DOJ Offshore Compliance Conviction (Danger of FBAR/FATCA Delay)
Just knowing about the IRS Offshore Voluntary Disclosure Program, but failing to take action is not the best strategy for compliance.
Especially since the IRS, (and U.S. Government as a whole) continue to make offshore compliance a key enforcement priority.
The most recent conviction comes by way of Los Angeles, Israel and Germany.
DOJ Offshore Conviction Summary
As provided by the Department of Justice’s Website:
A Beverly Hills, California, resident pleaded guilty today to filing false tax returns which did not report his offshore accounts in Germany and Israel and did not report the income earned on those accounts, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman and U.S. Attorney Nicola T. Hanna of the Central District of California.
According to the plea agreement and related court documents, Teymour Khoubian pleaded guilty to filing false tax returns for tax years 2009 and 2010 that failed to report foreign financial accounts in Germany and Israel, and failed to report income earned on those accounts.
Between 2005 and 2012, Khoubian jointly owned multiple accounts at Bank Leumi in Israel with his mother that held between $15 million and $20 million.
Additionally, since at least 2005, Khoubian also owned a foreign account at Commerzbank AG in Germany.
Despite his ownership interest in these accounts and a legal requirement to declare all offshore accounts containing $10,000 or more, Khoubian prepared false tax returns for tax years 2005 through 2011 that did not fully disclose his foreign accounts, nor report all the interest income earned on those accounts.
For instance, Khoubian’s Bank Leumi accounts generated interest income in excess of $4 million between 2005 and 2010, none of which was reported to the Internal Revenue Service (IRS). The total tax loss associated with the Bank Leumi accounts is approximately $ 1.2 million.
At least since 2009, Khoubian was aware of the IRS’s Offshore Voluntary Disclosure Program (the OVDP). The OVDP allowed U.S. taxpayers to voluntarily disclose their previously unreported foreign accounts and pay a reduced penalty to resolve their civil liability for not declaring foreign accounts to U.S. authorities.
During 2011 and 2012, Bank Leumi requested that Khoubian sign a Form W-9 for U.S. tax reporting purposes. In an August 13, 2012, recorded telephone conversation with a banker at Bank Leumi, Khoubian stated that the reason he did not want to sign a Form W-9, was “because you have to pay half of it.”
In 2012 and 2014, Khoubian knowingly made multiple false statements to IRS special agents investigating his foreign accounts, including falsely stating that the Bank Leumi accounts were not in his name, that he did not own a bank account in Germany from 2005 to 2010, that he closed his German bank account and moved all of that money to the United States, and that none of the money in his German bank account was moved to Israel.
As part of the plea agreement, Khoubian agreed to the entry of a civil judgment against him for an FBAR penalty in the amount of $7,686,004. Khoubian further agreed to pay an additional $612,310 in restitution to the IRS.
Khoubian faces a maximum of three years in prison for each of the tax counts to which he pleaded guilty, as well as monetary penalties and a period of supervised release.
This case is being prosecuted by Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci of the Justice Department’s Tax Division, with the assistance of Assistant United States Attorney Robert Conte of the U.S. Attorney’s Office for the Central District of California, and was investigated by the Internal Revenue Service-Criminal Investigation.”
What if I am Out of IRS Compliance?
When you have not met your prior year IRS foreign bank account compliance obligations, your best options are either the traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.
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Be Careful of the IRS
With the introduction and enforcement of FATCA for both Civil and Criminal Penalties, renewed interest in the IRS issuing FBAR Penalties, crackdown on Cryptocurrency (and IRS joining J5), the termination of OVDP, and recent foreign bank settlements with the IRS…there are not many places left to hide.
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