NJ Man Pleads Guilty to Tax Evasion, Failure to File FBAR for Russian Bank Account

New Jersey chiropractor Carlo Amato, 57, pleaded guilty on Wednesday, September 19, 2018 to two criminal tax charges in Trenton federal court: one count of federal income tax evasion, plus one count of failing to file an FBAR (Foreign Bank Account Report), which is mandatory for U.S. citizens with foreign income over certain limits. In Amato’s case, the offshore account was held with Russian bank UniCredit – and, according to federal prosecutors, contained approximately $1.5 million in undisclosed funds. Both charges can lead to thousands of dollars in fines, IRS restitution, possible disciplinary sanctions depending on the defendant’s profession, and, for many offenders, months (or years) in federal prison, often followed by supervised release. In the past, noncompliant taxpayers had a chance to avoid or at least mitigate these sorts of outcomes by participating in the Internal Revenue Service’s Offshore Voluntary Disclosure Program (OVDP) – but with last month’s permanent closure of the OVDP, taxpayers now face fewer options, and greater danger.

Willful Failure to Report and Pay Taxes on U.S. Income is Tax Evasion (Fraud)

According to a press release from the U.S. Department of Justice (DOJ), Amato was a Beachwood, NJ resident with two chiropractic businesses located in nearby Lakewood Township: Accident Recovery Physical Therapy and Chiropractic Care Consultants Inc. These entities received various checks, generating income which Amato failed to disclose to the IRS.

Appearing in federal court last month, Amato admitted to both of the charges against him, namely failing to report offshore income (which is ordinarily accomplished by filing an FBAR, among other tax forms) and failing to report U.S. income (which is accomplished by filing Form 1040, Form 1040A, or Form 1040EZ). Though Amato filed tax returns with the IRS, as opposed to cases that involve outright failure to file, he drastically underreported his true level of income, indicating, for example, no taxable income on his 2014 return. In reality, Amato’s taxable income for the year totaled more than $561,200, creating a tax liability of approximately $197,000 – not exactly the $0 amount indicated on the return.

Nor was 2014 the only tax year in which Amato broke the law by concealing taxable income. In addition, “Amato admitted that he also evaded more than $300,000 in taxes for the tax years 2012, 2013, and 2015,” according to the press release.

The penalties for tax evasion are enumerated at 26 U.S. Code § 7201, a federal statute which is part of the Internal Revenue Code (IRC) that governs tax laws in the United States. This statute describes tax evasion (or, as it is more broadly known, tax fraud) as the willful or intentional attempt to “evade or defeat any tax” – in this case, federal income tax liabilities. The statute also creates the maximum penalties for tax evasion, which generally include a fine ranging from $100,000 (for individual taxpayers) to $500,000 (for corporations), in addition to a prison sentence of up to five years. Adding to these considerable fines, convicted offenders may also be required to pay for the fees and expenses associated with their own prosecution. However, in Amato’s case, the fine may be as great as “$250,000 or twice the gain to any person or loss to any victims of the offense.”

U.S. Citizens with Foreign Income Must Report Offshore Bank Accounts by Filing FBAR

Though more widespread, domestic income tax evasion is not the only form of tax evasion of which a taxpayer may find himself or herself accused. Offshore tax evasion – in other words, the practice of deliberately evading one’s U.S. tax liabilities by hiding funds in foreign accounts, like the Russian account Amato held with UniCredit – can also lead to criminal charges (in addition to civil penalties).

Offshore tax evasion is generally discovered through a foreign account tax audit or FBAR audit, which may lead to an IRS criminal investigation if the taxpayer appears to have acted willfully. Because the $1.5 million contained in the Russian account far exceeded the $10,000 threshold for filing an FBAR, Amato violated the law by intentionally failing to make a timely disclosure. It is interesting to note that Amato wired these funds to the Russian bank account – a potential risk which our criminal tax defense attorneys discussed in a previous article on how international wire transfers can trigger an IRS audit.



Though his sentencing hearing will not take place until next year, Amato, through a plea deal with prosecutors, has already agreed to “file amended tax returns and make full restitution for the years 2012 through 2015.” In addition, he will be required to file an FBAR for each tax year from 2012 through 2017. The FBAR may only be filed online, and is also known as FinCEN Form 114 (formerly referred to as Form TD F 90-22.1).

International Tax Attorneys for FBAR, FATCA, and Tax Audit Help

From the perspective of the IRS, it does not matter whether you store your earnings in a foreign or American bank account: if you are a U.S. citizen or resident, you must report domestic and worldwide income to the federal government, regardless of where or how such funds are withdrawn or deposited. This generally entails filing an FBAR, filing Form 8938 (Statement of Specified Foreign Financial Assets) to comply with the Foreign Account Tax Compliance Act (FATCA), and meeting additional tax requirements. Failure to do so can result in harsh FBAR penalties, making skilled and effective representation essential.

If you or one of your family members has been chosen for an IRS tax audit, is under federal investigation, or has questions about the safest and most efficient strategy for disclosing offshore income, it is in your best interests to consult an experienced tax lawyer immediately. For a reduced-rate consultation concerning domestic or international tax compliance, contact the Tax Law Office of David W. Klasing online, or call our international tax attorneys today at (800) 681-1295.

Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan Jose, San FranciscoOakland and Sacramento.

 

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