Offshore Bank Account Problems

FBARs and More FBARs

May 11, 2010 | by Dennis N. Brager

I just returned from an ABA meeting of tax lawyers in Washington, D.C. It seemed like all of the tax attorneys (or at least the tax litigation attorneys) could find nothing to talk about, but Foreign Bank Account Reports, i.e. TDF 90-22.1 (FBARs),voluntary disclosures, and offshore bank accounts. Over a period of two days I spend at least 8 hours in formal meetings with other tax lawyers talking about FBARs, and more hours over drinks and food talking about FBARs. The main theme was that the rules surrounding tax amnesty are being enforced more harshly than many tax attorneys had hoped would be the case. A few highlights of what I heard, the good, the bad, and the ugly:

• 225 revenue agents have been assigned to conduct civil tax audits in voluntary disclosure of offshore bank account cases

• IDRs (Information Document Requests) can be expected in most offshore bank account cases within the next few weeks

UBS FBAR Indictment Illustrates Tax Problems Exacerbated by Lack of Attorney Client Privilege

May 3, 2010 | by Dennis N. Brager

Disbarred New York attorney Kenneth Heller was among 7 UBS clients charged a few weeks ago with failing to file Foreign Bank Account Reports, TDF 90.22-1 (FBARs), and tax evasion as a result of failing to report his Swiss bank accounts to the IRS. The case would be just one more in a string of FBAR and tax fraud criminal tax cases, but something in the complaint caught my eye. Some of the records that the IRS Criminal Investigation Division used to prepare its tax fraud case against Heller were obtained from Heller’s tax preparer-both documents and through an interview of the tax preparer. The records included instructions to the tax preparer to go to Switzerland to review the offshore bank account records. There was also a letter from the tax preparer to Heller reminding him that he had to report the income from the Swiss bank accounts.

This illustrates a vital point that as a tax controversy lawyer I remind clients about all the time. In a criminal tax case many times the first witness is the client’s tax preparer. There is no accountant client privilege in a criminal tax fraud case! Had these communications been between Heller and his tax attorney it is likely that the attorney-client privilege would have shielded them from IRS . While the IRS might have been able to bring a tax evasion case without the tax preparer the statements by the tax preparer will no doubt be extremely damaging.

If you have a tax problem including unreported offshore financial accounts contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

HSBC Offshore Bank Account Holders Indicted

April 23, 2010 | by Dennis N. Brager

Last week I blogged about 7 UBS clients with Swiss bank accounts who were indicted by the Department of Justice for a variety of criminal tax offenses including failure to file Foreign Bank Account Reports (FBARs) and tax evasion. On the same day, Mauricio and Leon Cohen, father and son real estate developers were also arrested in New York. (Proving the old adage that the family that commits tax fraud together stays together) .The government alleged the two evaded taxes and failed to account for $45 million.

The difference is, these two were not clients of UBS, but instead had offshore financial accounts with HSBC, Europe’s largest bank, according to a source with knowledge of the case. This could signal the shift that many tax attorneys have suspected was coming. Up until now all the FBAR indictments had been of UBS clients, but there are U.S. citizens with unreported offshore accounts all over the world. I fully expect the IRS to go after other Swiss banks, and then expand to other countries. The IRS is currently sifting through all of the information they received as part of last year’s tax amnesty program for offshore account holders, looking for patterns that implicate other offshore banks and financial institutions. It’s only a matter of time before there are more tax evasion prosecutions of offshore bank account owners at a variety of financial institutions.

If you would like information about whether or not making a voluntary disclosure of your offshore bank account is a wise choice, contact the tax attorneys at Brager Tax Law Group, A P.C.

Seven UBS Clients Charged with Hiding over $100 Million in Secret Swiss Bank Accounts

April 16, 2010 | by Dennis N. Brager

The FBAR indictments just keep coming. The Department of Justice announced April 15th the filing of charges against seven individuals who collectively hid more than $100 million from the IRS by using sham companies to conceal their ownership of secret Swiss bank accounts held at UBS AG.

The defendants are variously charged with conspiracy, tax fraud, criminal tax offenses, and/or willful failure to file a Foreign Bank Account Report, Form TDF 90-22.1 (FBAR). Those defendants charged with willful failure to file FBARs may be subject to a civil penalty of up to 50 percent of the value of the accounts for each year the accounts were not disclosed.

Two defendants, Jules Robbins and Federico Hernandez, pleaded guilty to separate criminal charges and agreed to pay civil penalties of $20.8 million and $4.4 million, respectively.

UBS Swiss Bank Account Owner Pleads Guilty to Failure to File Foreign Bank Account Reports (FBARs)

April 15, 2010 | by Dennis N. Brager

Former UBS Swiss bank account owner Harry Abrahamsen, a New Jersey resident, became the third former UBS client charged this year when he admitted in court that he concealed almost $800,000 in Swiss bank accounts and pleaded guilty to failure to file a Foreign Bank Account Report, Form TDF 90-22. 1 ( FBAR) for the calendar year 2005. Abrahamsen stated that he established an offshore company with the assistance of a Swiss lawyer and Swiss banker in order to hide these offshore financial accounts from the IRS. According to the Justice Department, he funded his accounts with $1.3 million in false and inflated expenses paid by his printing company to a Swiss company.

Abrahamsen faces as long as five years in prison when he returns to court for sentencing on July 27th, along with a fine of $250,000. He also agreed to pay taxes and interest, as well as a 50 percent FBAR civil penalty on the highest balance of his accounts. It is not clear whether he will also have to pay a 75% civil tax fraud penalty. Based upon the amounts disclosed in public documents the taxes and penalties will probably exceed 100% of the amount in his Swiss bank account.

