IRS laws related to the disclosure of foreign bank accounts by U.S. citizens can be complex. Sometimes, people with such accounts can make unintentional mistakes when filing returns or fail to file when they know they are supposed to do so. The IRS has created a process known as “streamlined voluntary disclosure” where those who make unintentional mistakes in reporting foreign accounts can make the proper disclosures without facing major fines and penalties. However, a condition of this is that you must certify that your past misconduct was not willful under penalty of perjury. Below, our experienced tax lawyers at the Tax Law Offices of David W. Klasing discuss a recent case showing how seriously the IRS prosecutes those who lie about the willfulness of their conduct.
Note: Tax Practitioners must counter-sign the client’s statement of non-willfulness and can also be criminally prosecuted for assisting known false statements.
If you have interest in, or are a signatory over, one or more financial accounts in a foreign country with an aggregate value of more than $10,000 at any time in the previous year, you are required to file with the IRS what is knows as a “Report of Foreign Bank and Financial Accounts,” or FBAR. Some of the information you are required to provide on an FBAR includes the name of the financial institution at which the account was held, the account number, and the maximum value of the account during the calendar year.
Failing to comply with your reporting duties under FBAR can result in serious penalties including fines up to the greater of the following: $129,210 or 50% of the amount in the account for each account in violation. You could also face criminal penalties, including the possibility of up to 5 years in prison and fines of up to $200,000.
If you knew about your FBAR reporting requirements and chose not to report anyway, that would be considered a willful violation of the law. However, some violations are non-willful. A taxpayer might have been genuinely unaware of these requirements and only failed to make the required reports because of this ignorance. For these non-willful violators, the IRS has created the streamlined disclosure process.
In order to qualify for streamlined disclosure, you must submit a narrative, certified under penalty of perjury, that details the origin and background of the foreign account, including favorable and unfavorable facts, the source of the funds, and the taxpayer’s contact with the account at issue. The taxpayer must then certify that the conduct was unwilful. If the taxpayer submits amended returns and FBARs disclosing the foreign accounts, they will only have to pay a significantly lower civil penalty of 5% of the highest year-end balance of accounts and assets that should have been reported on FBAR. They will not face potential criminal penalties.
Brian Nelson Booker was a Florida resident until 2016. He operated several companies based in South American countries and had foreign bank and investment accounts all over the world. From 2008-2014, he failed to file required FBAR reports with the government for bank accounts in Switzerland and Panama, including some worth upwards of $9,000,000. He later filed amended FBAR reports for these years under the streamlined disclosure program, claiming that his actions were not willful.
The government did not believe this to be the case. They noted that Booker was a certified public accountant (CPA) whose training should have given him a heightened awareness of the reporting requirements. They also noted that Booker had reported some of his foreign bank accounts in Venezuela and elsewhere that had less money in them than the larger accounts he failed to report. Finally, they noted that the originally undisclosed accounts were held in the bank secrecy havens of Switzerland and Panama.
As a result of his alleged false claims of non-willfulness, Booker was charged in an indictment with multiple criminal counts. The first three counts were for filing false reports of foreign bank and financial accounts, with each count carrying a potential sentence of up to 5 years in prison. The next four counts were for filing false statements with the IRS, with each count carrying a potential sentence of up to 3 years in prison. These charges stemmed specifically from Booker’s allegedly false claims of non-willfulness in his application for the streamlined disclosure program.
As you can see from the Booker case, the government is taking seriously the cases of those whose actions were willful but who try to make claims of non-willfulness in order to get access to the benefits of the streamlined disclosure program. If you are found to have made false statements of non-willfulness, you could face many years in jail. This is why it is vital to contact an experienced tax attorney like those at the Law Offices of David W. Klasing before filing for the streamlined disclosure program. We can take an honest look at your narrative and the actual facts and circumstances underlying your case and help you determine whether your failure to file actually qualifies as non-willful so that you do not end up in trouble down the line. Contact us today at (800) 681-1295.
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!
See our Non-Filer Q and A Library
See our 2011 OVDI Q and A Library
See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library
Note: It is imperative to understand that the IRS has come up with alternate theories of (willfulness, like willful blindness) in the FBAR arena that are not intuitive or well known.
Note: If you are already under FBAR audit or criminal tax investigation over foreign accounts and unreported foreign sources of taxable income you need to hire competent international criminal tax defense counsel! You DO NOT qualify for any of the programs designed to bring you into compliance and are facing an eggshell audit at a minimum.
Here is a link to our YouTube channel: click here!
Regardless of your particular business 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.
Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client.