The Department of Justice and IRS have done it again; they convicted another lawyer accused of helping American taxpayers hide money from Uncle Sam. U.S. law says taxpayers with interest in foreign bank accounts must annually declare those accounts on a Report of Foreign Bank and Financial Accounts, better known as an FBAR.
Failing to file an FBAR can be a felony and usually carries very high civil penalties. If the IRS believes the failure to report was “willful,’ penalties can be as high as 50% of the highest account balance or $100,000 for each year the account was unreported. Millions of Americans are not in compliance with FBAR reporting regulations and the government has been hot on their heels.
One tactics used by the government in the hunt for unreported offshore accounts is going after the professionals – lawyers, accountants and bankers – that help taxpayers open these accounts. On Friday, attorney Edgar Paltzer pleaded guilty in a Manhattan federal court to helping Americans open Swiss accounts knowing they intended in engaging in tax evasion.
Although Paltzer is licensed as a lawyer in Switzerland, that didn’t stop the long arm of the law from reaching out and indicting him. A co-defendant is believed still at large in Switzerland.
Paltzer helped Americans open accounts at Bank Frey, a Swiss bank run by his law partner. Of importance to all holders of accounts at Bank Frey is Paltzer’s promise to cooperate as part of his plea deal with prosecutors. “His cooperation is complete and without any limitation”, said his lawyer.
What does “full cooperation” mean? It means that Paltzer will likely disclose the names of all his clients and those of the bank.
Paltzer is due to be sentenced in February of 2014. He was convicted of one count of criminal conspiracy and could face 5 years when sentenced. As is typical in these plea deals, the amount of information Paltzer turns over will likely effect his sentence. We believe that he will turn over all information in his possession notwithstanding any claim of attorney – client privilege. The government contends there is no privilege if an attorney is an active participant in a client’s criminal behavior. Because Paltzer knew his clients were not making FBAR filings yet still helped them evade tax, there is no privilege.
If you have an offshore account and have not filed an FBAR, give us a call. We will explain your responsibilities and explore your options. Our tax lawyers have helped many taxpayers with a wide variety of foreign reporting problems including the OVDP tax amnesty program and unfiled FBARs. In many cases it is possible to avoid all or most penalties.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.
Need more information about FBARs? Our Due Diligence blog has a search engine located in the upper right hand corner. Our website also has an article titled FBAR 101 – Critical Information for FBAR Filers.
Post by Brian Mahany, Esq.