The U.S. Department of Justice announced a US$100M FBAR penalty and criminal guilty plea in an international tax evasion case. The government’s press release on November 4, 2016, provided as follows:
- A Rochester, New York emeritus professor of business administration pleaded guilty today to conspiring with others to defraud the United States and to submitting a false expatriation statement to the Internal Revenue Service (IRS), announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Dana J. Boente of the Eastern District of Virginia, after the plea was accepted by U.S. District Judge T.S. Ellis III.
The case is extraordinary in the steps apparently taken by the business investor/professor in hiding some US$200M of assets overseas. The facts are egregious as reported and tie directly to IRS Form 8854. Hence, this seems to be a very good criminal tax case for the government. See a prior post that briefly discusses IRC Section 7206(1), see, What could be the focal point of IRS Criminal Investigations of Former U.S. Citizens and Lawful Permanent Residents?
Prior posts have discussed the importance of certifying truthfully and accurately as to all items of information requested on IRS Form 8854, Initial and Annual Expatriation Statement; which is made under penalties of perjury (like all U.S. tax statements). See, Part II: C’est la vie Ms. Lucienne D’Hotelle! Tax Timing Problems for Former U.S. Citizens is Nothing New – the IRS and the Courts Have Decided Similar Issues in the Past (Pre IRC Section 877A(g)(4))
Also, prior posts have discussed the steps taken by the government to track taxpayers and their assets globally, to help assure they comply with U.S. federal tax law. See a prior related post, 19 Jan 2014 – Should IRS use Department of Homeland Security to Track Taxpayers Overseas Re: Civil (not Criminal) Tax Matters? The IRS works with Department of Homeland Security with TECs Database to Track Movement of Taxpayers
The recent press release explains how a false IRS Form 8854 was prepared by a co-conspirator of the taxpayer, as follows:
- In 2013, the individual who had nominal control over Horsky’s accounts at the Zurich-based bank conspired with Horsky to relinquish the individual’s U.S. citizenship, in part to ensure that Horsky’s control of the offshore accounts would not be reported to the IRS. In 2014, this individual filed with the IRS a false Form 8854 (Initial Annual Expatriation Statement) that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.
The importance of a complete and accurate IRS Form 8854, is to enable a taxpayer (if they meet other statutory requirements) to avoid “covered expatriate” status. See, the Tax Court case earlier this year 2016, Topsnik v. Commissioner (2016), where the Court found the taxpayer had failed to meet the certification requirements and was necessarily a “covered expatriate.”
Whether criminally or civilly, taxpayers should never underestimate the importance of filing complete and accurate tax returns; specifically including IRS Form 8854, Initial and Annual Expatriation Statement.
Maybe most important of all, it is crucial the taxpayer understands the full range of legal and tax consequences to them regarding the important steps that might lead to “tax expatriation.” The law is complex and fraught with potential minefields. It’s always advisable to have thoughtfully analyzed and considered the consequences of “tax expatriation” long before taking specific steps (pre as opposed to post-expatriation) of renunciation of U.S. citizenship or abandonment of lawful permanent residency.