Source: https://www.goldinglawyers.com/tax-evasion-foreign-accounts-2018-example-of-foreign-tax-crimes/
Timestamp: 2019-04-19 00:27:07
Document Index: 31214515

Matched Legal Cases: ['§ 7201', '§ 7202', '§ 7203', '§ 7206', '§ 7206', '§ 371', '§ 7202', '§ 7203', '§ 7206', '§ 7206', '§ 371']

Home Example of Foreign Tax Crimes Tax Evasion Foreign Accounts (2018) – Example of Foreign Tax Crimes
1 Tax Evasion Foreign Accounts
2 Civil Tax Evasion – Section 6663
3 Criminal Tax Evasion – Various Sections
4 Title 26 USC § 7201 – Attempt To Evade or Defeat Tax
5 Title 26 USC § 7202 – Willful Failure To Collect or Pay Tax
6 Title 26 USC § 7203 – Willful Failure to File Return
7 Title 26 USC § 7206(1) – Fraud and false statements
8 Title 26 USC § 7206(2) – Fraud and false statements
9 Title 18 USC § 371 – Conspiracy to Commit Offense or to defraud the U.S.
10 Examples of Foreign Bank Accounts, Tax Fraud & Evasion
10.1 Matthew and His Foreign Account – Tax Fraud and Evasion
10.2 Dana and Her Foreign Account – Intentional Omission
10.3 Michael and His Foreign Accounts – Willful Blindness
10.4 Reckless Disregard (Civil vs. Criminal)
11 Civil Offshore Penalties (Less Evidence Required)
14 Summary of IRS Offshore Voluntary Disclosure
16 Common Un-filed IRS International Tax Forms
17 Golding & Golding – Offshore Disclosure
18 What To Look For in an OVDP Attorney?
Tax Evasion Foreign Accounts (2018) – Example of Foreign Tax Crimes (Golding & Golding)
The IRS and DOJ are targeting Foreign Bank Accounts and Offshore Evasion. Not only has the IRS initiated several International Tax Enforcement Groups, but in a recent budget request by the DOJ, the DOJ sought $500,000 for an annual budget in order to develop an “Offshore Evasion Team.”
Tax Evasion Foreign Accounts
Tax Evasion occurs when a person knowingly, intentionally or willfully avoids taxes. A person may perpetuate Tax Evasion by hiding income, artificially deflating income, artificially increasing deductions or otherwise falsifying tax returns in order to obtain a benefit.
Civil Tax Evasion – Section 6663
Civil Tax Evasion amounts to Tax Fraud and may subject a person found liable (when the IRS can meet the Clear and Convincing Standard) to a 75% penalty.
Criminal Tax Evasion – Various Sections
There are many different crimes a person can be charged and convicted of when it involves “Criminal” Tax evasion. To meet the standard of proof, the U.S. Government (Typically the DOJ) must meet the highest standard of proof, which is Beyond a Reasonable Doubt (Qualified at around ~95%)
The following are common Tax Evasion crimes:
Title 26 USC § 7202 – Willful Failure To Collect or Pay Tax
Title 26 USC § 7203 – Willful Failure to File Return
Title 26 USC § 7206(1) – Fraud and false statements
Title 26 USC § 7206(2) – Fraud and false statements
Title 18 USC § 371 – Conspiracy to Commit Offense or to defraud the U.S.
See Other Post (Indicators of Fraud)
Examples of Foreign Bank Accounts, Tax Fraud & Evasion
Matthew and His Foreign Account – Tax Fraud and Evasion
An example of a person being intentional is relatively simple: Matthew is aware that he has foreign accounts and that the foreign accounts earn income. He is also aware that he supposed to report this information to the IRS.
Matthew prepares his tax returns himself using his own software. When the software prompts him regarding foreign accounts, he marks “No” to Question Seven, Schedule B even though he is fully aware that he has foreign accounts.
In addition, even though Matthew is aware that he supposed to report the income on his US tax return, he intentionally does not do so.
This is an example of clear cut tax fraud and tax evasion. In order to prove civil tax fraud the IRS would have to show clear and convincing evidence. In order for the US government to prove criminal tax evasion, they would have to prove it beyond a reasonable doubt.
**But, in order to prove willful FBAR penalties, the IRS would only have to show preponderance of the evidence.
Dana and Her Foreign Account – Intentional Omission
An example of intentional omission is also relatively simple (but slightly more complicated). Why? Because you are proving a negative. For example, Dana has accounts scattered throughout many Asian countries. She’s has had these accounts for many years, and they have amassed substantial balances, and earn significant income.
When Dana sits down with her CPA, he asks her for a list of any income she has received from anywhere worldwide. Dana provides a list of certain selected accounts and income, but does not identify several other accounts that she knows she has, and knows earns income.
She’s careful, and chooses to omit accounts in countries in which the US does not have a bilateral tax treaty. Unfortunately, what Dana fails to realize is that there are FATCA Agreements with more than 110 countries.
Even though Dana reported some of her income and foreign accounts, she intentionally omitted other accounts.
This is an example of tax fraud and tax evasion by intentional omission. In order to prove civil tax fraud the IRS would have to show clear and convincing evidence. In order for the US government to prove criminal tax evasion, they would have to prove it beyond a reasonable doubt. But, in order to prove willful FBAR penalties, the IRS would only have to show preponderance of the evidence.
Michael and His Foreign Accounts – Willful Blindness
Willful blindness is another form of tax evasion or tax fraud. In a situation regarding willful blindness, a person intentionally avoids the knowledge that they could otherwise obtain.
For example, let’s say Michael goes to his CPA. The CPA provides a brief summary and brochure of how the IRS is focusing on foreign income, accounts, investments, or assets. Michael knows he has foreign income, accounts, and assets and therefore purposely does not read the brief brochure, believing this will absolve him of any liability…it won’t.
As you can see, willful blindness is a bit more difficult to prove, but if the IRS or US government could show the emphasis the CPA placed on the foreign money, coupled by the fact that Michael had every opportunity to know about the requirements, but chose not to, the IRS or US government may be able to show an Willful Omission.
It should be noted that reckless disregard is a weaker version of willfulness, because it does not contain the same level of intent as the other examples provided above.
As such, reckless disregard can typically not be used to pursue a criminal indictment or other criminal prosecution against an individual. While reckless disregard can be used to seek willful FBAR penalties or civil tax fraud – it cannot be used as a basis for a criminal investigation, which requires a level of intent (aka knowledge)
Civil Offshore Penalties (Less Evidence Required)
FBAR Foreign Life Insurance (2019) – How to Report a Foreign PolicyForm 8854 Instructions (2018) – Basics of IRS Expatriation Statements