Willful Streamlined Procedure Leads to Criminal Indictment

Willful Streamlined Procedure Leads to Criminal Indictment

False Streamlined Offshore Filing Leads to Criminal Tax Charges

False Streamlined Offshore Filing Leads to Criminal Tax Charges (United States of America v. Azizur Rahman): To assist Taxpayers with getting into compliance for not properly disclosing foreign accounts in prior tax years — on the FBAR and other international information reporting forms — the IRS has developed various offshore amnesty programs. One of the more popular programs is the Streamlined Filing Compliance Procedures. But, those procedures are only available to taxpayers who are non-willful. Despite this fact, there are still some Taxpayers who still submit to the streamlined program — either because they believe they will not get caught or because they misunderstand the parameters of the program.

More often than not, it is because the Taxpayer was goaded by an unethical attorney who convinced them to submit to the streamlined program — even when the Taxpayer acknowledges they are willfulThese attorneys usually work in tandem with outside CPAs. Together, the Attorney and CPA intentionally convince the Taxpayer that even though they were willful, the tax noncompliance was “minor,” so they will not get caught.

These attorneys then intentionally misapply the principles of “Kovel,” to try to shield themselves from a malpractice lawsuit. Here is a case study example of how an unethical attorney convinces a willful taxpayer to go Streamlined.

Willfulness Disqualifies Taxpayer for Streamlined

No matter what any attorney or tax professional tells you, if you are willful you do not qualify for the streamlined program.  Even if you believe your noncompliance was minor — there is no de minimis rule for willfulness. In other words, if you are willful then you do not qualify for the streamline program.

US v Rahman

Mr. Rahman submitted to the Streamlined Program, but based on information the IRS had about the circumstances surrounding the noncompliance and subsequent disclosure, they determined him to be willful — and the case was referred to the Department of Justice; he was subsequently indicted for his alleged crimes

Let’s take a look at some of the key portions of the indictment:

      • “On or about March 20,2015, Azizur Rahman disclosed to the Internal Revenue Service (“IRS”) that he had previously failed to properly report his financial interest in, or signature authority over, foreign bank accounts on his tax filings. Azizur Rahman claimed he was eligible for a reduced penalty for this past failure because he was unaware of his legal obligation to report his financial interest in, or signature authority over, his foreign bank accounts. In his disclosure, the defendant identified three bank accounts in Switzerland. He verified that the 2015 disclosure was a complete statement of all the foreign assets that he had failed to report in the six prior years.

      • The defendant’s 2015 disclosure to the IRS was false. Azizur Rahman’s disclosure did not report all the foreign bank accounts that he controlled in the six prior years. Azizur Rahman had a financial interest in, or signature authority over more than twenty additional foreign bank accounts in at least three other foreign countries, ail of which he had previously failed to report to the IRS, and which he continued to conceal on his 2015 disclosure.”

Foreign Account Background

      • From at least June 2012 through at least October 2013, Azizur Rahman held a financial interest in, and signatory authority over, one or more accounts at Lloyds Private Bank held in his own name, including an account ending in 9295. In the paperwork to open the account, Azizur Rahman falsely reported he was a “Non-US Person.”

*Rahman has interest/ownership over many foreign accounts.

Schedule B to Report Ownership of Foreign Accounts

      • “On or about the dates listed in the chart below, Azizur Rahman made and subscribed IRS Forms 1040 for the tax years listed below, which were filed with the IRS. On each of the Schedules B of these tax returns, Azizur Rahman claimed, in effect, that he did not have an interest in, or signature authority over, one or more financial accounts in a foreign country with an aggregate value of more than $10,000 at any time during those years.

      • For tax years 2014 through 2016, Azizur Rahman did, in fact, have a financial interest or signature authority over foreign financial accounts, including accounts at (i) Credit Agricole, (ii) UBP, (iii) Bank Asia, (iv) BRAG Bank, (v) Dutch-Bangla Bank, (vi) HSBC Bangladesh, (vii) MTB, (viii) One Bank, (ix) Pubali Bank, (x) Southeast Bank, and (xi) UCB. The defendant’s accounts at each of these banks had an aggregate value of more than $10,000 during those tax years, and, thus, Azizur Rahman was required to file an FBAR reporting those accounts.

      • Azizur Rahman failed to file timely FBARs for calendar years 2014 through 2016 with the Commissioner of Internal Revenue.”

Eligibility for the Streamlined Program

      • “In order to be eligible under the Streamlined procedures, taxpayers were required to file amended tax returns for the most recent three years for which the U.S. tax retum due date had passed and certify under the penalties of pejury that their failure to report all income, pay all tax, or submit all required retums was due to non-willful conduct. Under the terms of the Streamlined procedures, the IRS defined non-willful conduct as conduct that was due to negligence, inadvertence, or mistake, or conduct that was the result of a good-faith misunderstanding of the law.”.

DOJ Press Release: Businessman Indicted for Not Reporting Foreign Bank Accounts and Filing False Documents with the IRS

    • ALEXANDRIA, Va. – A federal grand jury returned an indictment today charging a Herndon man with failing to file Reports of Foreign Bank and Financial Accounts (FBARs) and filing false documents with the IRS.

    • According to the indictment, Azizur Rahman, 70, had a financial interest in and signature authority over more than 20 foreign financial accounts, including accounts held in Switzerland, the United Kingdom, the Republic of Singapore, and Bangladesh. For the years 2010 through 2016, Rahman allegedly did not disclose his interest in all of his financial accounts on annual FBARs, as required by law. Rahman also allegedly filed false individual tax returns for the tax years 2010 through 2016 that did not report to the IRS all of his foreign bank accounts and income.

    • Rahman is also charged with filing a false “Streamlined Submission” in conjunction with the IRS Streamlined Domestic Offshore Procedures. Those procedures allowed eligible taxpayers residing within the United States, who failed to report gross income from foreign financial accounts on prior tax returns, failed to pay taxes on that gross income, or who failed to submit an FBAR disclosing foreign financial accounts, to voluntarily disclose their conduct to the IRS and to pay a reduced penalty if their conduct was non-willful. The indictment alleges that Rahman’s Streamlined Submission did not truthfully disclose all the foreign bank accounts in which he had an interest, and falsely claimed that his failure to report all income, pay all tax, and submit all required information returns, such as FBARs, was non-willful.

    • If convicted, Rahman faces a maximum sentence of three years in prison for each of the counts related to filing false tax documents. Rahman also faces a maximum sentence of five years in prison for each count relating to his failure to file an FBAR or filing a false FBAR. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

    • Raj Parekh, Acting U.S. Attorney for the Eastern District of Virginia; Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division; and Kelly R. Jackson, Special Agent in Charge, Washington, D.C. Field Office, IRS-Criminal Investigation, made the announcement.

    • Assistant U.S. Attorney Jamar Walker and Trial Attorneys Sean Beaty and Brian Flanagan of the Justice Department’s Tax Division are prosecuting the case.

    • A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:21-cr-22.

    • An indictment is merely an accusation. The defendant is presumed innocent until proven guilty.

Multiple Count Indictment Puts Taxpayers on Warning

In conclusion, Taxpayers who are willful do not qualify for the streamlined procedures. If a person is willful and they submit to the Streamlined Program, they may face criminal fines and penalties.

International Tax Lawyer Specialist Team: Golding & Golding

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