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Federal Government Seeking Prison Time for Undisclosed Offshore Investments

Offshore Account Update

Posted in on September 25, 2014

The Department of Justice and the Internal Revenue Service have joined forces to track down tax payers who are not fulfilling their reporting requirements. Taxpayers with money invested offshore must report the accounts each year and complete a form called the Report of Foreign Bank and Financial Accounts (FBAR). To identify taxpayers who may not be in compliance with the rules, the DOJ has been making deals with Swiss banks. The banks can turn over customer account information to avoid criminal charges and/or to reduce the potential financial penalties that could be imposed on the banks for failure to comply with U.S. tax rules. 

The Foreign Account Tax Compliance Act (FACTA) requires foreign banks to reveal information to authorities about Americans with offshore accounts valued at $50,000 or more. If banks don’t turn over customer details, they could face legal trouble- so many banks are cooperating.  However, taking action against the banks is not the only thing that is being done to stop people from parking money offshore and not reporting it. The government is also cracking down on investors who haven’t reported, and Forbes reports that they are looking for investors who they can make an example of. Investors should be worried about this government crackdown, and should contact an experienced New Jersey tax law firm for help if they fear they may be in violation of tax requirements. 

Federal Government is Seeking Prison Time for Undisclosed Investment

Ty Warner, the creator of Beanie Babies, is one of the offenders the government is coming down hard on.  Warner pled guilty to having offshore Swiss accounts that were undeclared. He agreed to pay the government the sum of $53 million because of his failure to follow tax reporting laws.  However, this was not enough for prosecutors, who were pushing jail time for Warner.  

Prosecutors were displeased when the investor was sentenced to probation only, and took the unprecedented step of appealing the sentence.  It is very rare for prosecutors to appeal once the decision on sentencing has been made, but in this case they are seeking to ensure the sentence is a strong deterrent for others with offshore foreign accounts. 

Of course, the large fines alone, not to mention the risk of any type of criminal prosecution, may be sufficient to convince many people with undeclared offshore accounts that they need to come forward before their Swiss bankers turn over their information.

The Offshore Voluntary Disclosure Program (OVDP) has been set up to encourage investors to voluntarily report accounts that they may not have properly disclosed in the past. Nonwillful violators who failed to file FBARs because they didn’t know they had to or because they made a mistake can take advantage of streamlined disclosure procedures to reduce the potential fines they face and avoid being subject to criminal prosecution. 

Unfortunately, not everyone who applies for the OVDP will be considered a non willful violators. With the government aggressively going after people who didn’t report their offshore accounts, you need to be very careful if you are not in compliance with the rules. A New Jersey tax law firm can provide you with advice and assist you in deciding how to deal with your tax issues related to offshore accounts.


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