UBS turned over data to the U.S. on Abrahamsen as part of its deferred-prosecution agreement. Had Abrahamsen made a voluntary disclosure to the IRS, it is possible he could have avoided his criminal tax problems.

Another Round of Offshore Bank Account Tax Fraud Cases Begins

April 8, 2010 | by Dennis N. Brager

In a move designed to remind people of their duty to report offshore bank accounts and file Foreign Bank Account Reports (FBARs), federal prosecutors are beginning another wave of UBS tax evasion prosecutions just ahead of the April 15 tax-filing deadline. This newest wave reportedly includes accounts significantly larger than in previous cases. One tax lawyer has been quoted as saying that his client’s Swiss bank account held between $10 and $50 million.

In a separate announcement on Monday, April 5th, IRS Commissioner Doug Shulman said the IRS is still sifting through 15,000 records on foreign bank accounts that it received from individuals who took part in the IRS tax amnesty program. The IRS is looking for patterns in the records to identify other offshore banks and advisors that helped individuals hide funds in foreign financial accounts, and may have committed tax fraud. That area will be “the next wave” of the investigation, according to Shulman. Some tax attorneys have speculated that HSBC and Credit Suisse are the next ones on the IRS hit list.

Although the IRS tax amnesty program for unreported offshore income ended in October, it is not too late to make a voluntary disclosure of your offshore bank accounts, and possibly avoid criminal tax fraud charges. For more information contact the tax attorneys at Brager Tax Law Group, A P.C.

Criminal Tax Problems for HSBC Customer Who Failed to File FBARs

February 22, 2010 | by Dennis N. Brager

In the latest of a string of guilty pleas related to FBAR cases, Dr. Andrew Silva, a Virginia surgeon pled guilty to one count of conspiracy to impede the United States, and to making a false statement. Several interesting points about this tax fraud case.

• Dr. Silva inherited the Swiss bank account from his mother.

• Silva failed to file a Report of Foreign Bank Account, Form TDF 90-22.1 (FBAR), but was charged with other crimes instead.

UBS Offshore Account Owner Wins Case Against Internal Revenue Service (IRS)

January 22, 2010 | by Dennis N. Brager

The owner of a UBS offshore account has won a lawsuit in the Swiss Administrative Court barring UBS from turning over her name to the Internal Revenue (IRS). The reasoning of the Court was that the only evidence of tax fraud was the failure to submit IRS Form W-9, and this by itself was not sufficient to establish tax fraud, or the like which is a precondition to supplying information to the IRS under the terms of the Swiss Tax Treaty. The Swiss Government has indicated that it will respond to the decision on Jan. 27th.

This leaves the question of how will other UBS offshore account holders, and owners of other Swiss bank accounts at other banks will be impacted. Those individuals who have already made voluntary disclosures to the IRS are not impacted. They have already committed to going forward, and there is no good way to unring that bell.

I expect there will be a good deal of buyer remorse among holders of offshore financial accounts who already entered the voluntary disclosure program. To those I would point out several things. First, everyone’s situation is different. The fact that the failure to provide a Form W-9 is not by itself tax fraud or the like, doesn’t mean that there might be other facts in your case which would constitute tax fraud. Second, in order to dispute the decision of the Swiss Federal Tax Administration (FTA) to turn over bank records would have required the filing of an action in Switzerland. Doing so would trigger the provisions of U.S. law requiring someone who files such an action to serve a copy of the pleadings on the U.S. Attorney General. The failure to do so would be a criminal offense. The lead prosecutor on FBAR (Foreign Bank Account Report) cases stated last year that the IRS intended to prosecute anyone who failed to follow that law.

IRS Issues Fact Sheet on Filing Foreign Bank Account Reports (FBARs)

January 13, 2010 | by Dennis N. Brager

The IRS has issued a fact sheet on filing Form 90-22.1, Report of Foreign Bank and Financial Accounts (FBARs) to start the New Year. The FBAR fact sheet adds nothing to the sum of our knowledge on FBARs simply stating the obvious. For example, it states:

If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund or other type of financial account, you may be required to report the account yearly to the Department of the Treasury. Under the Bank Secrecy Act, each United States person must file a Form TD F 90-22.1, Report of Foreign Bank and financial Accounts (FBAR), if:

• The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Swiss Court Finds Certain UBS Disclosures of Offshore Accounts Illegal

January 13, 2010 | by Dennis N. Brager

The Swiss Federal Administrative Court ruled that the order to UBS by the Swiss Financial Market Supervisory Authority (FINMA) to turn over the names of 250 United States UBS customers accused of committing tax fraud or tax evasion was illegal. The decision may be appealed to the Swiss Supreme Court. You will remember that early last year UBS turned over the names of 250 of its U.S. customers with offshore accounts; the IRS Criminal Investigation Division (CI) reportedly began investigations of about 150 of those persons for potential tax evasion, and failure to file Foreign Bank Account Reports (FBARs). Several of those persons already have pled guilty to criminal tax charges.

If the decision is upheld many U.S. persons will no doubt argue that any prosecution of them on the basis of evidence provided illegally is tainted. Whether that argument will fly remains to be seen. For a copy of the court’s decision (in German) click here: Download file 1 Download file 2 Download file 3 Download file 4 Download file 5 Download file 6

Swiss tax attorneys have been quoted as saying that the court’s order will have no effect on those 4,450 names being turned over pursuant to the agreement entered into between UBS, and the IRS last August.