The U.S. Department of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently issued its Final Rule under the Corporate Transparency Act (CTA) implementing the CTA’s requirements related to reporting beneficial ownership information. While the Final Rule, which goes into effect on January 1, 20204, represents a significant enhancement to current U.S. anti-money laundering laws, it places an undue burden small businesses.  The CTA was intended to make it more difficult to operate shell companies for criminal or tax evasion purposes and will require that “Reporting Companies,” as that term is defined, annually collect and report beneficial ownership information (BOI). Reporting Companies include small companies and will invariable place a further burden on small businesses that operate as corporate or other entity. In the regulatory context, painting with a broad brush is consistent with government’s “one size fits all” approach. The BOI will then be populated and placed in a database maintained by the federal government.


The CTA casts a large net in terms of what entities are required to report BOI to FinCEN and include, but are not limited to, entities that are formed for specific real estate acquisitions or development projects, large companies that form new entities for individual projects as well as small business owners who form an entity to protect themselves from liability. Consequently, corporations, limited liability companies or similar entities formed under state law or foreign entities registered to conduct business in the United States will be required to meet CTA’s reporting requirements. Consequently, bodegas, landscapers and others will be subject to the CTA.


The new Rule serves to implement the CTA’s requirements that reporting companies submit a report to FinCEN that provides BOI of the reporting companies. The implementation of the new Rule will presumably help national security, provide critical information to law enforcement and promote financial transparency.  The predicate for the CTA is based upon the same logic behind the Bank Secrecy Act, which unfortunately has been weaponized against political adversaries and selectively enforced.  The CTA will create similar opportunities for abuse.


The final Rule defines “Reporting Companies” to include both U.S. domestic companies and foreign companies registered to do business in any U.S. state of tribal jurisdiction. Under the Rule, the 23 categories of entities that are specifically exempt from the BOI reporting requirements remain unchanged and include:


  • Certain issuers of securities registered with the Securities and Exchange Commission;
  • Certain financial institutions, including domestic banks, bank holding companies, federal or state credit unions and FinCEN registered money service businesses;
  • Certain U.S. federal and state governmental entities and public utilities;
  • Investment companies and advisors;
  • Insurance companies and insurance producers;
  • Commodity Exchange ACT registered companies;
  • Public accounting firms covered under Sarbanes Oxley;
  • Certain pooled investment vehicles;
  • Certain tax exempt entities, including 501(c) entities, political organizations, and charitable trusts;
  • Large Operating Companies. The term “Large Operating Company” is defined as any entity that
    • Employs more than 20 employees in the United State,
    • Has an operating presence in the United States, and
    • Filed a federal income tax return or information return for the prior year reporting more than $5 million in gross receipts or sale, excluding gross receipts or sales outside the U.S.
  • Companies, whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities that are considered exempt from the reporting requirements.


Ironically, The CTA will do little, if anything; curb the widespread practice of using foreign shell companies that do not register to do business in the states.


It would not be unreasonable to assume that some of the entities that are exempt from the CTA reporting requirements were able to secure exempt status, through effective lobbying efforts and political connections.


The final Rule requires Reporting Companies to provide to FinCEN the following information:


  1. The reporting companies’ full legal name, street address, the state of incorporation or formation or registration and the reporting companies’ Tax Identification Number (TIN). Foreign Companies that do not possess a U.S. TIN are permitted to provide a foreign tax identification number with the name of relevant jurisdictions;
  2. Reporting companies must disclose the beneficial owner or company applicant’s full legal name, date of birth, current residential or business street address and a unique identifying number from an acceptable identification document, such as a valid U.S. Passport, U.S. Identification Document or U.S. Driver’s license. If none of the foregoing documents are available, the reporting company may use a foreign passport. As part of the disclosure the reporting company must identify the jurisdiction that issued the identification document bearing the unique identification number; and
  3. The reporting company must provide a scanned copy of the identification document, bearing the unique identification number.


The final Rule defines the term “beneficial owner” as any individual who, directly or indirectly, either exercises “substantial control” over the reporting company or owns or controls at least 25% of its “ownership interests.”


Under the CTA the Secretary of the Treasury is required to establish security measures designed to maintain confidentiality over the information collected. Once the beneficial ownership information is collected, FinCEN may only disclose the information to government and financial institutions for law enforcement, national security or intelligence purposes and it is prohibited from disclosing the information to the general public. Given Treasury’s abysmal track record with respect to implementing the Foreign Asset Tax Compliance Act (FATCA) and its handling of Report of Foreign Bank and Financial Accounts (FBAR) as well as government’s penchant for leaking confidential information to the media and others for political purposes, Treasury should avoid taking a victory lap.


