Tax Problem Attorney Blog

Deportation for Tax Fraud and Other Tax Crimes

February 11, 2010 | by Dennis N. Brager

Filing a false tax return in violation of Internal Revenue Code (IRC) Section 7206 can result in deportation of a resident alien, i.e. a green card holder, according to the 9th Circuit Court of Appeals. Kawashima v. Holder (9th Cir. 2010). In a long running case Mr. Kawashima pled guilty to subscribing to a false tax return in violation of IRC Section 7206(1). His wife pled guilty to aiding and assisting in the filing of a false tax return in violation of IRC Section 7206(2).

Generally green card holders can be deported for committing an “aggravated felony.” Tax fraud or tax evasion in violation of IRC section 7201 is specifically defined by the immigration laws as an aggravated felony. Aggravated felonies also include any offence that involves fraud or deceit which exceed a loss to the victim of more than $10,000. The Kawashimas argued that since tax fraud was specifically defined as an aggravated felony Congress meant to exclude all other tax crimes including filing a false tax return. The 9th Circuit disagreed, holding that under the plain language of the statute not only was tax evasion a removable offense, but so was filing a false tax return.

This is just another reminder that the collateral consequences of a criminal tax conviction can reach far beyond the potential prison time.

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.

Taxpayer Advocate Reports Tax Liens as Serious Tax Problem

January 20, 2010 | by Dennis N. Brager

The Internal Revenue’s (IRS ) tax lien filing polices were in the Taxpayer Advocate’s 2009 Report to Congress listed as the second most serious tax problem facing taxpayers today. This is not a big surprise to those tax lawyers who deal with IRS tax collection problems on a regular basis. I often tell clients that the most difficult objective is to try and get the IRS to release a tax lien prior to making full payment of a delinquent tax liability.

The Taxpayer Advocate’s Report details how the IRS files tax liens without regard to whether or not the taxpayer has assets, and despite the fact that in many instances the filing of a tax lien does not protect the IRS, and only exacerbates the taxpayer’s inability to pay. The Report also points out that the Internal Revenue Manual puts obstacles in the path of their employees who decide not to file a tax lien— requiring managerial approval, and documentation of any decision not to file a tax lien.

One would only hope that the IRS tax Collection Division takes serious note of the criticisms by the Taxpayer Advocate, and that it not continue to file tax liens as method of punishing taxpayers; however, the IRS responses to the Report make clear that Congressional action will be necessary for any significant tax lien relief.

California Income Tax Evasion Charged

January 20, 2010 | by Dennis N. Brager

The California Franchise Tax Board (FTB) has arrested an individual for felony income tax evasion. According to the FTB Phillip Leech was the CFO of In & Out Desighns, Inc. which allegedly earned more than $1.3 million over a three year period, but didn’t file corporate income tax returns. There are a couple of interesting things about this tax fraud case. One is that Leech was apparently not the owner of the corporation; nevertheless because he was the CEO and CFO the FTB pointed out that he had a duty to file the income tax returns, and was charged with tax evasion. The amount of tax alleged to be owed by the corporation was not huge, $122,000, but the FTB still brought a criminal tax fraud case.

Another interesting point is that the criminal tax fraud case was brought only after the FTB issued notices to the corporation requesting tax returns. Sounds like Mr. Leech should have paid more attention to his mail!

If you have a tax problem with the California Franchise Tax Board, the Internal Revenue Service, or another California tax agency call the tax litigation lawyers at Brager Tax Law Group, A P.C.

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.

Offshore Tax Havens, Tax Fraud and Senator Carl Levin

October 5, 2009 | by Dennis N. Brager

I lifted my nose up from filingtax amnesty under the here. A few highlights are worth repeating:

• Liechtenstein and Switzerland have reversed decades of resistance and agreed to enter into Tax Information Exchange Agreements in line with the model agreement developed by the Organization for Economic Cooperation and Development (OECD). Both countries have already initialed such agreements with the United States and other countries.

• G-20 leaders signaled a new willingness to take action against uncooperative tax havens, the changes made by Liechtenstein and Switzerland set off a chain reaction in other bank-secrecy nations. Places like Luxembourg, Austria, Andorra, Monaco, and others also pledged for the first time to share tax information and cooperate with international tax enforcement

IRS FBAR Tax Amnesty is a Good Gamble (Part II)

October 1, 2009 | by Dennis N. Brager

Yesterday I started a blog post subtitled Why 70% of a Foreign Bank Account Is Better Than 100% of No Foreign Bank Account. It included three reasons why, if you have offshore financial accounts, filing for tax amnesty by the Oct. 15th may be a good idea. It doesn’t matter if your offshore bank account is at UBS, or some other foreign financial institution. Today I have listed three more reasons:

1. Legally “Launder” Your Offshore Funds.

If your money is an offshore financial account it is difficult to spend in the United States. Banks keep copies of offshore wire transfers, and are required to report suspicious transactions to the Internal Revenue Service (IRS). If you bring cash back to the United States in excess of $10,000 you must declare it. Over the years people have come up with many methods of bringing the money back to the U.S., including credit cards tied to their offshore bank accounts—some have gone to jail. Any actions to hide the existence of the foreign bank accounts, e.g. moving them one from one country to another, or investing the funds in offshore real estate to avoid the reporting requirements could be construed as money laundering subjecting you to further criminal penalties.

IRS FBAR Tax Amnesty is a Good Gamble

September 30, 2009 | by Dennis N. Brager

Why 70% of a Foreign Bank Account Is Better Than 100% of No Foreign Bank Account (Part I)

Clients sometimes ask why they should take advantage of the IRS Offshore Voluntary Disclosure Program. In it’s frequently asked questions regarding offshore financial accounts the IRS provided an example of what could happen to someone with a foreign bank account of $1million in 2003 that earns $50,000 per year who hasn’t filed Foreign Bank Account Reports, TD F 90-22.1 (FBAR). That person could, if they didn’t apply for tax amnesty, could incur taxes, penalties and interest of well in excess of $2.3 million. If the IRS determined that the non-reporting was due to tax fraud, the amount would be much higher. Under the tax amnesty, the amount due would be $386,000 plus interest. Nevertheless some people don’t want to file for tax amnesty. If the IRS example doesn’t convince you here are six more reasons.

1. Avoid Going to Jail

Tax Amnesty Offshore Voluntary Disclosure FBAR Deadline Extended

September 21, 2009 | by Dennis N. Brager

The IRS announced that the Offshore Voluntary Disclosure program granting tax amnesty to those who failed to file Foreign Bank Account Reports, Form TD-F 90-22.1 (FBAR) has been extended. The new deadline for filing a request to participate in the Offshore Voluntary Disclosure program is Oct. 15th. The prior deadline for participating in the Offshore Voluntary Disclosure program was Sept. 23rd.

The IRS had previous announced in March of this year that individuals and entities who had an interest in offshore bank accounts, and who had failed to file FBARs who voluntarily came forward, and notified the IRS of the existence of their offshore financial accounts would qualify for a reduced penalty regime. Normally the penalty for failing to file an FBAR on Form TD-F 90-22.1 can result in a penalty equal to the greater of $100,000 or 50% of the balance in the offshore account. In addition, non-filers of FBARs could be subject to criminal tax penalties, as well as a civil tax fraud penalty of 75% of any taxes that were owed. For more details on potential penalties please review our earlier post.

The IRS has said it extended the deadline in response to the requests of numerous tax attorneys and other tax professionals who requested additional time. The IRS stated that there would be no further extensions of the deadline for the Offshore Voluntary Disclosure program.