In recent years, the IRS has come under fire from some prominent critics in Congress about the fact that the agency seems to have disproportionately been targeting low-income taxpayers for audits and criminal tax investigations while letting wealthier Americans get away with tax crimes that cost the agency exponentially much more money. As a result, the agency has doubled down in the last few years in its efforts to crack down on tax fraud by the wealthiest Americans, announcing a program aimed at auditing those in the highest income brackets and doubling down on its commitment to the “Wealth Squad” unit.
Recent articles have indicated that IRS criminal tax investigations into the activity of two prominent billionaires, Robert Smith, and Robert T. Brockman, are in the late stages, and indictments could soon be brought. Our skilled dual licensed Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing have been following these developments and what they might mean for other billionaires or high net worth individuals who have been filing fraudulent or incomplete tax returns, especially those related to foreign or offshore assets or bank accounts.
A Tale of Two Billionaires
Robert Smith may be best known as the African-American billionaire who announced during his 2019 commencement speech at Morehouse, a prominent HBCU, that he would be paying off the loans of the entire graduating class. According to a new in-depth report by Bloomberg Law, this major philanthropic gesture happened at the same time that Smith was being targeted in a years-long IRS criminal tax investigation into his apparent failure to report over $200 million in taxable foreign income that he moved through a series of offshore structures and institutions before it ended up deposited in a bank account for one of his charitable foundations.
Robert Brockman, meanwhile, is a Texas businessman and major Republican donor, who, as per the same Bloomberg Law article, is also under IRS criminal tax investigation. This unlikely duo became intertwined when Brockman convinced Smith, then at Goldman Sachs, to launch his own firm, Vista Equity Partners, and buoyed its early successes with a $1 billion-dollar commitment from an entity held by a charitable trust in Bermuda, of which Brockman was the beneficiary. The two worked together on several large financial investments and projects over the years, including Smith’s Vista providing Brockman’s equity financing for a buyout of one of their biggest rivals.
The Ongoing IRS Investigation of Smith
As noted above, the crux of the IRS’s at-least 4-year-old criminal investigation into Smith is an attempt to figure out whether Smith was actually the beneficial owner of Caribbean entities that received the $200 million in proceeds from his company’s first private equity fund. If so, he would have been required to report this amount on his FBAR, the form that individuals with a certain amount of money in offshore bank and financial accounts are required to file as part of their tax return with the IRS each year. FBAR violations could come with major civil penalties as well as the potential of jail time if the violation was willful. Smith and his legal team are said to be working to convince the Justice Department to forgo criminal tax charges and resolve his case with a civil settlement, but it is unclear if this IRS will be willing to do so.
One interesting tidbit of information from the Bloomberg Law report caught the eye of a tax law blogger. He notes in his blog that Smith is said in the article to have become concerned after his wife filed for divorce in 2013 about scrutiny into his tax returns as lawyers on both sides of the divorce pored over the family finances. In 2014, Smith is alleged to have approached the IRS to try to get back into compliance through the agency’s Offshore Voluntary Disclosure Program, or OVDP, which has helped thousands of Americans get back into compliance by voluntarily disclosing their past failures to file complete and accurate FBAR in exchange for a near-certain pass on criminal tax prosecution. The IRS supposedly rejected Smith, potentially because he was already on their radar. This is a critical reminder to those with potential FBAR issues seeking to use voluntary disclosure to get back into compliance that you must do so before the IRS begins an audit or criminal tax investigation into your conduct, not once one has already begun. At this point, the agency will usually reject your application as it did with Smith’s.
The Brockman Angle
Meanwhile, the IRS has also been pursuing Robert Brockman in a separate, but intertwined, tax case regarding as much as $1.5 billion in revenue concealed from the IRS through offshore holdings. The IRS has allegedly empaneled several grand juries, applied for and been granted search warrants of Brockman’s lawyer’s home in Bermuda, and granted immunity to the former lawyer who has agreed to testify against him. In a sign that the Brockman and Smith cases are considered linked, both cases are said to be being handled by a veteran Tax Division prosecutor, Corey Smith. Reportedly, because the case against Brockman is even larger than the one against Robert Smith, prosecutors are attempting to work out a deal where Smith turns into a cooperating witness against Brockman in exchange for leniency.
