US Taxpayer Pleads Guilty to Failure to File a Foreign Bank Account Report

 

            CONCORD - Georges Mazraani, 57, of Windham, pleaded guilty in federal court on Wednesday to willful failing to file a foreign bank account report, Acting United States Attorney John J. Farley announced today.

            According to court documents and statements made in court, federal law requires that a U.S. person having a financial interest in, or signature or other authority over, a bank or other financial account in a foreign country, must file a Foreign Bank Account Report (“FBAR”) with the Treasury Department identifying each foreign account if the aggregate balance of all foreign accounts exceeds $10,000 at any point in the calendar year.  FBAR information is used by the federal government in criminal, tax, or regulatory investigations or proceedings.  A willful failure to file a required FBAR is a felony.

            Defendant Mazraani owned and operated Dot Square, a New Hampshire corporation that exported computers and related goods primarily to Lebanon.  He also had a financial interest in bank accounts held in Lebanon, from which he sometimes wired money to Dot Square’s bank account held in Salem, New Hampshire.  For calendar year 2012, Mazraani filed an FBAR identifying three accounts in Lebanon.  During the years 2013 through 2017, however, Mazraani did not file FBARs, even though he had an interest in at least one Lebanese bank account holding more than $10,000 during each of those years.  For example, in calendar year 2017, $554,245 was wired, in 13 separate wire transmissions, from Mazraani’s account at a bank in Beirut to Dot Square’s business checking account in New Hampshire.  Although Mazraani’s tax preparer advised the defendant’s bookkeeper about the FBAR filing requirement and Mazraani acknowledged on his 2016 and 2017 tax returns that he was required to file an FBAR, he nevertheless failed to file the report. 

           Mazraani is scheduled to be sentenced on February 14, 2022.

           “Failing to file a Foreign Bank Account Report is a federal crime,” said Acting U.S. Attorney Farley.  “By failing to file these reports from 2013 to 2017, the defendant concealed information about foreign bank accounts that he was required to disclose.  We will continue to work with our law enforcement partners to identify and prosecute those who commit tax crimes and other financial offenses.”

           “The law requires companies who use our country’s financial system to provide financial institutions with truthful information about their business operations, but Georges Mazraani admitted today that he knowingly and willfully failed to do that, over the course of five years. In fact, he went out of his way to conceal his bank accounts in Lebanon, despite a reminder from his bookkeeper,” said Joseph R. Bonavolonta, Special Agent in Charge of the FBI Boston Division. “The FBI will not hesitate to aggressively investigate companies who are doing business in the United States but failing to adhere to our laws.”

            “The accurate reporting of foreign bank accounts ensures fairness and integrity in the U.S. tax system. By his own admission today, Mr. Mazraani deliberately avoided his reporting requirements in an attempt to hide assets. As a result of his actions, he is now subject to a federal felony conviction,” said Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division, Boston Field Office. 

            This matter was investigated by the Internal Revenue Service, Criminal Investigation Division, the Department of Commerce, and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney John S. Davis.

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If you have not been reporting your foreign bank accounts you could incur heavy penalties and possible criminal prosecution.  We can help. Email Us to request a consultation with the absolute privacy of attorney client privilege. Email us at ddnelson@gmail.com

INDIVIDUAL AND CORPORATE TAXES IN COUNTRIES AROUND THE WORLD - FOR EXPATS

Need to know the income taxes, corporate taxes in the country you are living in or the country you plan to move to after you leave the USA to retire or work?   The links below will provide you with almost all the information you might need.

CORPORATE TAXES IN FOREIGN COUNTRIES

INDIVIDUAL TAXES IN FOREIGN COUNTRIES 

If you need assistance with planning your US tax when abroad, preparing the necessary returns, and other IRS or state tax matters contact us at ddnelson@gmail.com.  we specialize in US expatriate, nonresident and international taxes.

