New Yorkers busted Trying to Move Funds From An Undisclosed Swiss Account – Don’t Make The Same Mistake

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New Yorkers busted Trying to Move Funds From An Undisclosed Swiss Account – Don’t Make The Same Mistake

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In a recent article, David Voreacos reported that “U.S. prosecutors moved to seize $12.2 million they say was transferred to New York from a secret Swiss account set up by a tax lawyer who helped Americans hide assets from the Internal Revenue Service.”1 The Swiss and New York accounts “were set up by Swiss attorney Edgar Palzar.”2 Palzar pleaded guilty to tax fraud last year and has been cooperating with U.S. authorities since then.3 According to the complaint, Palzer formed corporations “under the laws of Panama, among other jurisdictions, to conceal, from the IRS and others, the ownership by U.S. taxpayers of accounts established at…Swiss banks and the income generated in those accounts.”4

If you have an undisclosed offshore account, do not try to secretly move your funds back into the U.S. The IRS Criminal Investigations Division (CID) can track movements of cash coming from offshore into the U.S., and if they target you for doing so you will not be eligible to make a 2012 offshore voluntary disclosure and thus will not qualify for amnesty for your past criminal tax actions. Even worse, your clandestine action of moving the cash from the non-disclosed account back into the U.S. will be viewed as an additional “badge of fraud” against you in a very likely subsequent criminal tax prosecution. The IRS uses badges of fraud to help them prove to a jury a taxpayer’s actions were willful rather than negligent and to show that a U.S. citizen intentionally hid taxable income from them and thus committed income tax evasion. Other badges of fraud include:

  1. Unreported foreign income – this could consist of interest, dividends, or capital gains related to investments in the foreign account, earnings in a foreign business or foreign rental property, or unreported taxable foreign income of any kind.
  2. Unfiled FBARS – or TDF 90-22.1
  3. Failure to report the existence of offshore account(s) under schedule B of your personal tax return.

If the IRS finds badges of fraud, they will send the case to the Criminal Investigation Division “CID” for development for criminal prosecution. You do not want your case sent to CID because, historically, the IRS obtains convictions in over 80% of their criminal tax cases it pursues and the criminal and civil consequences are in the foreign account area are purposely extremely severe (even Draconian).

Civil penalties for failure to file your FBAR(s) go from $10,000 per year for mere negligence to up to fifty percent the unreported foreign account balance for every year the account was open.

In addition, failing to file a false return (i.e. failing to check the bock on your Schedule B) is a felony, punishable by a prison sentence up to three years and a fine of $250,000. If you are found guilty of tax evasion, the prison sentence will increase from three to five years.

Thus, your best option is to contact an experienced tax attorney and enter into the 2012 offshore voluntary disclosure program before the IRS gets your name – possibly even from the person who set up your offshore account. The penalties are not as steep as they otherwise would be if the IRS catches onto your criminal action and there is substantially no risk of jail time if the terms of the 2012 OVDI program are strictly complied with.

The Tax Law Offices of David W. Klasing, P.C. can help you make a 2012 offshore voluntary disclosure. For more information, click here.

1 David Voreacos, Bloomberg, U.S. Seeks to Seize $12 Million In Swiss-Linked Tax Case (Apr. 8, 2014), http://www.bloomberg.com/news/2014-04-08/u-s-seeks-to-seize-12-million-in-swiss-linked-tax-case.html
2 Id.
3 Id.
4 U.S. v. Paltzer. Complaint, http://www.justice.gov/usao/nys/pressreleases/April13/PaltzerandBuckIndictmentPR/Paltzer,%20Edgar%20and%20Stefan%20Buck%20Indictment%2013%20Cr%20282.pdf