The IRS estimates that individual taxpayers underreported their income tax on average by $245 billion each year for tax years 2011 to 2013 (See IRS Publication 1415). This underreporting is the largest component of the tax gap—the difference between the amount of taxes owed and taxes paid timely and voluntarily.

There has been a great deal of debate concerning the impact the Inflation Reduction Act (“IRA”) will have on low to middle income taxpayers, including wage earners and small business owners.  According to the Biden Administration and the media pundits, we are expected to believe that spending $80 Billion on hiring 87,000 new agents and beefing up compliance and enforcement initiatives will only affect those whose incomes exceed $400,000.  Better think again.


Questionable tax legislation is not limited to Democrats.  Let us not forget Bush Senior’s famous words: “Read my lips, no new taxes.” Irrespective of political affiliation, history tells us, that changes in the Internal Revenue Code and tax policy have done little, if anything, to protect low and middle income wages earners and small business owners from IRS scrutiny.  The additional funding for the IRS will particularly affect self-employed taxpayers, who will be the first on the IRS hit list.

The Biden Administration’s claims that the new and improved IRS will focus their attention on Taxpayers earning more than $400,000 is debunked by a number of reliable sources as well as historical  audit data.

The Congressional Budget Office (“CBO”) in a Report entitled: “The Effects of Increased Funding for the IRS,” concluded that IRS funding under the IRA will lead to more audits and enforcement measures, and higher taxes for families making less than $400,000. The CBO’s findings directly contradict President Biden’s claim that taxes for those making less than $400,000 will not increase a “penny.”  According to the CBO, the IRS funding would result in at least $20 billion of the total projected revenue being collected from lower and middle-income earners and small businesses.

The Biden Administration’s claim that the new funding will only affect taxpayers earning over $400,000 is a deliberate attempt to deceive the public and is further belied by the fact that 50 Senate Democrats voted against an Amendment offered by Mike Crapo (R-ID). The Crapo Amendment would have protected lower and middle income American taxpayers against new audits by the IRS.  If the new legislation is indeed limited in scope to taxpayers with incomes in excess of $400,000, why did the Democrats unanimously reject the Amendment?

Further, in its Report, the CBO comments related to the consequences associated with the Democrat’s rejection of the Crapo Amendment strongly suggest that the IRS will target low and middle income taxpayers.  The CBO concluded that if the Republican Amendment passed, the projected total revenue contained in the IRA would be reduced by at least $20 Billion. As such, $20 Billion of the total projected revenue in the amount of $124 Billion would come from an increase in the number of audits of low and middle income taxpayers.

The CBO also concluded that if audit levels return to the historical levels in 2010, lower and middle income earners could face an increase of as many as 710,00 additional audits.

These revelations should come as no surprise given Biden’s penchant for lying to Americans.

The Biden Administration’s true intentions are further evidenced by House Budget Committee Republican Leader Jason Smith’s (MO-07) comments. Smith maintains that Americans earning less than $200,000 are 80 percent more likely to be targeted by the IRS based upon Secretary Yellen’s historic audit levels.

In addition to the CBO Report, a recent analysis  conducted by Joint Committee on Taxation, an independent Congressional body is further evidence that low to middle income taxpayers will be targeted by the IRS. In its analysis, the Committee concluded that 78 to 90 Percent of the money raised from under-reported income would likely come from those making less than $200,000 a year. The non-partisan Committee further maintains that nearly half of the audits would affect taxpayers making $75,000 or less and that only 4 to 9% would come from those making more than $500,000.

In addition, to the CBO and the Joint Committee’s findings, there is evidence that the IRS has historically focused their audit efforts on low and middle income taxpayers.

In a recent Report by the Government Accountability Office (“GAO”) entitled: “Trends of IRS Audit Rates and Results For Individual Taxpayers By Income,”  the GAO found that for the years 2010-2021, the majority of additional taxes IRS recommended from audits came from taxpayers with incomes below $200,000.  According to the GAO, the higher audit rates for lower income taxpayers is attributable to the  fact that the average number hours spent per audit for the period studied was stable for those earning less than $200,000, but the number of hours almost doubled for those earning over $200,000.

The explanation offered by the IRS is that higher income audits are generally more complex, resulting in additional time spent per audit. However, the IRS explanation does not tell the whole story. Taxpayers with incomes exceeding $200,000 are more likely to be represented by a tax attorney, CPA or enrolled agent.  Taxpayers who are represented invariably increase the number of audit hours, particularly in cases where a genuine tax controversy exists.

Moreover, contested cases involving taxpayers earning more than $200,000 do not necessarily result in the assessment and collection of additional tax revenue. Hence, low and middle income taxpayers will be expected to make up the shortfall.

Historically, audits of the lowest income taxpayers, in particularly those claiming the Earned Income Tax Credit (“EITC”) have resulted in high amounts of recommended additional tax per audit hour. This is due to the fact that EITC audits are pre refund audits, which are conducted through correspondence and generally require less time.