IRS Continues to Prosecute for Failing to File FBAR (form 114) forms and Collect Large Penalties

Howard Bloomberg, a forensic account and certified fraud examiner of Atlanta, Georgia, pleaded guilty on Friday to failing to file a Foreign Bank Account Report (FBAR) for the year 2008. Mr. Bloomberg opened a bank account at UBS AG in July 1997. The value of Mr. Bloomberg’s account increased to approximately $930,000 in 2001, and he routinely wired funds from the UBS account to his U.S. accounts. He closed the UBS account in April 2008 and wired the balance of over $540,000 to the U.S.

For having admitted to not filing the 2008 FBAR, Mr. Bloomberg has agreed to pay a penalty of $278,397, representing 50% of highest balance in 2008, and file accurate FBARs from 1997 to 2008. At sentencing, currently scheduled for December, Mr. Bloomberg faces a maximum of five years’ imprisonment and 3 years’ supervised release. According to the U.S. Attorney for the Northern District of Georgia, Sally Quillian Yates:

G8 Conference Folows US IRS Lead to Eliminate Tax Evaision and Investment Secrecy Abroad

 The world's rich economies said they would take a tougher stance on fighting money laundering and tax evasion but promised little in the way of specific new action at the end of a two-day summit on Tuesday.

The Group of Eight leaders signed up for a string of aims including improved transparency about who owns shell companies and more information-sharing between tax authorities.

Under pressure from austerity-weary voters, lawmakers have focused increasingly on tax dodges. More than 50 countries have agreed to a new protocol on tax data sharing since 2011.

Cameron said his proposal that firms report profits on a country-by-country basis could help expose corporate profit shifting into low-tax states.

The G8 leaders, meeting in Northern Ireland, said their governments would draw up action plans for collecting and sharing information on who really owns companies, making it harder to set up Russian-doll type structures.

The United States pledged to keep on pressing for legislation to cut down on the criminal use of shell companies.

"The credibility of this depends on the ability of the White House to advance legislation," said Gavin Hayman, director of campaigns at anti-corruption group Global Witness.

The United States pointed out it was planning to require banks to understand who their customers actually are and provide information for law enforcement and tax authorities.

A frequent critic of tax havens, the United States has come under fire from campaigners for the low transparency requirements around ownership of corporate entities registered in some U.S. states such as Delaware.

Tax campaigners had called for companies to be forced to make public their profits, revenues and tax payments for every country where they operate. That could deter accountants from building contrived arrangements to keep tax low. Business groups remained against such a move.

"We continue to have real doubts about the utility of any rules requiring the release of vast amounts of raw data to the public," Andrew Wilson, UK Director of the International Chamber of Commerce said in a statement.

The G8 leaders also called on the Organisation for Economic Co-operation and Development (OECD), which advises rich nations on economic policies, to come up with a way that could require multinational corporations to report profits and tax payments to authorities on a country-by-country basis

Some developing nations complain they struggle to get information about companies' operations in other countries, so the measure could help them cut profit shifting.

The OECD is working on a broader program  to tackle tax avoidance under the auspices of the Group of 20 comprising the leading developed and developing economies.

What is described above at the G8 is the wave of the future. All countries will within the next few years be sharing tax data, etc. with each other. Now is the time to get into legal compliance with your tax filings before it is too late.  If you need help email us at ddnelson@gmail.com .

FILE YOUR 2012 FBAR (TDF 90-22.1) ON BEFORE 6/28/13 ON LINE

You can file your FBAR form for 2012 on line in order to meet the 6/28/13 filing deadline. Got to  http://bsaefiling.fincen.treas.gov/Enroll_Individual.html to file it.  Print out a copy while there so you have proof it was filed.

The penalty for not filing  this Report of Foreign Bank and Financial Accounts can be $10,000 or more as well as the possibility of criminal prosecution in the event the IRS can show you intentionally did not file the form.  It is not a tax form, but a reporting form with tremendous penalties for not filing. 

