New information revealed by The Economic Times indicates that Falciani turned over records of 24,000 HSBC clients with unreported foreign accounts in HSBC’s Swiss banking unit. If that information isn’t bad enough for those who failed to repot those accounts, we now have learned that France’s finance minister turned over those names to the IRS.

Willfully failing to report a foreign account is a crime in the United States punishable by up to 5 years in prison. In certain cases, taxpayers can also be prosecuted for tax evasion, particularly if the interest generated by those accounts wasn’t taxed or the account was used to hide unreported income. Unreported offshore brokerage accounts, hedge funds, CD’s and other financial products can also give rise to a tax evasion prosecution.

We have long warned that the world gets smaller each day. The ability to hide money from the IRS is getting more difficult. And with huge civil penalties and the possibility of a tax evasion convictions, the risks just aren’t worth the reward.

Although the IRS has not resorted to purchasing stolen bank records, as the Falciani case reveals, Uncle Sam will still accept the information if offered by another country.

If you have an unreported foreign account, there are methods to come into compliance.

For many people, the easiest method is the IRS’ Offshore Voluntary Disclosure Program, sometimes called “OVDI.”  This program is a true amnesty program that provides for a single year 27.5% penalty, no audit and a get out of jail free card. For taxpayers who intentionally or knowingly failed to report their offshore accounts, OVDI is extremely attractive.

Other programs exist for those with smaller balances and for American ex pats living overseas. For those who believe they can prove that their actions were innocent, a voluntary disclosure may be the best bet. There are no guaranties with voluntary disclosures, however, meaning a tax evasion prosecution is a real possibility if the government believes the failure to report was deliberate.

Tax evasion is a serious crime. If you are under investigation for failure to report a foreign account or other tax problems, seek the assistance of an experienced criminal tax lawyer immediately. Filing missing returns or speaking to the IRS without a lawyer present may jeopardize your case and your freedom.

For more information about tax evasion and other criminal tax cases, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence. Whether you hire or us or not, we will gladly discuss your options at no cost and without obligation.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic in the search bar. We have posted hundreds of informative articles on our site.

The post Update on HSBC Tax Evasion Post – France Provided 24,000 Names To IRS appeared first on Due Diligence.

4 weeks ago we wrote a post about an internal IRS search warrant manual that said agents did not need to obtain a search warrant in order to read a taxpayer’s email. This was especially troubling since a federal court of appeals ruled in 2010 that emails shared the same expectation of privacy as regular mail. The court ruled that the IRS’ policy of getting emails from Internet Service Providers without permission and without a court order violated the 4th Amendment.

That should have been the end of the story but the ACLU and CNET released evidence last month that the IRS was not following the law. Congress stepped in and is debating amending the Electronic Communications Privacy Act to prohibit the practice. The Justice Department dropped its resistance to the measure.

Facing mounting public and political pressure, the IRS last week released a policy memo saying it would now follow the court’s ruling and require IRS agents to obtain a warrant before snooping through email.

The decision to bow to public pressure and follow the law is a good one. Why the IRS hasn’t followed the law for the last several years is more troubling. Technically, the court’s decision was only binding in certain states but the Service usually follows appellate court decisions everywhere.

If you are facing a criminal tax investigation or have been charged with tax evasion, seek competent criminal tax counsel immediately. The government holds the upper hand with its wide array of investigative techniques and surveillance tools. Getting a great lawyer that focuses on white collar tax cases can level the playing field, however.

The tax attorneys at Mahany & Ertl specialize in a wide variety of criminal tax matters including unreported offshore accounts, tax evasion, FBAR violations, wire fraud and money laundering. For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 223-0464 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many jurisdictions.

Want more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific topics, just click the white collar criminal tab or type in the name of a particular topic such as “tax evasion” in the search bar. We have posted hundreds of informative articles on our site.

The post UPDATE: IRS Promises To Obtain Warrants Before Reading Emails appeared first on Due Diligence.

Opening an account in Israel or any other foreign country is legal. Not filing required FBARs for that account is a crime, however. Guity Kashfi of Los Angeles is learning that lesson the hard way. Prosecutors charged her with conspiracy to defraud the United States, a charge that carries a 5 year prison sentence and a $250,000 fine. She is expected to plead guilty later this spring.

