Anyone who believes the IRS takes a “kinder, gentler” approach to taxpayers who don’t report their offshore bank accounts had their hopes dashed this week. In the news were two cases that involved secret Swiss bank accounts, millions of dollars unreported in those accounts and willful attempts at keeping those accounts hidden.
- A Virginia court ruled in favor of the IRS against an ex-Mobil executive who they said intentionally failed to disclose his offshore accounts and comply with FBAR regulations. Reuters reported in their article Ex-Mobil executive loses offshore tax fight with IRS that former senior Mobil Oil Corp executive, Bryan Williams was charged in federal court with hiding over $7 million in two Swiss bank accounts from 1993-2001.
- On July 24, a Florida court sentenced former UBS client and Miami Beach resident, Luis A. Quintero for willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR). The charges handed down to Quintero were as follows:
Four (4) months in federal prison
(3) years of supervised release
250 hours of community service
A criminal fine of $20,000
A civil penalty of $2 million civil penalty for the FBAR violation
Both cases represent “test cases” for tax lawyers to see how the courts will rule on FBAR willfulness cases; instances where a taxpayers knows they need to disclose account information on FBAR’s but intentionally do not.
Williams has faced the feds in court before. In 2003, he pled guilty to federal criminal charges of fraud and conspiracy associated with his Swiss bank accounts. In that case, Williams:
- Admitted to receiving $2 million in covert payments that helped Mobil buy a stake in a Kazakhstan oil field in 1996.
- Received a sentence to 46 months in prison and agreed to pay back taxes and interest.
The judges in his recent case reasoned that Williams’ 2003 admission and conviction does not allow him to claim he “did not know” about the FBAR reporting requirements. Therefore, his non-reporting is considered a willful violation that carries harsher IRS penalties.
Offshore reporting activity is managed by the Criminal Investigation Division (CID) of the IRS. Therefore, failing to file the proper FBAR paperwork and meet the June 30 deadline can be met with severe penalties:
- A civil penalty of $10,000 for each non-willful violation.
- Willful violations can be levied for up to $100,000 or 50% of the account amount for each violation. Separate violations = each year of non-filing.
- Criminal penalties can result in a $250,000 fine and 5 years of imprisonment.
(Note: The IRS states that “not knowing” and not properly reading tax forms can be a form of “willful blindness” that can carry the heavier penalty.)
However, taxpayers who are proactive and come forward to report their offshore assets even if the reporting deadline passed, do better with the IRS than taxpayers like Quintero and Williams who do nothing. If you have unreported offshore accounts at this stage, you will need to hire a tax attorney or tax resolution specialist to help you. These tax experts will get you back into tax compliance by amending your tax returns and file FBAR reports and all other paperwork associated with offshore account disclosure. Their goal is to achieve tax relief through a negotiated offshore tax settlement.
More Tax Help, IRS News and Tax Relief Tips:
- Offshore Tax Accounting Paperwork
- Swiss Bankers Caught Hiding Offshore Accounts from IRS
- Treasury Proposes Multilateral Agreement for Offshore Compliance
- IRS Help for Americans with Foreign Income
- FATCA-No Tax Relief for Americans Living Abroad