If You Are a High Net Worth Earner with FBAR Issues, Call Our Skilled Tax Attorneys and CPAs Today
The IRS is pursuing more audits and criminal tax investigations against billionaires and other high-income earners than ever. The reporting on the Smith case also makes it clear that the IRS is willing to turn down attempts from such billionaires who have failed to properly report offshore accounts and assets on their FBAR to get back into compliance if they do not come forward before the agency has already started looking into their issues. As such, if you are a wealthy individual who has filed false or incomplete FBARs in past years, you should get in contact with an experienced tax attorney like those at the Tax Law Offices of David W. Klasing as soon as possible to try to remedy the situation before it goes from bad to worse. Call our office today at (800) 681-1295 to set up a consultation.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed returns coupled with affirmative evasion of payment) 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!
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
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More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
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- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRS tax auditor’s findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
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- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
Questions and Answers about Offshore Voluntary Disclosure Initiative (OVDI)
- Why hire David W. Klasing to represent me in an audit
- 2011 Offshore Voluntary Disclosure Initiative FAQ
- Key Features of Initiative
- Eligibility For This Initiative
- 2011 OVDI Process
- Calculating The Offshore Penalty
- Statute of Limitations
- FBAR Questions
- Taxpayer Representatives
- Case Resolution
- What not to do!
- What to do!
- FBAR Reporting and Expired Voluntary Disclosure Program
- How the Law Offices of David W. Klasing Can Help
- Bank account overseas I didn’t report on my income tax
- Do I have to maintain information on overseas bank accounts
Questions and Answers about FBAR Compliance and Disclosure
- Potential charges for not participating in the 2014 OVDP
- How many tax returns will I amend for my FBAR filing?
- FBAR Voluntary Disclosure program end
- Can I make a voluntary disclosure after the deadline?
- Can I use IRS Voluntary Disclosure if I Can’t Pay?
- Potential reporting requirements and civil penalties
- What Happens if You Don’t Disclose Foreign Accounts
- Criminal charges if you refuse voluntary disclosure
- Characteristics of FBAR voluntary disclosures
- What is required to make a valid voluntary disclosure?
- 2012 Offshore Voluntary Disclosure Initiative Objectives
- What is an FBAR?
- Filed amended returns without making a Voluntary Disclosure
- Undisclosed foreign accounts: What exchange rate to use
- Why did the IRS announce the 2012 OVDI at this time?
- Should I consider making an offshore voluntary disclosure?
- Why to consider making a Voluntary Disclosure
- 2012 OVDI program vs. the voluntary disclosure practice
- Foreign bank account asset reporting/filing requirements
Questions and Answers About Foreign Tax Audits
- Does the Fifth Amendment apply to foreign accounts?
- How is evidence cultivated from foreign sources?
- How is tax loss determined?
- How might an FBAR audit be resolved?
- Is a penalty assessment ripe for judicial review?
- Overview of an administrative criminal investigation
- What is the process of an FBAR referral?
- Statute of Limitations raised during a FBAR audit?
- Precautions to be taken in the pre-audit phase
- Recent international tax and reporting prosecutions
- Foreign account, entity and investment prosecution
- Who collects restitution and penalties?
- International tax investigations are an IRS high priority
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
- Federal criminal code crimes that apply to tax issues
- Penalty for making, subscribing, and filing a false return
- CID special agent’s report for criminal prosecution
- What is the discovery process in a criminal tax case?
- What the IRS includes in indictment for tax case
- What is the hardest element of a tax crime to prove?
- IRS methods of gathering evidence to prove tax crime
- What does a grand jury do in IRS tax crime prosecution?
- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
- What is income tax evasion and how is it punished?
- What is attempted income tax evasion?
- What is the crime of failure to pay tax? What is punishment
- Crime of making or subscribing false return or document
- Criminal Investigation Division investigation tactics
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- What is the crime ”evasion of assessment” of tax?
- Specific examples of “attempting” to evade tax assessment
- What is the so-called Spies evasion doctrine?
- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
- What is evasion of assessment for tax liability?
- Is evasion of assessment different from evasion of payment
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- What is the IRS burden of proof for tax fraud convictions?
- Are Tax Laws Constitutional?
- What is the source of law that defines tax evasion?
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- What if I helped someone else evade taxes?
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- What is a proffer agreement and what are the risks?
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- Limited use immunity from proffer agreements
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