Holders of foreign accounts must report those accounts each year. Offshore bank and brokerage accounts are reported by filing a Report of Foreign Bank and Financial Accounts (FBAR) by each June 30th of the following year. Prosecutors say that Kashfi, a U.S. citizen, moved money in 2008 from Israel to a second Israeli bank, this one located in Luxembourg. The following year she  flew to Europe and was promised by bankers there that her accounts would remain private. In 2011, she repatriated the money to the United States.

The IRS  says that not only did Kashfi fail to file FBARs, they say she also didn’t report $221,000 of interest income during the years the account was overseas. For approximately $70,000 in taxes, Kashfi is facing prison, a huge fine and penalties that could exceed the original $2.5 million account balance. In our opinion, the risk just wasn’t worth it.

In addition to possible criminal sanctions, failing to file an FBAR carries a maximum civil penalty of the greater of $100,000 or 50% of the account balance for each year an account is unreported. In Kashfi’s case, avoiding tax of $10,000 to $20,000 in one year can subject her to a $1,250,000 IRS civil penalty. That’s just for 1 year!

Kashfi obviously believed what we she was being told by her bankers. The IRS, however, has become extremely adept at finding people with unreported accounts. “We will continue to work aggressively to uncover and prosecute those who hide unreported income in secret offshore bank accounts as well as the employees of financial institutions and the financial institutions themselves who facilitate such crimes,” said Los Angeles’ U.S. Attorney, André Birotte Jr.

Remember, if you are a U.S. taxpayer (that includes Americans living overseas and resident alien “green card” holders) and have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000, you must disclose that information on Schedule B of your individual income tax returns and file an FBAR.

What happens if you haven’t filed? If last year was the first year you had a foreign account, there is still time to file an FBAR. They are due on June 30th. You may have to amend your 2012 tax return, however, if already filed. If your unfiled FBARs go back even longer, speak with an experienced tax attorney or CPA that specializes in foreign reporting requirements. Don’t delay!

The IRS is running an amnesty program called the Offshore Voluntary Disclosure Program (OVDI or OVDP for short) that can help you avoid criminal prosecution and the heaviest penalties. If your failure to report foreign accounts was not “willful”, there may also be other alternatives available. Unfortunately, all  amnesty options are off the table if the IRS  finds you first.

[Have an unreported account at Bank Leumi and Mizrahi Tefahot? Call us today. The IRS may already have a customer list from these banks.]

The tax lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of foreign reporting problems. From unfiled  FBARs to the new FATCA legislation to the OVDI amnesty program, we can help. We are the exclusive legal services provider to the CPAmerica organization for foreign reporting issues meaning we are the lawyers that other professionals turn to with questions.

For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Whether you hire or us or not, we will gladly discuss your options at no cost and without obligation.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic such as “foreign accounts”  or “FBAR” in the search bar. We have posted hundreds of informative articles on our site.

The post Businesswoman Charged With Unreported Israeli Accounts – FBAR Post appeared first on Due Diligence.

Willful Blindness has long been a tool of federal prosecutors in a wide variety of criminal tax and drug cases. The doctrine holds that one can’t avoid criminal responsibility by simply ignoring the obvious. For example, drug couriers have unsuccessfully attempted argue that they couldn’t be found guilty of transporting drugs since they never asked or learned what was in the packages they were carrying.

The U.S. Supreme Court identified a two prong test to prove willful blindness. First, the defendant must subjectively believe that there is a high probability that a fact exists. Second, the defendant must take deliberate actions to avoid learning of that fact. Recognizing that the doctrine could easily be misused, courts have said that willful blindness must extend well beyond negligence and even recklessness.

The Court’s test is somewhat abstract. To explain it better we will return to its origins and drug smuggling cases. If I am asked to send a FedEx envelope for a very good friend; a person I believe to be honest and upstanding, there is no criminal liability if the package contains narcotics. However, if a stranger approaches me in the Medallin, Columbia airport and offers me $10,000 to swallow 50 rubber balloons filled with a powdery substance and deliver once inside the United States, surely a jury could convict me even if I truthfully didn’t know what the balloons contained. Simply because I didn’t ask and know if the balloons contained heroin or cocaine will not absolve me of liability.

