Singapore FBAR Penalty Case 2020

Singapore FBAR Penalty Case & Willfulness

Singapore FBAR Penalty Case & Willfulness

Singapore FBAR Penalty Case & Willfulness: When it comes to IRS offshore compliance for matters involving FBAR & FATCA, the country of Singapore very commonly comes up in the conversation. That is because U.S. Persons with ties to Singapore will frequently have passive investments, including foreign life insurance, Bank accounts, UOB trusts and CPF.

In fact, the CPF is one of the few foreign provident funds that the Internal Revenue Service has issued some memoranda on, involving the taxation of the fund. According to the memoranda, IRS has determined both the contributions to the fund and growth within the fund are taxable – and do not qualify under 402.

Recently, the US government filed a complaint against a California couple with unreported accounts in Singapore.

Here’s a brief summary of U.S. v. H0 & Tay:

US v. Ho and Tay (Case No. 3:20-cv-3818)

The complaint alleges that Defendants had ownership in foreign accounts in Singapore, as follows:

“Since approximately 1991, Mr. Ho has held an account at DBS Bank Ltd. in Singapore, account number ending in -911-1 (“DBS account”).

In approximately 2003, Ms. Tay was added as a joint account holder of the DBS account. For the years 2011, 2012, 2013 and 2014, Mr. Ho and Ms. Tay jointly owned and managed the DBS account, and each has personally used and profited from the funds in the account. Funds from the DBS account were used to pay for a life insurance policy on Mr. Ho’s life with Aviva Limited, a foreign insurance company.

In 2013 or 2014, Mr. Ho traveled to Singapore to open an account at OCBC Bank, account number ending in -9001 (“OCBC account”). The OCBC account was held in defendant Michael S. Ho’s name. Both Mr. Ho and Ms. Tay held a beneficial financial interest in the OCBC account, and/or had signatory authority over the OCBC account.

The OCBC account was used to facilitate the purchase of a rental property in Bangkok, Thailand.

In 2014, Mr. Ho deposited approximately $246,000 in U.S. dollars into the OCBC account.

During each of the years 2011, 2012, 2013, and 2014 the value of the DBS account exceeded $10,000 in U.S. currency, and both Mr. Ho and Ms. Tay were each separately required to report their interest in the DBS account on a timely filed FBAR for each of these years.

During the year 2014, the aggregate value of the DBS account and OCBC account exceeded $10,000 in U.S. currency, and both Mr. Ho and Ms. Tay were each separately required to report their interests in the DBS account and OCBC account on a timely filed FBAR for the 2014 calendar year.”

Defendants had accounts in Singapore

According to the complaint, both defendants had bank accounts in Singapore that met the threshold for reporting.

Moreover, there was a rental property which was generating income and the accounts for both actively being used.  Complicating the matter further is that one of the defendants was making deposits of U.S. currency into one of the accounts. 

*When a person deposits US currency into a foreign account it tends to ding the IRS’s radar. While there is nothing inherently nefarious about making such a deposit, there is the perception that the person should also have an understanding of any U.S. tax or reporting requirements.

Defendant had an Accounting Background

The Government also tossed in the fact that Defendant has a bachelor’s degree in accounting and finance from Edith Cowen College in Australia for good measure/

Of course, just having an accounting degree does not make a person a tax expert.

Many CPAs and accountants never practice tax at all.

“No” on Schedule B

Marking “no” on IRS Form 1040, Schedule B is oftentimes the catalyst for an FBAR investigation.

As further alleged in the complaint:

“Both Mr. Ho and Ms. Tay were required to file a Schedule B, Interest and Ordinary Dividends, to their Forms 1040 for each of the years 2011, 2012, 2013, and 2014.

Mr. Ho and Ms. Tay failed to attach the required Schedule B for the years 2011 and 2013.

For 2012, Mr. Ho and Ms. Tay filed a Schedule B, but falsely answered “no” to the first question on line 7a of Part III, Foreign Accounts and Trusts (“At any time during 2012, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions.”), indicating that each did not have any such interest or authority over a foreign account.

For 2014, Mr. Ho and Ms. Tay filed a Schedule B, but falsely answered “no” to the first question on line 7a of Part III, Foreign Accounts and Trusts (“At any time during 2014, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions.”), indicating that each did not have any such interest or authority over a foreign account.”

Misrepresentation During an IRS Audit

Defendants apparently made some misrepresentations during a tax audit(s).

This is a topic we have covered many times. Whether it is during an eggshell audit or regular tax audit, it is never advisable to intentionally misrepresent facts to the IRS Agent.

This goes double for matters involving “quiet disclosure.”

As further provided in the complaint:

“During an audit related to his 2009 Form 1040, Mr. Ho falsely stated that he did not have any foreign bank accounts, when in fact he jointly owned the DBS account with Ms. Tay.

On April 17, 2013, during an interview for an audit, Mr. Ho falsely stated to an IRS Revenue Agent that he did not have any assets or accounts in foreign countries.

On January 27, 2016, both Mr. Ho and Ms. Tay falsely stated to an IRS Revenue Agent that since coming to the United States, neither of them had any foreign accounts or businesses. Both had an interest in the foreign DBS account for over a decade, and had immigrated to the United States in or before 1994.

On October 26, 2016, a representative for Mr. Ho and Ms. Tay informed the IRS Revenue Agent conducting the audit of the existence of the DBS account and Mr. Ho and Ms. Tay’s joint ownership of that account.

On September 21, 2017, Mr. Ho and/or Ms. Tay disclosed the existence of the OCBC account to the IRS Revenue Agent conducting the audit.”

Willfulness & FBAR

As a result of these facts, the government seeks willful penalties over for the non-compliance and alleged misrepresentations made during audit.

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