According to the Treasury Inspector General for Tax Administration (“TIGTA”) in a Report entitled “Trends in Compliance Activities through Fiscal Year 2019, “ audit rates declined 44% between 2015 and 2019, due to attrition and increase in the number of cases transferred. Nevertheless, TIGTA noted that, despite IRS budget, there was only a 33% drop in audits for low income taxpayer claiming the EITC compared to 75% for individuals with incomes of $ 1 million or more.

In its report, the GAO stated that because the no change rate has generally decreased because of fewer audits, the IRS tends to select returns for audits that have the highest results in changes. ( i.e.  low hanging fruit).  The GAO also points out that since 2010; the average number of audit hours has more than doubled for returns with incomes of $200,000 and above.

The projected revenue by the current Administration is based upon hiring 87,000 new agents, IT improvements and additional compliance and enforcement initiatives.  However, the projections fail to take into consideration the fact that new auditors require training and further fail to consider the learning curve. In its report, the GAO noted that new IRS agents must spend additional hours conducting research in connection with tax law changes.  Further, the projected revenue does not take into consideration the effect retirement of existing IRS personnel will have on bringing the new crop of agents up to speed. Consequently, many, if not most, new hires will be assigned to simple cases involving low to middle income taxpayers.

The current Administration’s claim that only taxpayers who earn in excess of $400,000 will be the subject of IRS scrutiny is, at best, disingenuous, and more probably a deliberate attempt to deceive U.S. taxpayers. The CBO, Joint Committee on Taxation, GAO and TIGTA Reports as well as historical data make clear that low and middle income taxpayers will not escape IRS scrutiny.

The Government will examine efforts by a Taxpayer to avoid detection by the Internal Revenue Service, when deciding whether to assess the Civil Willful FBAR penalty. In particular, the IRS considers  making a quiet disclosure, an indicator of Willful conduct on the part of the Taxpayer and will often use such a disclosure to support the assessment of the Civil Willful FBAR Penalty under 31 U.S.C. § 5321(a)(5)(C), and in certain cases, the commencement of criminal prosecution.

In this regard, consider the recent collection case filed by the Government in United States v. Gaynor, (M.D. Fla. Dkt.  2:21-CV-00382 Dkt # 1 Complaint 5/14/21), wherein the Government is seeking to collect $17M in Willful FBAR penalties from a Taxpayer, who utilized the illegal practice of making a quiet disclosure.

The Gaynor case involves a suit brought against George Gaynor, Jr. in his capacity as the personal representative of the Estate of   Lavern N. Gaynor (the “Decedent”) who died on April 12, 2021.

The Decedent’s grandfather was a wealthy oil tycoon who left the Decedent a sizable fortune.

In 2000 the Decedent’s late husband, George Gaynor, Sr.  (“Gaynor”) opened a Swiss bank account at Cantrade Privatbank AG (“Cantrade”) under the name of “Gery Trading Corporation,” (“GTC”), a nominee company  formed in Panama for purposes of preventing the IRS from discovering that Gaynor was in fact the beneficial owner.  Although unclear from the Complaint, the original source of funds for the account came from the Decedent’s inheritance from her grandfather.

In furtherance of Gaynor’s clandestine scheme, GTC appointed a Swiss Trust Company to handle any and all business with the bank. The account was moved several times first due to a bank merger and then due to an acquisition. In 2004 Cantrade merged with Ehringer & Armand, which was subsequently acquired by Julius Baer in 2005.

Following the death of Gaynor in 2003, and while the account was still with Cantrade, the Decedent became the beneficial owner of the account. According to the allegations in the Complaint, a form was filled out designating the Decedent as the beneficial owner of the account, and included the Decedent’s Florida Address and a notation that the Decedent’s nationality is “USA.”

Subsequently, in 2004 a representative of GTC executed a false certification asserting that GTC was the account’s beneficial owner and that GTC is not a U.S. Person. The certification directly contradicts the form that was filled out by the Decedent.

In 2009 Julius Baer was one of many Foreign Financial Institutions targeted by the IRS for being complicit in facilitating offshore tax evasion by U.S. Persons. In an effort to comply with U.S. law and avoid criminal prosecution, Julius Baer contacted GTC and requested that the company furnish proof that it had complied with the U.S. tax law and financial reporting requirements. The request, which had a deadline of September 30, 2009, fell on deaf ears. Similarly, a follow-up letter in October of 2009 was ignored. Instead, the Decedent acting through GTC’s Agents moved the account to Banque Louis in Switzerland. In 2011, the Decedent once again caused the account to be moved to Bank Frey under the GTC’s name.

From 2003-2011, the Decedent’s federal income tax returns were prepared by a CPA in Naples, Florida.  Not surprising, the Decedent never told the tax preparer about the existence of her foreign financial account or the income associated with the account.