There is a tremendous expanse of gray area in between both extremes, of course.

In recent years, the Department of Justice Tax Division has been successful in getting willful blindness jury instructions in criminal tax cases. Often these are used in tax protester cases (now called tax defiers by the IRS). In the jurisdictions that allow such instructions, defendants can’t say they simply relied on crazy information they gleaned from the Internet and ignored decades of case law and thousands of pages of instructions and information from the IRS.

The willful blindness doctrine started out in criminal cases but has found its way to civil matters. The doctrine was successfully used in civil patent infringement cases where marketers of file  share services said they never asked how their technology was being used. The court found that some of these services were used almost exclusively to download pirated movies and music.

Earlier this year, the United States Tax Court used the doctrine in a civil tax case against a well known tax attorney. Owen Fiore went to prison for evading his 1999 taxes but after his release, the IRS wasn’t finished. They claimed that he committed fraud in other years as well.

There were not many records in the civil Fiore case. That apparently was deliberate. Other than bank deposits, Fiore didn’t keep records. There was no documentation of his expenses, for example. Because he did not maintain records, arriving at tax deficiency was relatively easy. Proving fraud (and thus obtaining a civil fraud penalty) was not quite as simple.

The U.S. Tax court borrowed the willful blindness case law from the criminal courts. The court said that the IRS could meet its burden of showing fraudulent intent to evade taxes with clear and convincing evidence that Fiore was

1) aware of a high probability of unreported income or improper deductions, and

2) deliberately avoided steps to confirm this awareness.

The Court’s full opinion can be found here.

We worry about extending the willful blindness doctrine to civil tax cases. While it does have its place in certain cases, it also invites shoddy investigation. The doctrine invites imposition of high penalties based on mere negligent conduct.

We know many taxpayers who are terrible record keepers. Virtually every preparer has been forced to complete returns on less than perfect documentation. Should the IRS be allowed to impose tax and interest when a taxpayer cant properly document expenses and other items on the return? Of course. But lack of documentation alone shouldn’t be enough to impose a 75% fraud penalty.

Use of the willful blindness doctrine in civil fraud tax cases is relatively new. The Tax Court bar and front line CPAs should monitor any expansion of the doctrine carefully.

The tax lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of criminal and civil tax matters. From criminal tax evasion investigations to audit defense and U.S. Tax Court litigation, we can help.

For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Whether you hire or us or not, we will gladly discuss your options at no cost and without obligation.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic in the search bar. We have posted hundreds of informative articles on our site.

The post IRS Extends Willful Blindness To Civil Tax Disputes appeared first on Due Diligence.

According to a recent story published by CNET, the IRS says it doesn’t need a search warrant to read your email. While privacy advocates, liberals, conservatives, the ACLU and courts think otherwise, the IRS still claims that Americans have no expectation of privacy in their emails.

I was shocked when reading this story. A IRS search warrant handbook obtained by CNET states that emails and other electronic messages lose any expectation of privacy once they leave your computer. That means the IRS can snoop through your emails without your knowledge and without seeking approval from a judge.

While regular mail is clearly protected, emails and text messages apparently are not. Or so says the IRS.

The U.S. Sixth Circuit of Appeals ruled in December of 2010 (US v Warshak) that emails were protected by the 4th Amendment. Speaking for the court’s majority, Judge Boggs said, “Given the fundamental similarities between email and traditional forms communication, it would defy common sense to afford emails lesser Fourth Amendment protection…. Accordingly, we hold that a subscriber enjoys a reasonable expectation of privacy in the contents of emails ‘that are stored with, or sent or received through, a commercial ISP.”

According to CNET, an update to the IRS’ search warrant manual, published months after the court’s opinion in Warshak, said nothing had changed and that only unopened emails and voicemails had an expectation of privacy requiring a warrant.