Accelerated FBAR Filing Deadline in 2013

In general, FBARs must be received by the U.S. Treasury Department by
June 30. Because June 30, 2013, falls on a Sunday, FBAR filers should
plan to have their 2012 FBARs received by Treasury by Friday, June 28,
2013. Unlike income tax filings, the FBAR due date is not extended to the
next business day when the deadline falls on a weekend. In addition,
unlike income tax filings, there is no “mailbox rule” with respect to
FBARs, so the deadline is measured by the date received, not the date
sent.

 The FBAR should be delivered to the address shown in the
instructions to the FBAR (Rev. January 2012). A street address is provided
in the FBAR instructions if an express delivery service is used. Although
paper filings still are acceptable for timely filed 2012 FBARs, filings made
after June 30, 2013, are required to be done electronically (using the BSA
E-Filing System). 

FATCA- Using a non US passport to open your foreign bank accounts will not work!

FATCA requires foreign banks to conduct due diligence to see if there are US persons with foreign bank accounts.  The fact you did not give a foreign bank your US passport still does not mean they might not report your foreign bank, financial and other accounts to the US and IRS.

FATCA was enacted to expose those US citizens and green card holders who are trying various tricks such as dual passports, etc. to avoid reporting and paying taxes on their foreign financial accounts.

Under the FATCA law  in order to stay in good graces of the IRS, the foreign banks  must put into place procedures to weed out account holders who are Americans and US green card holders even though the passport they opened the account with said otherwise. These are the questions you need to ask yourself before you take the HUGH risk of not reporting those accounts on form TDF 90-22.1 (FBAR form). 

• Are there any US address associates with your account?
• Are there any US phone numbers with your account?
• Is your birthplace listed as somewhere in the US?
• Have you made more than one wire in or out form the US?
• Any other item that may make the bank suspicious you are a US person.

If any of the questions above you answered yes, there is a significant chance the your bank will disclose your account to the IRS. If you are detected by the IRS before you made an Offshore Voluntary Disclosure, you must expect the harshest penalties both criminal and civil. The IRS has invested everything in this program. It operates by fear and intimidation. It has the law, the political clout (in Congress, no one is standing up for international community).

This form (TDF 90-22.1) for 2012 is due  on 6/30/13 (must be received by IRS as of that date).   It cannot be extended. The statute of limitations for prosecution or huge monetary penalty imposition for not filing this form goes back for 6 years.

Bank accounts in the Central and South America, the Mideast and the Far East — Panama, Ecuador, Argentina, Venezuela, Taiwan, South Korean, Thailand, Dubai, Malaysia, Singapore, Hong Kong, China, India — these are the targets of FATCA.  The US is signing up other countries daily to participate in the program. Remember, the US already had information sharing agreements with European banks. FATCA was put in place to find out  US account holders everywhere in the world.

 

Chief of IRS Criminal Investigation Divisions Comes After Those No Disclosing Foreign Accounts and Assets

 On October 18th, the chief of the IRS’ Criminal Investigation Division, Richard Weber, stated that his 4000 special agents will continue to focus on unreported foreign bank accounts.

You do not want to see one
of these in person

The requirement to file FBARs (Report of Foreign Bank and Financial Accounts) dates back to the Bank Secrecy Act in the 1970′s. No attempts were made to enforce this until until the last 4 to 5 years.  Failure to report a foreign account is a felony punishable by up to 5 years in prison. Civil penalties can include the greater of $100,000 or 50% of the high account balance for each year an account is unreported. Even “innocent” violations can result in penalties of up to $10,000 per year.

The  IRS has been looking at banks outside of Switzerland (where they originally began their enforcement efforts). Those banks includes several Israeli banks as well as financial institutions in the Bahamas, India, China, Australia,  Hong Kong, Liechtenstein and others not yet announced.

