Federal prosecutors and the IRS convicted a 73 year old Manhattan man for failing to report an offshore account held at UBS, a prominent Swiss bank. Gabriel Gabella pleaded guilty last week in a Brooklyn courtroom to a single count of Willful Failure to File a Report of Foreign Bank and Financial Accounts (FBAR).
There are few details in the information (criminal charging document), however we know that Gabella maintained an account at UBS bank in Switzerland for at least 3 years and failed to report the account. Opening or maintaining a foreign bank account isn’t illegal but not reporting the account is a crime.
Since 1970, Congress and the IRS have required U.S. taxpayers to report many types of foreign financial account if at any time the value of that account or accounts exceeds $10,000. Reporting is done both on Schedule B of the individual income tax return and on an FBAR form.
In announcing the conviction, U.S. Attorney Loretta Lynch said, “Those who willfully conceal assets abroad will be investigated and prosecuted, and those convicted of such conduct will not only face imprisonment but significant financial penalties.” In Gabella’s case, those financial penalties will mean a civil penalty of $3,140,346 and back taxes of $239,000. He also faces five years in prison when sentenced later this year.
The civil penalties for failure to file an FBAR are up to the greater of $100,000 or 50% of the highest historical account balance. A Justice Department press release says that the penalty is equal to 1/2 Gabella’s offshore bank balance in 2007. Under current IRS regulations, he could have received those penalties for each year his UBS account wasn’t reported.
Prosecution of taxpayers with unreported foreign bank accounts remains a priority with both the IRS and Justice Department. Acting IRS Special Agent – in – Charge Shantelle Kitchen said, “Offshore tax enforcement remains a top priority for the Internal Revenue Service and we continue to gain access to more and more information about individuals who hide money in bank accounts outside of the United States.”
Gabella’s prosecution last week takes on special significance because FBAR forms must be filed by June 30th. Even if you received an extension to file your income tax return, FBARs are still due on the 30th. The IRS estimates that millions of Americans and many green card holders fail each year to report their offshore financial holdings.
While there is little risk of going to prison for most people with unreported accounts, the IRS routinely imposes the harsh 50% penalties. This special FBAR penalty is on top of any other tax, interest and other penalties that the IRS may calculate.
If you have an unreported foreign bank or financial account, speak to a tax attorney, qualified CPA or expat tax service specializing in offshore reporting immediately. There are some amnesty programs available but those disappear if the IRS finds you or finds out about your account first. Even if the IRS simply issues a subpoena to your foreign bank it may be too late to qualify for amnesty.
For more information, give us a call. Our FBAR lawyers and offshore tax professionals can help with FBAR issues, FATCA, foreign owned real estate reporting and foreign gifts. We are a full service boutique tax firm. For a no obligation, confidential review of your matter, contact attorney Bethany Canfield at or by telephone at (414) 223-0464.
Post by Brian Mahany, Esq.
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