Tax Problem Attorney Blog

“Little Fockers” Star has Tax Liens for $433K in Back Taxes to IRS, State of California Franchise Tax Board

March 23, 2011 | by Dennis N. Brager

The Detroit News is reporting that Hollywood actress Teri Polo, perhaps best known for playing alongside Robert De Niro and Ben Stiller in “Meet the Parents,” has a tax lien for $433,736.

The former Playboy pinup landed the role after a string of TV show appearances, including “The West Wing.” She is also appearing in “Little Fockers,” which is in theaters this year.

-The Internal Revenue Service filed a tax lien against Polo in August in Kent County Delaware in August 2009, claiming she owes $114,843.95 in income taxes from 2007.

California claims she owes $91,748 for taxes in 2005 and 2006, according to a tax lien filed in Los Angeles County in 2008.

-A second IRS tax lien in Delaware also claims she owes $227,144.48 in back taxes for 2005 and 2006.

Polo blames her tax problems on a costly divorce and being unable to work while raising two young children. She reportedly has reached a deal with the IRS to repay the tax debt.
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Failure to File FBARs for Swiss Bank Account Costs Defendant $500,000, possible 3 Years in Prison

March 21, 2011 | by Dennis N. Brager

A 45-year-old Ohio man has pleaded guilty to filing false personal income tax returns after admitting to having nearly $1 million in an undeclared offshore bank account, the U.S. Department of Justice reported.

Tax attorneys are being called to handle such cases with increasing frequency. As we report frequently on our Tax Problem Attorney Blog, the Offshore Voluntary Disclosure Initiative gives taxpayers a chance to avoid criminal prosecution for failing to file FBARs (Foreign Bank Account Reports) by self-reporting and paying interest and penalties.

Over the last several years, the government has significantly ramped up enforcement against U.S. taxpayers who use Swiss bank accounts or other overseas accounts.

In this case, Edward Gurary pleaded guilty before U.S. District Judge Dan Polster in Cleveland to charges of filing false personal income tax returns from 2004 to 2008. Court documents indicate Gurary has lived in Switzerland since 2010 but was residing in Orange Village, Ohio during the years relevant to the prosecution. Gurary admitted to owning a UBS AG account in the name of a Bahamian entity, named Demko Ltd., which carried a balance ranging from $490,000 to $947,000.

The Internal Revenue Service alleged unpaid taxes ranged from $3,400 to more than $21,000 per year. This is generally below the threshold that many tax attorneys believed would trigger a criminal tax prosecution.

As part of the plea, Gurary also admitted that he falsely indicated on his Schedule B that he did not have authority over any foreign financial accounts. In addition to the UBS account in Switzerland, the defendant also had significant assets at Credit Suisse AG.

An FBAR form is required to be filed with the IRS each June on any financial accounts that have exceeded $10,000 in the reporting year, and over which the reporter has signature control or ownership.

Gurary agreed to pay a 50 percent penalty of the highest aggregate amount in the two accounts between 2002 and 2007. He tendered a check to the government for $300,000 at the sentencing hearing and has agreed to surrender a $200,000 cash bond at sentencing.

He will face a sentence of up to three years in prison and a $250,000 fine at his June 1 sentencing.
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Wesley Snipes to Serve 3 Years for Failure to File Tax Returns

March 15, 2011 | by Dennis N. Brager

CNN reports Hollywood actor Wesley Snipes is off to serve a three-year prison sentence for failing to file tax returns.

While simple non-filing of tax returns doesn’t often result in criminal tax fraud charges being brought, in some cases, it may require being proactive, and consulting an experienced tax lawyer to prevent a tax problem from getting worse.

Prosecutors alleged Snipes has earned $40 million since 1999 but filed no returns because of his involvement with a tax resisters group. Snipes denied membership in such a group and blamed his tax problems on an adviser. Jurors believed his contention that advisers were at fault when they acquitted him of more serious felony tax fraud and conspiracy charges. Still three years in jail can hardly be considered a vindication.

