by Brian Mahany
Living the American dream is a wonderful thing unless you are not a U.S. citizen and file a false tax return. The U.S. Supreme Court ruled on Tuesday that a married Japanese couple legally in the U.S. since 1984 could be deported for filing false tax returns.
Although we hear everyday how bad things are in the U.S., the fact is millions of people still desire to move here. Watch a reality show such as Border Wars and you see the swarms of people attempting to enter the U.S. illegally. Not just Mexicans but people from India, China and Europe too. Obviously those that cross the frontier illegally are subject to arrest and immediate deportation. Residents here legally can generally only be deported if they commit an “aggravated felony.”
While some violent crimes are obvious aggravated felonies, there is a provision that includes crimes involving fraud or deceit. In a 6 – 3 split decision, the U.S. Supreme Court said filing a false tax return is a deportable offense if the tax loss exceeds $10,000.
Delivering the majority opinion, Justice Thomas found that Akio and Fusako Kawashima were legally in the U.S. According to news reports, the couple owned and operated a restaurant in California. 15 years ago Mr. Kawashima pleaded guilty to a single count of filing a false tax return. His wife pleaded guilty to “aiding and abetting” in the filing of the return. Those guilty pleas began a 15 year legal nightmare for the couple culminating in a deportation order.
The immigration laws allow for the deportation of people convicted of aggravated felonies. One of the categories of crimes included in that definition are crimes involving “fraud or deceit in which the loss to the victim or victims exceeds $10,000.” (Tax Evasion is specified in the list of deportable offenses – the crime at issue in this case, filing a false tax return, is not on the list.)
Although fraud and deceit are not elements of a false return case, the divided court took a broad view of the statutes and said that “false” statements in a tax return are akin to fraud.
Not everyone on the Supreme Court agreed with the decision. Justices Ginsburg, Breyer and Kagan filed a dissent. They fear that such a broad view could now allow immigration officials to deport people for a wide variety of federal, state and local tax offenses including misdemeanors.
The divided decision certainly gives pause to resident aliens and greencard holders who are accused of tax crimes. While we do not believe the government will deport persons convicted of misdemeanors, the decision is a clear signal that many tax crimes can now be considered deportable offenses.
Given the current wave of prosecutions for failing to file FBARs (Report of Foreign Bank and Financial Accounts), non U.S. citizens sitting on the fence and worried about their unreported foreign accounts need to be very worried. It’s one thing to pay a large civil penalty to the IRS but quite something else to also face prison and deportation.
Luckily, for those with unreported offshore accounts there is an amnesty program (the Offshore Voluntary Disclosure Program also called “OVDP” or “OVDI”) which can reduce penalties and avoid criminal prosecution.
The stakes are certainly higher for the millions of non-citizens taxpayers legally in the U.S. While most properly report and pay their fair share of taxes, some do not.
If you have unreported income or foreign accounts, contact us immediately. The foreign account amnesty, “opt-out” and voluntary disclosure programs only work if you may the first contact with the IRS. If the IRS finds you first, all bets are off. That could mean audit, huge penalties, criminal prosecution and for non U.S. citizens, deportation.
The tax attorneys at Mahany & Ertl have helped many people across the nation and the world with a wide variety of offshore reporting and criminal tax issues. From tax evasion to FATCA to FBARs, we can help. For more information contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at All inquiries are strictly confidential.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in most jurisdictions.