Speaking before a New York CPA group, Weber said that the IRS and Department of Justice would soon be announcing a new round of indictments involving unreported accounts. These prosecutions will involve banks outside of Switzerland.   The IRS has posted CID special agents around the world.  One indication is that they now have a field office in Panama which was a popular place for US taxpayers to hide their money and income.

There is presently an amnesty program to help taxpayers with unreported accounts. This includes those with foreign hedge funds, investments, bank accounts, CD’s and the like. The program, called the 2012 Offshore Voluntary Disclosure Program offers greatly reduced penalties and a promise of no criminal prosecution.  This program may not work for everyone. Some taxpayers may achieve lower or no penalties by negotiating directly with the IRS outside of the Disclosure program.  The important part is not to wait until the IRS discovers you first because it will then be too late to avoid higher penalties and criminal prosecution.

The procedures and rules for entering the program or surfacing with the IRS outside of the program are complicated.  You should speak with  a tax lawyer right away if you are one of the millions with unreported accounts (and other foreign assets that require reporting on your tax return such as foreign corporations, foreign partnerships and LLCS, passive foreign investment companies, etc.)

Don D. Nelson, Attorney, CPA with over 20 years of expatriate and international tax experience has represented or advises hundreds of clients with a wide variety of offshore reporting issues. His  clients include dual nationals, US permanent residents, taxpayers with offshore accounts, and expatriates who have businesses abroad or who have retired in other countries.

For more information, contact him at ddnelson@gmail.com.  All inquiries are protected by the attorney – client privilege and kept in strict confidence.

NO FBAR PENALTY FOR TAXPAYER WHO OPTS OUT OF IRS OFFSHORE DISCLOSURE PROGRAM

One Taxpayer who opted out of the administrative nightmare of the IRS Offshore Disclosure Program has been assessed no penalties for late filed FBAR forms.  The taxpayer was a 12 year US resident with unreported  offshore assets equal to about $120,000 at the peak. The taxpayer was ignorant of the special forms required to report offshore assets and the requirement he needed to report the income from these offshore accounts.

This may provide some guidance to those expatriates who are still trying to decide whether to enter the 2012  IRS Offshore Voluntary Disclosure Program or just proceed with a regular disclosure.  READ MORE DETAILS  ON JACK TOWNSEND (CRIMINAL TAX ATTORNEY) BLOG.

Another Tax Professional reports the following:  One of the  firm’s clients opted out and received no penalties whatsoever and another is opting out and may receive just one $10,000 penalty over 8 years even though the taxpayer had $1M+ overseas financial accounts .This professional fees the reason for these successes is  that OVDI penalties are mandated by the National Office and agents are mandated to assess penalties, whereas if someone opts out then the local office has the authority to close the case (and is typically motivated to do so to clear inventory).

FBAR (TDF 90-22.1) - When is there willful failure to file which leads to highest penalties?

The  4th District Federal Court has just held that there is willful failure to file an FBAR (TDF 90-22.1) form when you check the box "NO" on schedule B with reference to foreign bank and finanical accounts when you know you have combined highest balances in foreign accounts of $10,000 or more during the year. They stated this is sufficient showing of willfulness whether or not you know the FBAR (TDF 90-22.1) existed or was required to be filed.

If you willfully fail to file an FBAR form the penalties can be the greater of $100,000 or 50% of the highest balance in your accounts for each year. There are also criminal penalties  for willful failure to file of up to five years in Jail and a $250,000 fine.

The penalties for non-willful failure to file the Form can be $10,000 or less.

10 IRS Rules for Stress-Free Foreign Financial Accounts

See the article HERE from Forbes Magazine for these ten rules: Remember financial accounts also  include foreign pension accounts, gold held in another's  vault, foreign contracts you are collecting payments and interest on, cash surrender value of foreign life insurance, positive balances (you are owed the money) in foreign credit cards,  foreign stock broker accounts, and any other manner of foreign financial asset.  Interesting enough it does not include real estate if held in your own name.  All of these items must also be included in Form 8938 if you are required to file.

