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Foreign Bank Account Representation – Offshore Practice

Identifying U.S. taxpayers and entities that use secret offshore bank accounts remains a top priority for the Department of Justice.

For years, numerous taxpayers holding offshore or foreign bank accounts or having offshore income have not disclosed the existence of these accounts or claimed income from them on their income tax returns. These taxpayers thought that the U.S. government could not obtain information about their accounts.

THINGS HAVE CHANGED

Through its Offshore Compliance Initiative, Foreign Account Transaction Compliance Act (FATCA), and the use of Conventions and Tax Treaties, the US will easily identify individuals and entities with offshore bank accounts and other financial interests overseas.

The US has been very active in criminally prosecuting identified individuals, as well as assessing tremendous penalties and fines.

Criminal FBAR Related:

The U.S. government’s strategy for enforcing offshore bank account reporting and the taxation of worldwide income & assets has been to go after the banks who then turnover names and information in the hopes of negotiating for lesser criminal charges and fines.

Note: FAQ 21 of the OVDP's frequently asked questions states that the IRS may announce that groups of taxpayers "that have or had accounts at specific financial institutions will be ineligible [for the OVDP] due to U.S. government actions in connection with the specific financial institution." Presumably, those taxpayers at banks not blocked for participation and who otherwise qualify may still apply for entry to the program.

Not only have the banks turned over names of their employees for investigation and identification of offshore account holders, but the DOJ is independently following its own source of leads - prior amnesty applications, data mined from summonses, and criminal tax prosecutions.

When individuals such as the above are identified, part of any plea deal requires full disclosure of all information. Therefore, these bankers end up [going] through client by client, colleague by colleague,” said Mark Daly, a trial attorney with the U.S. Justice Department’s tax division. “It has been extremely helpful.”

As of December 2013, the US has criminally prosecuted approximately 130 individuals for failing to report their offshore bank account and related tax crimes such as: Tax Perjury, Conspiracy, False Statement, Tax Obstruction, Failure to File Tax Returns, and Structuring. In addition to facing the prison time (sentences are governed by the Federal Mandatory Minimum Guidelines), all civil penalties apply. Therefore, these taxpayers are not only convicted felons for the rest of their life, but also face penalties that are up many times the tax loss to the government. For instance, a recent plea in the Northern District of California for involved an individual prosecuted for failing to file an FBAR. He had inherited an account from his father. The total loss to the government was $16,000. He pled guilty and was sentenced (probation 2 years). The civil penalties and fines were $900,000.

also see: http://www.justice.gov/tax/offshore_compliance_intiative.htm

Civil: Offshore Practice Group

The offshore voluntary disclosure programs administered by the IRS have resulted in over thirty thousand US taxpayers coming forward and in exchange for lower penalties and no criminal prosecution. These programs have revealed banks, bankers, lawyers and associated parties who are then prosecuted to the full extent of the law.

Voluntary Disclosure for Offshore Bank Accounts, Failure to report FBAR

Civil Tax & FBAR Penalties

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