Congress is now debating an amendment to the federal Electronics Communications Privacy Act that would explicitly make it clear that the IRS and other law enforcement needs a warrant to snoop through voicemails and emails. The Justice Department has dropped its opposition to the amendment.

The Patriot Act and other recent legislative initiatives have largely sounded the death knell of privacy in this country. While it is gratifying to see Congress and the courts applying common sense and restoring some privacy rights, we warn everyone to be careful in their communications. Especially email.

An email is like a post card. It doesn’t take much effort to see read the contents. While we never advocate breaking the law, people make mistakes every day. The best line of defense to electronic snooping is to not communicate electronically. If you don’t want someone to read your texts, your emails or listen to your voicemails, don’t send them.

The federal government has many tools available now that were not existence a few years ago. Customs can mirror image a lap top in seconds. Some police departments have devices that restore text messages deleted from a cell phone.

If you are accused of a crime, seek competent counsel immediately. It takes a great deal of effort to keep up to date on electronic surveillance techniques and the laws regarding them. When your future and freedom is on the line, seek the best counsel you can find.

Even if you are not under criminal investigation, don’t expect money hidden from the IRS will remain hidden forever. Especially in the area of unreported foreign accounts, consider coming into compliance instead of playing an expensive game of “hide and seek.” Chances are the government will win.

The lawyers at Mahany & Ertl specialize in a wide variety of tax and white collar criminal matters including unreported offshore accounts, tax evasion, wire fraud and money laundering. For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 223-0464 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s White Collar Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many jurisdictions.

Want more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific topics, just click the white collar criminal tab or type in the name of a particular topic such as “tax evasion” in the search bar. We have posted hundreds of informative articles on our site.

The post Big Brother IRS Says It Can Read Your Emails Without A Warrant (Tax Evasion Post) appeared first on Due Diligence.

We are still scratching our heads over this story. A Swiss financial planner / CPA “accidentally” mailed his client list. Now the list is in the hands of Uncle Sam. According to published reports, 3 of his clients have already been charged by federal prosecutors for having unreported foreign accounts. Sooner or later, everyone sends an email to the wrong party. In this case, Swiss financial adviser Beda Singenberger accidentally mailed the entire list through the postal service mail!

Singenberger’s client list is rumored to have the names of dozens of Americans with unreported accounts. As noted above, the list has already resulted in 3 of those folks being charged criminally. That means there are many more nervous people out there just waiting for the fateful knock on the door.

As we reported last week, the IRS has begun rejecting applications for the Offshore Voluntary Disclosure Program (tax amnesty) if the taxpayer’s name is already known to the IRS. It’s fairly safe to say that the identity of the remaining clients is already known.

Americans with unreported foreign financial accounts (that means more than just bank accounts) must report those accounts every year on a Report of Foreign Bank and Financial Accounts, also known as an FBAR or TD 90-22.1 form. Failure to file an FBAR could be a felony if the violation is willful. Violations also carry huge civil fines.

Was Singenberger’s inadvertent mailing error the reason several clients have been caught? “Yes”, says Assistant United States Attorney Dan Levy. He also confirmed that “People who hide money in Switzerland are extraordinarily difficult for law enforcement to identify.”

It’s not just Singenberger’s client who are in trouble. Singenberger was indicted in July 2011 but has yet to be arrested. According to court records he is a certified public accountant and owner of Sinco Treuhand AG in Switzerland. Much of the 41 page indictment remains redacted and under seal but from we can glean, the feds say Singenberger conspired with his clients to defraud the IRS and evade taxes.They say to further conceal the identity of the taxpayers, Singenberger helped them open accounts in sham or nominee form using Liechtenstein and Hong Kong foundations and trusts. He also assisted them in filing false declarations with the IRS.

Conspiracy charges are serious felonies. Once arrested, Singenberger faces decades in prison. He apparently has not been caught yet as Switzerland generally does not extradite for criminal tax charges. Should he leave Switzerland, however, he is likely to be arrested immediately.

According to the indictment, one of the companies Singenberger helped set up for a client was called “Lucky Overseas Ventures LTD.” We suspect the American owning that account is not feeling so lucky today.

