by Brian Mahany
It’s never too late to become a felon and head to prison. Just ask Marlyn Hinders of Colorado. According to published reports, the 72 year old was sentenced to 21 months in federal prison for “corruptly endeavoring to impede and obstruct the due administration of the Internal Revenue Code”. A review of the court records and sentencing memorandums reveals that Hinders hid money in a Costa Rican account and failed to disclose the account.
Opening foreign accounts is completely legal, unless you fail to tell Uncle Sam about the account and use the account to evade taxes. Prosecutors say that he used a nominee account to further conceal his crime. Nominee accounts are bank accounts opened in someone else’s name or under a fictitious name.
We often see Costa Rican, Panamanian and other foreign lawyers advertising assistance in setting up foreign bank accounts. For a fee, they will establish a foreign corporation and then open an account in the name of the new entity. Often they will offer to receive bank statements so that there is no trail of accounts statements being mailed to the US.
The plan sounds great, but often it doesn’t work. Information in foreign countries can be obtained fairly cheaply. That includes foreign account information. No foreign lawyer is likely to lose his or her law license to protect some American.
Foreign accounts need to be reported annually to the IRS using an FBAR form (Report of Foreign Bank and Financial Account). Individuals may also have additional reporting requirements under the new FATCA legislation. Although use of nominee accounts and phony account names may protect some from detection, plan on serious felony charges if caught.
Most people with unreported accounts simply don’t know the law. But hide the money under a phony name and there is no convincing the IRS that your actions are anything but willful. The IRS views nominee accounts as an affirmative act of tax evasion.
If you have unreported accounts and are worried about prosecution, there is a window of opportunity. Currently the IRS is offering an amnesty program for unreported foreign accounts. Called the Offshore Voluntary Compliance Program (or “OVDI”), the program can help taxpayers avoid prison and outrageous penalties. If you are interested in the amnesty, act quickly. The IRS operates on a first contact policy. If they find you first, amnesty is not an option.
Want more information? Contact the tax lawyers at Mahany & Ertl. We assist taxpayers with a wide variety of foreign reporting services including FBARs, FATCA, OVDI, amnesty, voluntary disclosures and foreign gift, partnership and corporate reporting. We also offer extensive experience in defending criminal tax investigations and preventing the indictment of our clients.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS services available worldwide.