The New York Times reported the star of “Blade” and “White Men Can’t Jump” will serve the sentence at a federal prison in Pennsylvania.
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Hotel Developers Charged with Tax Evasion Involving Swiss Bank Accounts

March 14, 2011 | by Dennis N. Brager

A father and son team of Miami hotel developers have been sentenced to 10 years in prison after being convicted of conspiracy and filing false tax returns; the government alleges they tried to conceal more than $150 million in assets in offshore bank accounts, according to the U.S. Department of Justice.

Most of the allegations in this case stem from the sale of a New York hotel in 2000, which generated $33 million. They probably didn’t need a tax attorney to tell them that putting unreported income in an offshore bank account was illegal.

Mauricio Cohen Assor, 77, and son, Leon Cohen-Levy, 46, of Miami Beach, FL, were arrested on Tax Day, April 15, 2010. Cohen Assor has been ordered to pay $9.3 million in restitution, while Cohen-Levy has been ordered to pay more than $7.7 million.

The Internal Revenue Service accused them of concealing more than $150 million in assets, including mansions, yachts, luxury cars and bank accounts. Together, they failed to report more than $49 million in income to the IRS.

“American taxpayers who seek anonymity and shelter behind foreign bank accounts in tax haven jurisdictions are simply running out of places to hide,” said U.S. Attorney for the District of South Florida Wifredo A. Ferrer. “Those who evade their income tax obligations will be found and will be held accountable for their actions.”

The case is another illustration of why taxpayers may want to take advantage of the Internal Revenue Service’s Offshore Voluntary Disclosure Initiative, which permits citizens to avoid criminal prosecution by voluntarily reporting offshore bank accounts and paying interest and penalties. The IRS requires Foreign Bank Account Reports (FBARs) be filed each year, which disclose bank accounts that have a value of more than $10,000 at any point during the reporting year.

The two men were convicted of using shell companies and offshore tax havens in multiple jurisdictions, including the Bahamas, the British Virgin Islands, Panama, Liechtenstein and Switzerland. They are also accused of using shell companies to hide ownership of luxury homes and vehicles, file false tax returns, failing to file tax returns, and inducing witnesses to testify falsely under oath.

Cohen Assor and Cohen-Levy were the developers and owners of several hotels under the trade name Flatotel International, which had locations in France, Spain, Brussels and New York. About $33 million in proceeds from the sale of a New York hotel was transferred to HSBC in Switzerland and the income on the sale was never reported to U.S. authorities.
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Southern California IRS Revenue Agent Pleads Guilty to Tax Fraud

March 14, 2011 | by Dennis N. Brager

An IRS revenue agent has pleaded guilty to filing false tax returns, according to a report in the Los Angeles Times.

The 51-year-old defendant pleaded guilty to filing false returns for himself, as well as a number of relatives. In some cases, he admitted to filing returns for relatives without their knowledge and keeping the returns he received.

In this case, the defendant, who was employed as a revenue agent for the Internal Revenue Service, filed false returns from 2003 to 2007, which claimed excessive deductions and failed to report some income. He worked as a revenue agent in Southern California until being placed on leave following his arrest in 2009.

He has agreed to pay $127,000 in restitution to the government and faces up to 9 years in federal prison at his sentencing, which is scheduled before a federal judge in Los Angeles on April 13.

He had been charged with threatening to harm agents who served a search warrant on his Santa Clarita home in 2009. However, those charges were dropped as part of the plea agreement.
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Payroll Tax Problems Cannot be Solved by Payment after Criminal Tax Charges Filed

March 9, 2011 | by Dennis N. Brager

A Kansas woman will still face federal criminal tax charges for failure to pay payroll taxes after a federal court ruled the charges should not be dismissed simply because the taxes have since been paid.

As tax litigation attorneys we frequently hear from clients who have been contacted by the IRS criminal investigation division. Their first reaction is, “I will get the taxes paid can you get the IRS to drop the charges?” Unfortunately at that point simply paying the taxes will rarely solve the problem by itself. Payroll taxes cases usually turn criminal because the tax problem has been ignored for far too long.