Is there a lesson here? Absolutely! One never know how and when they will be caught. Even an inadvertent email could sink dozens of people and ruin families.

If you have an unreported foreign account, its only a matter of time before you are caught. The feds have become very adept at sleuthing the identities of Americans with unreported accounts – John Doe subpoenas, indictments of bankers, wire transfer records, IRS whistleblower reports (yes, ex lovers can receive a cash award for turning you in) and of course, the looming FATCA deadline. As we have previously reported, Switzerland signed an intergovernmental agreement with the IRS earlier this year.

There is an amnesty program for folks with unreported accounts. It is called the Offshore Voluntary Disclosure Program and its a great deal for people who intentionally didn’t report their offshore accounts. Other options exist for those with small accounts, who inherited accounts or who simply didn’t know about the FBAR requirements.

Whatever you do, act quickly. The IRS operates on a first contact policy meaning that you must get to them before they find you. Once they have your name – even if they have contacted you yet – it may be too late to seek amnesty. (See our article from last week, IRS Begins Rejecting OVDI Applications – Important News For Fence Sitters.)

With the number of options decreasing and looming compliance deadlines, anyone with an unreported account should consult with an experienced tax attorney immediately. The tax lawyers at Mahany & Ertl specialize in offshore reporting issues. For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. 

The post IRS Gets Copies Of Adviser’s US CLient List – FBAR Post appeared first on Due Diligence.

We field calls almost everyday from taxpayers with unreported foreign accounts. As the January 2014 compliance date looms large and the IRS / Justice Department juggernaut continues to ramp up enforcement efforts, much confusion about the IRS’amnesty program remains.

Unlike most IRS programs that have thousands of pages of regulations, rules and forms, the Offshore Voluntary Disclosure Program (“OVDI” or “OVDP” for short) only has a couple dozen “frequently asked questions” listed on their website. Unfortunately, that could mean bad surprises for the unwary.

Sometimes we speak with taxpayers who enter the OVDI tax amnesty program simply to avoid criminal prosecution. Amnesty allows taxpayers with unreported foreign accounts to avoid both prosecution and audit. Even amnesty has its limits, however.

According to the IRS offshore disclosure unit and the Criminal Investigations Division, amnesty only applies to the unreported accounts. In other words, if you have other tax problems, don’t expect a free pass. That means if you also cheated on your taxes, failed to pay taxes,or engaged in money laundering, the IRS may still prosecute you for those offenses.

Willful failure to file a report a foreign account is a felony. Offshore bank, brokerage, annuities and hedge fund accounts are disclosed annually on a Report of Foreign Bank and Financial Account also known as an FBAR. Comply with the amnesty program and any possible criminal prosecution for failing to file an FBAR is avoided. As noted above, however, the IRS is free to prosecute for other illegal conduct.

If you have failed to properly and fully disclose foreign accounts, seek a qualified tax lawyer immediately. There are options and amnesty programs available to help most taxpayers. With such high stakes and so many options, getting good information is a must.

Anyone with an unreported foreign account or other potentially criminal tax problems should consult with an experienced tax attorney immediately. The tax lawyers at Mahany & Ertl specialize in offshore reporting issues. For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic such as “FBAR”  or “OVDI” in the search bar. We have posted hundreds of informative articles on our site.

The post IRS’ Get Out Of Jail Free Card Has Limits – OVDI / OVDP Post appeared first on Due Diligence.

Unless you are new to this blog, you already know that we write many articles about offshore tax compliance and in particular, the need to disclose foreign bank and financial accounts. Generally, the IRS operates on a first contact policy meaning if you contact them before they find you, it’s possible to avoid audit, criminal prosecution and the harshest of penalties. (Unreported foreign accounts can carry a penalty as high as $100,000 per account or 50% of the highest account balance for each year the account was not properly disclosed.)

There are exceptions to that policy and they include situations where the IRS had already obtained your name from a cooperating bank – even if the IRS had not first contacted you. Many taxpayers were stunned this week when the IRS elected to rescind participation to many folks already accepted into the offshore amnesty program. From what we can piece together, these folks all had accounts at Bank Leumi and possibly Mizrahi Tefahot Bank.