Interestingly enough foreign real estate only has to be reported as a foreign assets if you hold it in a foreign corporation, partnership, LLC, or trust.  If you hold it in your own name and do not rent it out, you do not have to tell the government anything about it.  This also holds true with respect to gold, cash, diamonds, etc. located abroad and kept in your matters or personal foreign safe.

IRS KNOWN TO BE INVESTIGATING BANK AND FINANCIAL ACCOUNTS IN THE FOLLOWING NAMED COUNTRIES

Though the IRS tries to keep their investigation into offshore financial accounts held by US taxpayers confidential, it is known that they are investigating bank accounts and other financial accounts owned by US taxpayers, Citizens and Permanent Residents in the following countries:

1. Switzerland
2. Liechtenstein
3. Israel
4. India
5. Singapore
6. Hong Kong

The risk of criminal and/or substantial civil penalties grows greater as the US Internal Revenue Service (IRS) and Department of Justice (DoJ) complete more bank-investigations and as foreign banks continue to co-operate with US government officials.

Final Form 8938- Statement of Foreign Financial Assets Released

US Taxpayers including US Citizens, US Permanent Residents, and US Expatriates  may have to file Form 8938 with their US Income tax returns for 2012 to report their foreign financial assets.  The estimated time to complete this form is 1 to 3 hours.

Every taxpayer with assets located outside the US should review the instructions to this form to determine if they must file it. Read the Instructions to Form 8938 here.   Failure to file the Form 8938 when required can result in severe monetary penalties and criminal prosecution.


View the 2012 tax  year Form 8938  here.

FATCA Produces Fear Among US Expatriates and Foreign Banks

US Expatriates living Abroad and Foreign Financial Institutions are all in fear of the "sledge hammer" rules they must comply with in order to satisfy the IRS reporting rules on accounts owned by US taxpayers.  Some foreign banks are refusing to open bank accounts for US taxpayers in order to avoid having to comply with the extensive FATCA report rules.

 US taxpayers with sufficient foreign assets will have to start filing form 8938 with their 2012 tax returns which could take up to three hours to complete. That new form is in addition to the existing foreign assets reporting forms which must be filed which include Forms TDF 90-22.1, 5471, 8865, 3520, etc.

Taxpayers and financial institutions that fail to comply with the foreign assets tax reporting rules face severe monetary penalties and possible criminal prosecution.  We can help you avoid these dire consequences.

Read more  in  this New York Times Article

New FBAR form with Revised Instructions Just Released by IRS

The IRS just release in November a new FBAR (TDF 90-22.1) form with revised instructions which clarify some of the filing requirements and resolve some of the  open issues concerning when to file that form.

If you are filing it late (after June 30th following the end of a calendar year) the instructions still advise you to attach a reasonable late filing excuse, but fail to state whether or not  attaching that excuse will reduce the potential late filing penalty of up to $10,000 for "unwillfully" filing the form late.

SEE THE FORM AND  READ THE NEW INSTRUCTIONS HERE

SWISS GOVERNMENT OFFERS TO MAKE DEAL WITH IRS

Reuters reports the Swiss government has offered to pay a $10 Billion dollar penalty to the IRS  and US Justice Department for civil penalties in connection with its alleged  co - conspirator activities which allowed US taxpayers to avoid paying taxes on their income and secret assets held abroad.  This article shows how strong the current IRS effort to get foreign bank to reveal information on their US account holders actually is.

The IRS will not accept the proposed settlement unless the names of all US depositors and details of their accounts are included in the deal.  Read More Here.

Special Extended Filing Date for pre-2010 FBAR Signatory Powers IS November 1, 2011

November 1, 2011 is the deadline for persons whose relationship to foreign accounts is as signatory only (i.e., those persons who have no ownership or title interest in any foreign accounts but serve as signatory only) to file FBARs for pre-2010 years. See Notice 2011-54, 2011-29 IRB 53. Those who qualify for this extended deadline should take action to file immediately.