In this case, the employer was charged with seven counts of failing to pay over trust fund taxes (income taxes and FICA), which had been withheld from employees’ pay. The tax violations allegedly occurred between 2003 and 2005. She submitted evidence in 2010 that she had turned over to the Internal Revenue Service all unpaid taxes. She argued the charges should be dismissed since the taxes had been paid.

The government argued payment did not “cure” her of the violations or immunize her from prosecution. It was a novel legal question not addressed in case law. Section 7202 of U.S. tax law states: “Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall . . . be guilty of a felony. . . .”

The defendant noted the law makes no reference to a “due date” or other time frame. Section 7203 does make reference to a time frame when it states “at the time or times required by law or regulations.”

The court ruled that the statute’s wording “failure to pay over” necessarily encompasses late payments by any common sense standard. Additionally, the court ruled the defendant’s interpretation of the law would make it the only area of criminal law in which a crime could be undone at any time until conviction.

The defendant was also charged with two counts of failure to pay individual income taxes, which were not addressed in the court decision.
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Swiss Bankers Face Indictment over Alleged Criminal Tax Evasion Involving Offshore Accounts

March 5, 2011 | by Dennis N. Brager

Four Swiss bankers have been charged with conspiracy to defraud the United States of income tax revenue, according to an indictment unsealed in the United States District Court in Virginia. The bankers are accused of helping high net worth clients hide undeclared Swiss bank accounts.

U.S. citizens with $10,000 or more in foreign accounts are required to file with the Department of Treasury a Report of Foreign Bank and Financial Accounts, or FBAR. Tax litigation attorneys are frequently being called to defend clients against charges of tax evasion since the government launched its Offshore Voluntary Disclosure Program (OVDP) in 2009. The OVDP has since been replaced with the Offshore Voluntary Disclosure Initiative (OVDI). OVDI permits U.S. taxpayers to avoid criminal prosecution by declaring overseas accounts and paying tax on unreported income together with a 25 percent penalty.

The indictments alleges that International Bank operates as one of the biggest banks in Switzerland and is one of the largest managers of wealth in the world. As part of its business, it provided international bank accounts to U.S. customers. In doing so, authorities allege that the bank’s managers and employees knew or should have known that they were aiding and abetting U.S. income tax evasion. All totaled, the bank maintains thousands of undeclared accounts containing about $3 billion in assets.

The indictment also alleges that the bank did not register as a broker-dealer with the Securities and Exchange Commission, as required by U.S. law. In 2001, the bank allegedly agreed to cooperate with the Internal Revenue Service in verifying the identity, citizenship and residency of clients through IRS Forms W-8BEN and W-9 forms.

Several other Swiss banks are also accused in the indictment. By failing to have clients fill out the proper paperwork, the government alleges the bankers were complicit in assisting clients to evade U.S. tax obligations.

In one case, a banker is accused of helping a Palm Beach, Florida customer make investment decisions regarding an undeclared overseas bank account during meetings at a New York hotel. The account statements were also mailed to the address of an overseas residence, rather than to the client’s primary U.S. residents. Meanwhile, the client is accused of filing tax returns in 2005 that did not declare the account or its related income. When the account was closed in 2008, the banker allegedly recommended moving the funds to an Israeli bank or a bank in Hong Kong in order to continue to evade the U.S. tax obligation.
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FBAR Tax Amnesty— The Next Generation

February 8, 2011 | by Dennis N. Brager

On Tuesday the IRS announced a new tax amnesty for owners of foreign bank accounts who failed to file FBARs (Foreign Bank Account Reports). The new voluntary disclosure program is known as the Offshore Voluntary Disclosure Initiative (OVDI). The IRS has issued its FAQ for the Offshore Voluntary Disclosure Initiative consisting of 53 questions and answers. Our tax attorneys will be reporting on the details in the coming days and weeks, but for now here are the high points for those foreign bank account holders who have not yet come out of the cold.
• No criminal prosecution.
• Civil FBAR penalty of 25% of the highest account balance during the 8 year period from 2003 to 2010.
• A reduced penalty of 12.5% is available for those accounts which did not exceed $75,000 at any time from 2003 to 2010.
• A reduced penalty of 5% is available for certain inherited accounts • Amended tax returns must be filed, and tax paid with interest for 2003 to 2010 • An “accuracy related penalty” of 20% pursuant to IRC Section 6662 for unpaid tax for the years 2003 to 2010.
• Late filing and/or late payment penalties under IRC Section 6651(a)(1) and 6651(a)(2) in certain cases.
• All documents must be filed with the IRS by Aug. 31, 2010.
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Offshore Tax Fraud Scheme Fabricated Stock Losses to Offset Gains

