February 2017 JD Supra
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Due to the Foreign Account Tax Compliance Act (FATCA) and the work of IRS special agents (IRS-CI), international tax transparency is here. There is virtually nowhere to hide.  On 1/18/17, the Department of Justice (DOJ) reported that three residents of Orange County, California pleaded guilty to hiding millions of dollars in “secret” foreign bank accounts (https://www.justice.gov/opa/pr/southern-california-residents-plead-guilty-hiding-millions-dollars-secret-foreign-bank).  They admitted to willfully failing to file required reports of Foreign Bank and Financial Accounts (FBARs), and to disclosing their financial interest in, signature authority over, bank, securities, and other financial accounts in a foreign country with an aggregate value of $10,000.00 or more.

In the case of the three Orange County residents, there was a “partial” declaration on an individual’s tax return that was the “alert” or the “heads up” to the IRS.  The subsequent financial investigation conducted by IRS-CI led to the prosecution of the case.  Each of the three residents face up to five years in prison,  plus close to $5MM in aggregate fines payable to the US Treasury.

IRS-CI Chief Richard Weber said: “Regardless of where the money is hidden around the world, IRS-CI will follow the sophisticated financial transactions and ensure everyone is held accountable for the taxes they are required to pay.”  Caroline Ciraolo (head of the of the DOJ’s Tax Division) said: “The United States and foreign jurisdictions are sharing information and working together to ensure that citizens around the world are paying their fair share. The guilty pleas entered today are yet another example of what awaits U.S. taxpayers who continue to flout the law.”

Chapter 31 of the United States Code designates willful FBAR violations as a felony.  For willful FBAR violations, the financial penalty per account may be the greater of $100,000 or 50 percent of the highest balance in the account in the year of the violation, for each violation.  Don’t be a victim of your own making.  If you have FBAR filing deficiencies, consult now with your tax specialist.