounting the trial of Letantia Bussell, then 53, who was at that time convicted of “a handful of conspiracy, fraud and attempted tax evasion counts.” The charges which led to Bussell’s conviction arose from a bankruptcy filing in 1995. Because debtors are required to disclose their assets in bankruptcy using Form B 106, Bussell engaged in bankruptcy fraud by deliberately failing to disclose her assets. Not only can this lead to the dismissal of a debtor’s bankruptcy case, but more significantly, criminal prosecution of the debtor.
In June 2013, Bussell once more found herself in legal peril: on this occasion, a $1.2 million penalty stemming from Bussell’s failure in 2007 to disclose foreign financial interests on her tax return the previous year.
Though Bussell presented numerous arguments on appeal, none succeeded in persuading the U.S. Court of Appeals for the Ninth Circuit to reverse the ruling issued by the lower court, the U.S. District Court for the Central District of California. According to the unpublished opinion, Bussell attempted to obtain a reversal of the original ruling by using the following arguments:
Bussell presented no fewer than eight distinct legal arguments against the original ruling issued by the U.S. District Court for the Central District of California. All eight failed to impress the Ninth Circuit, leaving Bussell with a fine over $1 million.
This fine, while devastating, could have been avoided had Bussell properly disclosed her foreign income in compliance with the Foreign Account Tax Compliance Act (FATCA). Under FATCA, which was enacted in an effort to curb tax evasion and discourage taxpayers from concealing accounts held with foreign financial institutions (FFIs), taxpayers must use Form 8938 (Statement of Specified Foreign Financial Assets) to disclose foreign assets which exceed certain thresholds. In a similar but distinct requirement, certain taxpayers with foreign income must also file an FBAR (Report of Foreign Bank and Financial Accounts), otherwise known as FinCEN Report 114. Failure to meet either requirement may result in serious FBAR penalties and other consequences, as Bussell discovered firsthand.
If you control a foreign bank account, earn foreign income, or own foreign assets, you may be required to file an FBAR, file Form 8938, and meet other international tax requirements. Even if you have failed to disclose global income or assets in the past, it may be possible to minimize or avoid penalization by participating in the Offshore Voluntary Disclosure Program (OVDP). However, it is imperative that you act swiftly. The longer you delay, the fewer options will remain viable. To book a reduced rate tax consultation with the experienced tax crime defense attorneys at the Tax Law Office of David W. Klasing, contact us online or call (800) 681-1295 today.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.
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