The problem for such signatories, of course, is that U.S. owners (title or beneficial) may have their own FBAR filing requirements and, unless the owners filed (or will file) pursuant to a voluntary disclosure (OVDI or regular (quiet or noisy)), the signatory FBARs will not match to owner FBARs.  For those U.S. taxpayer owners who decided to go forward without correcting the past, their signatories (usually family members or friends) are at risk if they choose not to file the signatory FBARs within this extended deadline.  If they file, their FBARs could be the last link in the chain in identifying the U.S. taxpayer owners who have not gotten right with the IRS and, if they don't file, they are at risk of huge penalties.   This choice is not a good one for family or friends.  Owners of the accounts should consider now getting right with the IRS (however they do so, whether by quiet or noisy disclosure) so as to mitigate the  potential damage all signatories.

Amercian Citizens Abroad Call for Repeal of Foreign Bank Account Reporting on US Taxpayer Offshore Accounts

American Citizens Abroad (ACA) is advocating for the repeal of the draconian IRS rules requiring foreign banks withhold and report on foreign bank and financial accounts held by US taxpayers located  outside of the USA. Read the Forbes Magazine Article by clicking on this link.

Ninth Circuit finds Fifth Amendment (self incrimination) inapplicable to offshore banking records

M.H. v. United States; No. 11-55712 (8/19/2011)

The Ninth Circuit recently held that the Fifth Amendment privilege against self-incrimination may not be used by a taxpayer under grand jury investigation for the use of his undisclosed Swiss bank accounts.

Facts. An unamed taxpayer was the target of a grand jury investigation to determine whether he used undisclosed Swiss bank accounts to evade paying federal taxes. Records indicating that the taxpayer had transferred assets from an account at UBS AG to an account with UEB Geneva in 2002 was disclosed to the U.S. under a 2009 deferred prosecution agreement between the U.S. Department of Justice and UBS.

District Court. The U.S. District Court for the Southern District of California granted a motion to compel the taxpayer to provide his records pertaining to his foreign bank accounts under the Required Records Doctrine. Under the doctrine, records that are required to be maintained by law fall outside the scope of the Fifth Amendment privilege, when certain conditions are satisfied.

The taxpayer argued that the information requested could conflict with other information he may have provided to the IRS. Thus, production of the requested records would be self incriminating. Moreover, the taxpayer argued that the denial of maintaining such evidence would also be self incriminating because the failure to maintain such documentation is a felony.

Circuit Court. The Ninth Circuit affirmed the lower court's decision, finding that under Grosso v. U.S., 390 U.S. 62 (1968) documents that are regulatory, customarily kept and have some public aspects apply to documents that must maintained under the Bank Secrecy Act.

The decision can be viewed at http://www.ca9.uscourts.gov/datastore/opinions/2011/08/19/11-55712.pdf.

FBAR Filing Deadline Extended for Certain Financial Professionals

WASHINGTON — The Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) today announced that a small subset of individuals with only signature authority required to file the Report of Foreign Bank and Financial Accounts (FBARs) will receive a one-year extension beyond the upcoming filing date of June 30, 2011.

FinCen today issued Notice 2011-1 that extends the deadline until June 30, 2012, for the following individuals:

• An employee or officer of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”).
• An employee or officer of a controlled person of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.

All other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011, filing date. Unlike with federal income tax returns, extensions of time to file are not available.

Today’s notice was issued to facilitate more accurate compliance of FBAR filings in the wake of recent finalization of regulations. The FBAR filing requirements, authorized under one of the original provisions of the Bank Secrecy Act, have been in place since 1972.

On Feb. 24, 2011, FinCEN published a final rule that amended the Bank Secrecy Act regarding FBARs.

The FBAR form is used to report a financial interest in, or signature or other authority over, one or more financial accounts in foreign countries.

U.S. persons are required to file FBARs Form TD F 90-22.1 annually if they have a financial interest in or signature authority over financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.