by Brian Mahany
Usually when I write stories about Americans indicted for unreported foreign accounts, the story takes place thousands of miles away. Not this time. The IRS and U.S. Department of Justice have indicted an Indian American physician right here in Milwaukee. A doctor that is known and well liked by some of my existing physician clients.
The feds have indicted Arvind Ahuja, A U.S. citizen and native of India, for “hiding” $8.7 million in an offshore account. Before jumping to any conclusions, Ahuja is a neurosurgeon who elected to do his banking in his native country of India. According to the indictment, he may have done some banking in Jersey (officially known as the Bailiwick of Jersey, a British Crown dependency) as well.
The indictment does not accuse Ahuja of evading taxes. Instead the government says he failed to file Reports of Foreign Bank and Financial Accounts (“FBAR”) and filed false tax returns by not disclosing those accounts on his U.S. income tax return. Each of those offenses is a felony.
There seems to be some confusion about the unreported income, although he was not charged specifically with that offense. His attorney says he is not guilty of any of the charges. Others say that he may have gained as much as $1 million in interest over the years on these accounts.
Indian bank accounts are much different than those in the U.S. Americans are used to receiving 1099’s every year and know exactly what to fill in on their tax return account. Unfortunately, when dealing with foreign bank accounts, the IRS’ cookie cutter approach is not always a perfect fit.
How this case will end is anyone’s guess. One thing is fairly certain, however. Dr. Ahuja will probably have to pay millions and millions in IRS penalties. Under current law, the feds can (and do) seize 50% of the historic high balance of any unreported foreign accounts. Being convicted of a felony may jeopardize his medical license as well.
Having an account in a foreign country is not illegal and often makes good economic sense. Neurosurgeons, for one, are in a high risk occupation that is subject to questionable lawsuits by unhappy patients. Putting money aside to protect from runaway jury awards may make sense from an asset protection standpoint. But not telling Uncle Sam is a crime. An expensive crime.
Ahuja kept his money in HSBC India. As readers of this blog already know, HSBC India has been under IRS scrutiny for quite some time. And they are not the only Indian or foreign bank being examined.
If you have unreported income or unreported offshore accounts, seek professional guidance. Many CPAs and tax attorneys do not fully understand foreign reporting requirements. There is currently an IRS offshore amnesty program (IRS Offshore Voluntary Disclosure Initiative or “OVDI”) in place that runs through the end of August. Participants can avoid jail and loss of 50% of their offshore holdings but time is running out.
Mahany & Ertl is America’s premiere boutique tax and fraud recovery law firm. With offices in Milwaukee, Detroit, Portland Maine and soon in San Francisco, we can help taxpayers anywhere in the U.S.