Treasury (including tax) laws apply to all Americans. No matter your status, Uncle Sam hires the country’s best investigators and prosecutors to ensure our laws are complied with. This blog post looks at one of the more high-profile tax prosecutions and highlights how the same thing can happen to everyday Americans.
America learned last week that Paul Manafort and Richard Gates were indicted by a federal grand jury and charged with multiple counts relating to financial wrongdoing. Specifically, both Manafort and Gates were charged with counts relating to willfully failing to disclose foreign bank accounts as required by the Bank Secrecy Act. Prosecutors allege that between 2008 and 2014, Manafort had a financial interest in, or signature authority over, foreign financial accounts that were not disclosed. Furthermore, prosecutors allege that between 2008 and 2013, Gates also had a financial interest in, or signature authority over foreign financial accounts that were not disclosed.
Understanding the seriousness of the charges against him, Manafort has hired Kevin Downing, former prosecutor for the Department of Justice Tax Division, to represent him in this case.
Foreign Bank Account Reporting (FBAR) laws require that American residents disclose the existence of foreign bank accounts with balances that exceed $10,000 on an annual basis. The willful failure to comply with FBAR laws can carry a penalty of up to half of the balance of the undeclared account for each year of noncompliance and several years in a federal prison. Although the punishment for willfully failing to file an FBAR may be serious, the IRS has provided taxpayers an alternative to living on the run.
The Offshore Voluntary Disclosure Program (OVDP) gives taxpayers with foreign bank accounts that have not been disclosed on a yearly FBAR filing a potential way out. Under the terms of the OVDP, a taxpayer that comes forward, discloses extensive information about the undeclared foreign bank account in question, agrees to pay a penalty, back taxes, and interest, and is accepted into the program, can avoid being criminally charged for failing to comply with FBAR disclosure requirements.
Although many taxpayers with undisclosed foreign bank accounts likely qualify for the program, a large majority of them fail to act. Unfortunately, the OVDP has a stipulation that penalizes sitting on your hands: you may be disqualified or limited in participating in the program if the IRS is investigating you for any reason, including engaging in a routine audit. This means that a simple IRS examination that is unrelated to FBAR obligations may hinder a taxpayer’s ability to utilize the OVDP.
Many taxpayers with undeclared foreign bank accounts are concerned about the repercussions of being caught and prosecuted and feel like they are in a lose-lose situation: do nothing and get caught or come into compliance and get caught. But that simply doesn’t need to be the case. The IRS set up the OVDP to help taxpayers who are concerned about criminal prosecution come into compliance without worrying about being torn from your family and sent to a federal prison. An experienced tax attorney can walk you through the OVDP process and assess whether it is right for you.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers who are in or want to avoid trouble with the federal government with regard to their undeclared foreign bank account. Whether you are a wage-earning blue-collar employee or a high-visibility political player, the Department of Justice is on the lookout for taxpayers out of FBAR compliance. Don’t let the threat of hefty fines or prison time keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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Here is a link to our practice overview video on foreign income and information non-compliance.