We often deliver stories of U.S. residents who are sentenced to lengthy prison sentences because of tax noncompliance. Whether it be for failing to file in accordance with the Foreign Bank Account Reporting (FBAR) laws or willfully evading taxes, many Americans have investigations opened into their financial affairs and criminal charges filed in a federal court. That being said, it is important to know that not everyone that is charged goes to jail. With the help of an experienced tax attorney, it may be possible to avoid many of the potentially life-changing effects of a criminal prosecution.
According to major news outlets, a Kentucky resident who was arrested and charged with conspiring to defraud the IRS and evade taxes by establishing and maintaining secret, undeclared bank accounts in Switzerland, was sentenced last week in a federal court in New York. Peter Canale was arrested at his home in Kentucky in late 2014 and sent to New York for trial. Although he faced five years in a federal penitentiary, he was sentenced to serve only three years of community service, huge win for Canale and his defense team.
According to a Department of Justice press release that was distributed upon his arrest, Canale is accused of setting up at least one undisclosed foreign bank account to hold monies that he and his brother had inherited. When Peter and Michael Canale’s father died in 2000, the Canale brothers received an inheritance of a bank account at a Swiss financial institution. The brothers met in New York with financial advisors and client representatives from UBS Group AG and discussed what to do with the inherited funds. The brothers decided, after conversing with the Swiss banking representatives, that it would be for the best to keep the money in its then current account to benefit the Canale brothers.
The Department of Justice also alleged in court documents that Peter Canale opened another Swiss bank account in 2005 at Wegelin. Valued at over $750,000, some of the same advisors that met with the brothers previously played a role in the establishment of Peter Canale’s second Swiss bank account. In order to conceal ownership, a foundation formed in Lichtenstein was interposed between the account and Canale.
United States law requires U.S. residents report any ownership interest or signature authority of any foreign bank account with a balance of $10,000 or higher at any point in a tax year. Willful failure to do so can result in criminal charges that include potential jail time. Further, a taxpayer attempting to avoid paying federal income tax can be charged with tax evasion, which can add an extensive amount of prison time to an already long sentence. In addition to physical restraint in a correctional facility, taxpayers convicted of failing to disclose a foreign bank account may also face pecuniary repercussions such as being ordered to pay back taxes, interest, and extremely high penalties. For instance, taxpayers who are found to have willfully failed to file under the FBAR laws can face a penalty of up to half of the high-balance of the account that was left undisclosed.
There are various methods that experienced tax attorneys use to reduce the negative effects of a criminal prosecution. Many times, if a taxpayer involves a tax attorney at the first sign of trouble, a criminal indictment can be avoided. The IRS offers programs such as the Offshore Voluntary Disclosure Program (OVDP) to allow taxpayers to come forward before a criminal prosecution becomes necessary. Under that program, a taxpayer agrees to provide extensive information about their foreign bank account and pay back-taxes, penalties, and any interest in exchange for the government’s word that they will not levy criminal charges against him or her. If there have already been charges filed, an experienced criminal tax attorney can help to ensure that the taxpayer’s legal right are upheld and give them a chance to minimize the potential damage.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers in various situations, including those who are the subject of investigations or criminal prosecutions. When prosecutors have you and your affairs under the microscope, you cannot contact a tax attorney soon enough. We can leverage our extensive legal training and experience to ensure that the taxpayer doesn’t incriminate himself or herself during interactions with the IRS or DOJ and that they receive the best possible representation while in the courtroom. Don’t go up against the government alone. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.