A naturalized U.S. citizen and business owner who failed to disclose foreign accounts for several years is facing a collection action by the government for $23 million, plus additional fines and interest on the unpaid balance that would bring the grand total to over $26 million.
Behrouz Nadji, an engineer and CEO who made attempts to cooperate with the federal government in amending his delinquent foreign asset informational returns, is nonetheless staring at massive penalties for what the government has deemed willful evasion of his reporting requirements. With such high stakes, careful consideration is required for anyone who may meet the reporting threshold for overseas assets.
Cooperating with foreign asset disclosure guidelines can be tricky, and the consequences for failing to do so can be dire. To schedule a reduced rate initial consultation and learn more about FBAR requirements and how they may apply to you, call the dedicated International Tax Defense Attorneys and CPAs at the Tax Law Offices of David W. Klasing today at (800) 681-1295 or schedule online HERE.
Ex-Pat Defendant Facing Collection Complaint for Willful FBAR Penalties
The IRS is coming after a defendant in a prior FBAR willful penalty case, seeking millions of dollars that a court had ordered the defendant to pay.
Case Background
Behrouz Nadji, a naturalized citizen of the United States, was born in Iran and schooled in Europe before moving to the United States and obtaining multiple degrees in engineering and computer science. Nadji did move back to Tehran for a period of time before bringing his family back to the U.S. and completing his citizenship requirements in 1992.
Prior to this, however, Nadji started Comar Engineering Company, Ltd. In Iran. Comar did no domestic business and filed no U.S. tax returns. However, Nadji received income from his role as chairman and as the company’s only shareholder, which continued through his naturalization.
Nadji utilized several overseas bank accounts to receive and manage his income from Comar, as well as at least one account that he controlled on behalf of the company. In 2009, Nadji allegedly transferred over $28 million from his personally controlled account to the Comar account and subsequently closed the personal account. For the year 2009 and the four years following, Nadji allegedly did not disclose the foreign accounts to his tax preparer in Colorado.
Disclosure Process
In 2014, Nadji entered into the federal government’s Offshore Voluntary Disclosure Program (OVDP). While it was available, the OVDP program offered taxpayers with unreported foreign interests and/or income an opportunity to avoid criminal prosecution and settle civil and criminal penalties.
Nadji filed delinquent FBARs for his foreign accounts for five consecutive years, starting in 2008. Court documents show that in each year where Nadji missed the FBAR filing window, the total high balance of his collective accounts was at least $33 million, well above the $10,000 reporting threshold.
Nadji entered the OVDP to try to assuage the damage of his past violations but ultimately was removed from the program because of disagreements with the IRS. Thus, Nadji had not only conceded that he had violated his FBAR requirements but had also failed to make any payments on the accounts. Further, by participating in the OVDP, Nadji inadvertently extended the statutory window on assessing penalties until December 2020.
Demand
In August 2020, the IRS notified Nadji that they had assessed willful FBAR violation penalties across all of the accounts and years in question totaling $23,102,381. As of August 11, 2022, Nadji had failed to make any payment on the balance, racking up an additional $3 million in penalties and interest. Thus, the IRS filed a collection action against Nadji.
Significance of the Collection Action Against Nadji
Many areas of the tax code are unsettled, open for speculation, and vary depending on which government entity you ask. The method for calculating FBAR penalties is a perfect example of this unpredictability.
Generally, for willful FBAR penalties, the IRS is free to assess penalties up to 50% of the assets in the unreported foreign accounts collectively. However, there is confusion about how this methodology is applied in cases where there are multiple foreign accounts that go unreported for multiple years. In some instances, the government has chosen to use the highest value of each account in a given year to determine the limit. In others, however, the penalty limit is determined based on the net value of the accounts at their highest peak across the years concerned. These are just two of the various interpretations that have been used and reviewed by the various circuit courts.
While this may seem rather technical, the ultimate consequences could mean the difference between millions of dollars in penalties and interest. In Nadji’s case, the initial willful FBAR penalties seem to have been calculated based on the maximum penalty amount for each individual year. This approach is outlined in the IRS’s operational manual.
The other critical takeaway from Nadji’s case is that, despite entering into a voluntary disclosure agreement, Nadji’s cooperation ultimately eroded, leaving him facing the maximum amount of penalties with little to no recourse for challenging the government’s findings. This is why it is so important to work with a seasoned International Tax Defense Attorney whenever considering taking cooperative steps, as simple mistakes could turn your own good faith efforts against you very quickly.
Discuss Your FBAR Disclosure Requirements with the Tax Law Offices of David W. Klasing
No matter what situation you may find yourself in, you should never have to take on the federal government alone. To get a reduced-rate initial case evaluation from our experienced Dual Licensed Tax Attorneys and CPAs, call our offices as soon as possible at (800) 681-1295.
As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
See our 2011 OVDI Q and A Library
See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library
