St. Louis Man Sentenced For Failing to Disclose Multiple Foreign Accounts

While most Americans will break their New Year’s resolutions within the first week of January, there is certainly one group of people who do not; IRS investigators. In an organization that is underfunded and understaffed, you better believe that a popular resolution of top brass at the Service is to continue their hunt for taxpayers that have failed to disclose their foreign bank account by filing an FBAR.

The Grand Jury Indictment

A St. Louis man is learning the hard way that keeping secrets from the government is not just a bad idea, but it is downright illegal. Raju Mukhi was indicted by a federal grand jury last year on six total counts; four counts of failing to file an FBAR and two counts of filing false tax returns.

U.S. citizens are required by domestic law to indicate to the feds that they have a foreign bank account if they have any account outside of the United States with currency valued at $10,000 or more. There are usually additional taxes to be paid on foreign accounts as well, but not always. If there are, you are also require to pay those taxes.

Taking the Plea Deal

Mukhi pled guilty to one count of failing to file an FBAR and one count of filing a false tax return back in October. He was recently sentenced to three years of supervised release. Essentially, this means that he is technically in custody but he can avoid being locked up in a prison, like most taxpayers who are prosecuted with similar charges end up.

“Why the disparate treatment?” you may ask. The fact that Mr. Mukhi ended up retaining the majority of his freedom points to likelihood that he is working with the federal government to help bust both the banks that housed his accounts and you (meaning U.S. taxpayers generally). The available details of his case are few and far between. This is because the case records were sealed, another indication that there may be some cooperation occurring.

What we do know is this: Mukhi was working with at least two offshore accounts. One out of Switzerland at Clariden Leu bank and one in Singapore at Goldman Sachs. The accounts were not kept in Mukhi’s name, but rather names of other entities. The government made the assertion that even though that the legal owners may have been foreign entities; the economic reality was that Mukhi was the true beneficiary of the funds.

Turning Taxpayers into Informants

If you have been following the recent IRS and DOJ activity with regard to foreign bank account reporting, you will have seen that overseas banks, particularly those in Switzerland, have been hit the hardest. After a multi-billion dollar criminal settlement stemming from a plea deal with Swiss giant Credit Suisse, the Department of Justice gave over 100 Swiss banks an ultimatum; cooperate with us or get taken down.

At first, Swiss banks were lining up to participate in the non-prosecution agreement. But as the DOJ started making demands, several banks backed out, opining that the demands were just not worth it. Lawyers for a group of the banks even wrote a letter on behalf of their clients asking the DOJ to reconsider some of their demands. The request has, for the most part, been ignored. The government knows that with taxpayers who are willing to take a reduced sentence in exchange for information about their bank, financial institutions that are begging for less cumbersome requirements have no leverage.

Don’t Risk Being Caught

What does this mean for you; a taxpayer with one or more foreign bank accounts that have gone undisclosed? It creates the potential for folks like the defendant in this case to throw you under the bus in order to save themselves. U.S. citizens can face serious time in prison and life-altering fines and penalties that could far exceed the amount of money that you failed to disclose in the first place.

The government has provided one way out (that isn’t in handcuffs) as long as you get to them BEFORE they get to you. It is called the Offshore Voluntary Disclosure Program. Instead of waiting for the IRS to find you, open an IRS criminal investigation and prosecute you with the full might of the federal Department of Justice, you can opt to pay a reduced fine and back taxes and in exchange, the government will agree to not criminally prosecute you. Sounds easy, right? Wrong. The OVDP can be a trap for taxpayers without sophisticated tax law counsel. Further, if the IRS or DOJ comes across incriminating evidence to use against you and begins investigating before you apply to be a part of the Program, you are disqualified from participating. Only a seasoned FBAR Tax Attorney can provide the necessary advice and be a top-notch legal advocate in your corner in your fight against the IRS.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience helping taxpayers navigate through the tricky waters of the OVDP and many other complicated and downright scary tax matters. When your livelihood is on the line, playing hide and seek with the government you will lose nine times out of ten. Contact the Tax Law Offices of David W. Klasing today at (800) 681-1295 for a reduced-rate consultation.