The U.S. tax laws require that U.S. taxpayers must report their worldwide income, regardless of whether they are living in the U.S. or abroad. In addition all U.S. taxpayers who have an interest in, or signatory or other authority over a bank, securities or other similar foreign accounts must file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), if the aggregate value of the foreign accounts exceeds $10,000 at any time during the calendar year.
In addition to filing an FBAR form, the U.S. taxpayer must follow certain reporting requirements on his or her annual tax return. First, the U.S. taxpayer must include a completed Schedule B, Interest and Ordinary Dividends, with his or her annual tax return. On Schedule B, the taxpayer will complete Part III, Foreign Accounts and Trusts, which asks whether, at any time in the year, the taxpayer had a financial interest in or signatory authority over a foreign financial account. Schedule B also asks whether the taxpayer is required to file an FBAR, and if so, in which foreign country the financial account was located.
The U.S. Taxpayer may also be required to file Form 8938, Statement of Specific Foreign Financial Assets with his or her annual tax return. Whether a taxpayer is required to file this form depends on where the taxpayer lives, the taxpayer’s filing status, and the value in the accounts.
Failure to comply with the above reporting requirements can result in steep penalties to the unwitting taxpayer including civil and criminal charges. When investigating tax evasion, however, the IRS does not limit its inquiries to those who are responsible for paying taxes.
U.S. tax law provides that any person who willfully aids or assists in, counsels, or advises the preparation of a tax return or other IRS document that is fraudulent or false as to any material matter can be charged with a crime. If convicted, this is a three year felony that carries a maximum three year prison sentence and a fine of up to $250,000. An individual does not need to sign the document in question to found guilty of this crime and this statute is often is used to catch tax preparers, accountants, or lawyers who help taxpayers cheat on their taxes. IRC §7206(2).
In June 2012, three managers (David Kalai, Nadav Kalai, and David Almog) of a tax return preparation service called, United Revenue Service (“URS”), were indicted before the United States District Court for the Central District of California. The indictment alleged that the defendants prepared false individual income tax returns which did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts. If convicted, each defendant faces a maximum of three years in prison for each count and a maximum fine of $250,000 for each count.
This indictment appears to be just the beginning of the Justice Department’s attempts in California to prosecute not only those who have undeclared foreign bank accounts and under- (or un-) reported income to the IRS, but those who have assisted the taxpayers with improperly reducing (or avoiding altogether) their income tax liability to the IRS.
If you are under investigation or have been charged with a crime related to false preparation or false presentation of tax returns or you have just learned from your client that foreign income and foreign bank accounts needed to be reported on tax returns, you should speak with an experienced criminal tax defense attorney at the Law Offices Of Jeffrey B. Kahn, P.C. who can help you determine the most effective course of action.
Description: Protect yourself from loosing your license and being charged with fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in San Francisco, Los Angeles and elsewhere in California defend you from the IRS.