by Brian Mahany
While the world and business community calls upon the IRS and Congress to repeal FATCA (Foreign Account Tax Compliance Act), the government just indicted a lawyer and charged him with helping a family conceal an unreported Swiss account. Federal authorities arrested Michael Little, a British lawyer as he landed at New York’s JFK airport. He is charged with conspiracy to defraud the IRS.
According to a government press release, Little is licensed to practice law in N.Y. The conspiracy apparently began in 2001 after a member of a prominent New York family died in 2001. Heirs discovered that he had $10 million in an unreported foreign account. Prosecutors say that Little helped the family continue to conceal the funds.
Although having a Swiss account is completely legal, U.S. law says that the account must be reported annually to the IRS on a Report of Foreign Bank and Financial Account or “FBAR.” Although the heirs weren’t responsible for setting up the account, prosecutors say that once the account holder died, the family had a responsibility to report the account. One of the heirs has already pled guilty for her part in not reporting the account.
Failing to file FBARs and properly report an offshore bank account is a crime punishable by up to 5 years in prison. In addition, the IRS can impose civil penalties of $100,000 per year or half the high balance of the account each year the account is not reported.
In many cases, taxpayers don’t follow the rules because they are simply not aware of the foreign account reporting laws. We often represent dual nationals, recent immigrants to the U.S. and people who inherited a foreign account. Usually there is no intent whatsoever to evade taxes or violate the law. In this case, however, the government says the family and lawyer developed an elaborate code system in case the government was listening in. “FDA” meant the IRS, “beef” meant money and a pound meant $1000. That certainly does not sound like the behavior of an innocent person.
The case illustrates how the IRS will prosecute anyone who aids and abets a taxpayer in not reporting offshore money. In the words of U.S. Preet Bahara, “It cannot be said often enough that paying taxes is not optional and that we will prosecute and punish the people who do not do so – along with their enablers.” Often once arrested, the third parties will immediately cooperate with authorities in hopes of a lighter sentence. Was this family Little’s only client? Probably not.
If you have unreported or unpaid federal taxes, have other criminal exposure or are already under criminal investigation, give us a call. Our criminal tax lawyers are well experienced with tax evasion, false returns, unreported foreign accounts, criminal FBAR violations and money laundering cases. For those not yet under audit or investigation, a special tax amnesty program called the 2012 Offshore Voluntary Disclosure Program (or “OVDI”) is available. Although the penalties in the program are steep, participants can avoid jail and criminal prosecution.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and Minneapolis, Minnesota. IRS services available worldwide.