What happened?

That’s something being asked by many tax lawyers and CPAs. Officially, the IRS can’t answer those questions because of taxpayer confidentiality laws. It appears, however, that the IRS dusted off the amnesty rule that says participation can be denied to folks whose names had already been disclosed.

At first, that sounds reasonable, however, in this case the IRS had already sent acceptance letters to these folks. The IRS’ stated mission is to promote voluntary compliance. That mission is seriously jeopardized when the IRS pulls the rug out from folks who in good faith came forward and tried to do the right thing.

The problem may lie within the IRS computer systems. The organization is so big that the folks running the amnesty program don’t know what is happening in other places within the IRS. Your name could be sitting on an auditors desk for months yet the people issuing the acceptance letters have no idea that your account has already been identified. Mistakes happen but taxpayers shouldn’t be punished for the IRS’ own errors.

Already the IRS’ own taxpayer advocate has publicly reported the agency’s failure in communicating the need to disclose offshore accounts. Kicking folks out who have already been accepted will only further hurt the agency’s credibility.

Foreign bank and financial accounts (that includes hedge funds, some insurance vehicles, CDs and brokerage accounts) must be reported annually on a Report of Foreign Bank and Financial Accounts or FBAR form. Failure to report could be a felony and also  subject you to huge civil penalties. The IRS has been running an amnesty program to encourage people with unreported accounts to come forward, avoid audit and prosecution and receive a break on penalties. Thousands came forward and were accepted into the program.

This week we learned that some folks with Bank Leumi and Mizrahi Tefahot accounts in Israel were later tossed from the amnesty program even after they had previously been sent acceptance letters. This suggests that the IRS already had their names and account information from these banks. If so, those account holders are not eligible for amnesty but may still be able to avoid prosecution and receive a break on penalties if they can demonstrate that their failure to file an FBAR was because of mere negligence or ignorance.

Getting tossed from the program isn’t necessarily the  end of the world for most taxpayers but it means more stress, an audit, higher legal fees and the possibility of much higher penalties. For some, it also means the possibility of prison. If the IRS already had their names, attempting to hide wouldn’t have worked anyway.

The take away from all this is that time is running out. Soon foreign banks will be required to identify and report U.S. account holders and many are doing so already pursuant to John Doe subpoenas and existing tax exchange treaties. The message from the IRS is clear. Get to us before we get to you (or get your name).

Because the IRS does not publicize the names of banks that are under investigation or cooperating, its impossible to know what banks have turned over names and when. The sooner one comes forward, however, the better the chances of avoiding the worst penalties.

With so many options and looming compliance deadlines, anyone with an unreported account should consult with an experienced tax attorney immediately. The tax lawyers at Mahany & Ertl specialize in offshore reporting issues. For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic such as “FBAR”  or “OVDI” in the search bar. We have posted hundreds of informative articles on our site.

The post Unreported Bank Leumi or Mizrahi Tefahot Bank Account? READ THIS (FBAR Post) appeared first on Due Diligence.

Although all the media attention on unreported foreign accounts appears to focused on Switzerland, the Justice Department and IRS continue to look worldwide for U.S. taxpayers with undeclared offshore accounts. According to a press release from the United States Attorney’s Office, Sameer Gupta pleaded guilty last week to one count of tax evasion after the IRS discovered he had an unreported bank account at HSBC India. He faces 5 years in prison.

Possessing or having signature authority over an account in India is entirely legal if the account is reported annually to the IRS. Foreign bank and investment accounts must be reported each year on a Report of Foreign Bank and Financial Accounts, also known as an FBAR or form TD 90-22.1. Failure to file an FBAR is a felony.

Prosecutors say that in an effort to conceal his identity, Gupta had some 17 different bank accounts, several in nominee format. Opening an account in a false name or deliberately concealing one’s identity by opening an account in a third party name is considered an affirmative act of tax evasion.

Prosecutors say the tax loss caused by Gupta’s activities was somewhere between $200,000 and $400,000. As part of his plea deal, Gupta agreed to pay the IRS a $259,000 penalty. The judge can impose an additional fine of $250,000 or an amount of his twice the gain from his illegal activity at the time of sentencing.