February 2, 2011 | by Dennis N. Brager

Two former executives of an investment firm were sentenced to more than 4 months in prison after authorities convicted them of a tax fraud scam that fabricated stock losses in order to help wealthy clients avoid taxes.

The U.S. Attorney’s Office for the Western District of Washington reports the firm utilized offshore bank accounts to carry out the scheme.

As our tax attorneys frequently report on our Tax Problem Attorney Blog, the government’s crackdown on offshore bank accounts continues to result in federal tax evasion charges throughout the United States.

In this case the executives were charged with conspiracy to defraud the United States and aiding and assisting with the filing of a false tax return.

Both men also paid the Internal Revenue Service $7 million in penalties.

The case involved a tax shelter the men dubbed POINT (Portfolio Optimized Investment Transaction), which resulted in an estimated tax loss to the government of $250 million.

“Today the individuals responsible for developing and selling a fraudulent tax shelter scheme have been held accountable for their actions. Their tax strategies were no more than a web of lies and false representations,” said Victor S.O. Song, Chief, IRS Criminal Investigation. “As the tax filing season gets underway, honest taxpayers can be assured that the IRS, in partnership with the Department of Justice, will investigate and prosecute those who promote such bogus schemes. Also, it is worth noting that none of the investors benefited from this fraudulent scheme because the IRS collected the correct tax from those who invested in it.”

The government continues to become more aggressive in investigating and prosecuting alleged tax violators — particularly when the case involves offshore bank accounts. Seeking the advice of a qualified tax lawyer is always the best course of action to protect your rights, your freedom and the future financial well-being of you and your family.

Prosecutors had requested six years in prison, saying the defendants made “a mockery of the entire tax system,” by fabricating stock losses to offset gains for very wealthy individuals. The government contends the scheme was carried out from 1999 to 2006.

Puget Sound Business Journal report is available here.
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Prominent Civil Rights Lawyer Disbarred after being Convicted of Tax Evasion, Bankruptcy Fraud & Money Laundering

February 1, 2011 | by Dennis N. Brager

A controversial Southern California civil rights attorney has been disbarred after being convicted on federal charges of tax evasion, bankruptcy fraud and money laundering, according to the California Bar Journal.

Stephen G. Yagman, 66, had been suspended from the practice of law since August 2007, when he was convicted of one count each of tax evasion and bankruptcy fraud and 17 counts of money laundering.

He was convicted of attempting to avoid paying more than $100,000 in federal taxes and sentenced to three years in federal prison. He also faces two years of supervised release after completing his prison sentence. Prosecutors had requested nine years behind bars. A tax attorney should be consulted as early as possible in such cases.

The government alleged that Yagman hid money and transferred his Venice Beach home into his girlfriend’s name before declaring bankruptcy. He is also accused of incurring federal tax liabilities totaling more than $158,000 from 1994 to 1997, when he paid far less than what was owed, according to his own tax returns.

Prosecutors say he also failed to pay federal payroll taxes owed by his law firm, Yagman & Yagman, P.C. They say he hid more than $776,000 in various accounts and made numerous misrepresentations when he filed for both personal and corporate bankruptcy in 1999.

Yagman claimed he was targeted because of the numerous civil rights battles he had with the federal government. In 2002, he was part of a group that filed challenges to the detention of suspects at Guantanamo Bay. In the 1990s he pursued charges in connection with the case of Randy Weaver and the Ruby Ridge shooting. He often targeted the LAPD with allegations of police brutality and civil rights violations.
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