by Brian Mahany
Earlier this week I attended an offshore fraud conference in Miami. One of he speakers warned that US prosecutors were looking well beyond Switzerland in their hunt for Americans with unreported offshore bank accounts. How true. A recent federal indictment in New Jersey should have taxpayers with ties to India or ties to HSBC bank quite worried.
In January, the IRS charged Vaibhav Dahake with conspiracy to defraud the United States.Prosecutors say that Dahake was born in India but became a U.S. citizen in 2006. They say that he and bankers from HSBC India conspired to hide Dahake’s money and income from the IRS.
According to the indictment and press reports, HSBC advertised that its India affiliate paid high interest rates on accounts placed with their bank. One of their bankers met with Dahake in New York City and told him that opening an account in India required no U.S. tax forms or social security numbers, that no tax was due India and that no 1099’s would be filed with the IRS.
The banker also suggested that Dahake could obtain a debit card allowing him to access his cash anonymously anywhere in the U.S.
Obviously, Dahake was caught. Prosecutors have said the bankers are unindicted co-conspirators but that doesn’t help Dahake. Conspiracy to defraud the U.S. is a serious felony punishable by years in a federal prison.
Since the indictment, the government this month announced it was assisting the IRS in obtaining a “John Doe” subpoena to obtain bank records from HSBC India to identify other U.S. residents maintaining accounts there.
A “John Doe” subpoena is used when the government is not seeking records on a particular person. John Doe subpoenas were used in recent years to uncover many of the U.S. taxpayers hiding money at UBS Bank in Switzerland.
Simply because a banker told a customer that his account would not be reported to the IRS doesn’t mean the customer can’t be prosecuted. Like in the Vaibhav Dahake case, the person usually left holding the bag is the taxpayer. HSBC won’t go to jail but Dahake likely will.
The Swiss account scandal may just be the tip of the iceberg. We are familiar with many people who consider India or other countries “home.” For many taxpayers, sending money to their home country is not illegal. They are only partly correct; sending money to their home country is okay but not letting Uncle Sam know about it is a crime.
For U.S. residents – including dual nationals – not reporting a foreign bank account with at least $10,000 means the IRS can also seize half the account value even if there was no income derived from the account.
There is an amnesty program for offshore accounts (voluntary disclosure program) offered by the IRS that ends in August. Participation can help you avoid prosecution and significant penalties.
If you have a tax problem – including unreported foreign income or offshore accounts – call us. We can help with a wide range of tax problems including amnesty applications, U.S. tax court litigation, collections, audit defense, welfare benefit plans and criminal tax defense (failure to file returns, evasion, etc.). We help people with tax problems anywhere in the U.S.
Brian Mahany is Maine’s former state revenue commissioner and a has 27 years of experience. Brian can be reached directly at (414) 704-6731 or at