There is no word on how Gupta was caught.

In recent years, the IRS has been targeting foreign banks and bankers to get the names of U.S. clients. As Gupta discovered, opening an account in a fake name doesn’t always work. Beginning next year, the new FATCA law will require foreign banks to investigate and report any account holder with ties to the United States.

The IRS’ whistleblower program has also resulted in many people getting caught. Disgruntled employees, unhappy vendors and often jilted lovers provide the information which leads to the discovery of unreported foreign accounts.

There is an amnesty that allows those with unreported accounts to come into compliance and avoid audit and criminal prosecution. (The Offshore Voluntary Disclosure Program often called “OVDI”) The program does have a catch; there are some fairly steep penalties and also the need to come into compliance before getting caught. If the IRS finds you first or gets your name from a foreign bank, amnesty is off the table.

For those whose noncompliance is truly one of mistake or ignorance of the law, other options may reduce or eliminate all penalties. Do nothing, however, and you could face criminal prosecution or civil penalties that are the greater of $100,000 per year or 50% of the highest account balance for each year the account was unreported.

With so many options and looming compliance deadlines, anyone with an unreported account should consult with an experienced tax attorney immediately. The tax lawyers at Mahany & Ertl specialize in offshore reporting issues. For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic such as “FBAR”  or “OVDI” in the search bar. We have posted hundreds of informative articles on our site.

The post Indian Business Man Prosecuted For Unreported HSBC India Account (FBAR Post) appeared first on Due Diligence.

Wegelin & Co. was the world’s oldest bank. Established in 1741, decades before the Revolutionary War, the bank announced it will be permanently shutting its doors. Why? The bank simply could not survive after pleading guilty to U.S. criminal charges that it assisted American taxpayers evade taxes.

Wegelin once boasted to depositors that it was beyond the reach of the IRS. It soon learned, however, that Uncle Sam has a mighty long reach. Although it had no branches or employees within the United States, prosecutors here successfully indicted both the bank and 3 of its bankers.

U.S. taxpayers with unreported foreign accounts should take heed of the Wegelin prosecution. The IRS is deadly serious about tracking down tax evaders and unreported foreign accounts. Switzerland was once thought of us the ultimate bank secrecy jurisdiction with its storied “numbered” accounts. Banks and bankers when indicted, however, are relatively quick to cut a deal with the government to avoid jail or reduce fines.

Many U.S. taxpayers have offshore accounts for very legitimate reasons. Some are dual nationals that wish to send money home to family, some are retired American expats that now reside overseas, some simply don’t trust the U.S. banking system (who can blame them) while others find themselves added to an account of a loved one who lives overseas. Of course, a small percentage of folks open offshore accounts hoping to evade taxes.

Having a foreign bank or brokerage account is completely legal if you remember to file annual FBARs (Report of Foreign Bank and Financial Accounts). Many taxpayers must also file a FATCA form 8938 with their income tax return each year as well. Failure to file an FBAR can be a felony. And in certain cases, the government may also be able to charge you with tax evasion as well if your failed to report income such as dividends or interest from your foreign accounts.

Most taxpayers are not a risk for criminal penalties but still face huge civil penalties for failing to file FBARs. Those penalties can be as high as $100,000 per year or 50% of the highest account balance.

Many potential clients we speak with wonder if they will get caught. The prosecution of Wegelin should serve as a sobering reminder of just how far the government is willing to go in order to discover those with foreign accounts. Prior to Wegelin, the feds successfully pursued UBS bank.

Will Wegelin be the last? Absolutely not. The government is already been widely rumored to be investigating Credit Suisse, Julius Baer, Clariden Leu, Kantonbank, HSBC, Hapoalim, Bank Leumi and bank Mizrahi Tefahot. There are probably many, many more that are also under investigation.

If you have an unreported foreign bank or have unreported foreign income, contact an experienced attorney that specializes in offshore reporting. There are presently several amnesty programs that may help you come into compliance while avoiding criminal prosecution and much of the penalties. In some instances, there may be no penalties.

For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and coming soon San Francisco, California. Services available worldwide.

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