For the tax years 2009-2011, the Decedent’s income tax returns included Schedule B, which contains certain disclosures related to the existence of foreign financial accounts and the obligation to file FinCEN Form 114 (FBAR).  In each year, the Decedent answered “no” in response to the disclosure question 7(a) on Schedule B.

In an effort to belatedly disclose her offshore assets and related income, in November 2012 the Decedent filed amended returns for 2009 and 2010 and in 2013 also filed an amended return for 2011 as well as FinCEN Form 114 (FBAR) for the years 2009 -2011. It is noteworthy that the Decedent used a Swiss accountant, rather than the Naples CPA for purposes of preparing the amended returns. The tax on the additional foreign source income for the 3 year period resulted in an additional $1M in tax due.

The IRS has repeatedly cautioned Taxpayers not to use a quiet disclosure as a method of coming into compliance with the U.S. tax laws and financial reporting requirements.  The IRS further maintains that making a quiet disclosure carries the risk of an IRS examination and potential criminal prosecution.

While the outcome of this case remains to be seen, it is unlikely that the Taxpayer will survive a motion for summary judgment by the Government.

The takeaway from the Gaynor case is this: If you have failed to declare your offshore assets and the income related to thereto, there is a substantial likelihood that you will be outed by your foreign financial institution.  Making a quiet disclosure, while tempting, is a  recipe for the assessment of the Civil Willful FBAR penalty,  which is equal to the greater of $100k  or 50% of the balance in the foreign account at the time of the violation. Furthermore, it may result in criminal prosecution.

The IRS has placed procedures in place that enable delinquent taxpayers to disclose their offshore assets and related income in order to come into compliance.    The procedures for coming into compliance include the Streamlined Procedures or making an offshore disclosure using the new Voluntary Disclosure Practice Rules.

My office has successfully represented hundreds of Taxpayers with coming into compliance with the U.S. tax laws and financial reporting obligations.

Biden tax proposalThe Biden Tax Proposal, if enacted, will have a significant impact on estate planning for those who have failed to take advantage of the current gift and estate tax rules.  According to the Proposal, estate and gift tax exemption will be reduced from 11.58 million under the current law to $3.5 million. In addition, the Biden Proposal will increase the top rate for estate tax from 40 percent to 45 percent.

The proposed changes to the gift and estate tax exemption and rate increase will largely depend on whether Biden, in fact, becomes our 46thPresident and whether the Republican Party retains control of the Senate.

A new administration may also result in the imposition of a new wealth tax, should Elizabeth Warren become the new Treasury Secretary.

The growing uncertainty should serve as a call to action for those who have failed to do any estate planning. Failure to act prior to January of 2021 creates a significant risk that those with large estates may face a higher tax burden.

If you have not already done so, it is not too late to do so. Please feel free to contact the Law Office of Anthony N. Verni at (561)531-8809 or by visiting my website at


Internal Revenue Service plans to close the Offshore Voluntary Disclosure Program (OVDP) on September 18, 2018.

Offshore Voluntary Disclosure Program

The Internal Revenue Service recently announced that they will be winding down the Offshore Voluntary Disclosure Program (OVDP) and plan to close the program on September 18, 2018.  As such, taxpayers who have yet to come forward have a limited amount of time in which to make a disclosure or face the new penalties.  This is of particular importance for those taxpayers who may be deemed to have been “willful” in their failure to file FinCen Form 114 (FBAR) and as such would not otherwise qualify for the Streamlined Filing Compliance Procedures. This announcement is intended to give taxpayers who have yet to come forward one last chance to do so.

The Streamlined Filing Compliance Procedures will still continue to be available to eligible taxpayers. However, the IRS has indicated they may also close this method for making an offshore disclosure.

The IRS will continue with its global enforcement initiatives to detect the offshore evasion of income tax, and further, to uncover those who have undeclared foreign assets.  These global initiatives include reporting under the Foreign Account Tax Compliance Act (FATCA), Whistleblower leads, civil examination and criminal prosecution. As the Chief of the IRS Criminal investigation recently stated:

“The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics.” “Stopping offshore tax noncompliance remains a top priority of the IRS.”


Current Developments May Make It Easier For the IRS To Assess Penalties After Willfully Failing to File FBAR’s

The Foreign Bank Account Report (FBAR) can be submitted with the advice of a tax law attorney.A taxpayer who willfully fails to file a Report of Foreign Bank and Financial Accounts (FBAR) may be subject to both civil and criminal penalties as well as imprisonment.  In both the criminal and civil context, the government has the burden of proof.

In FBAR criminal prosecutions, the standard of proof is well settled and requires the government to prove its case using the beyond a reasonable doubt standard.  However, in cases involving the assessment of the 31 USC § 5321(a) (5(C) willful civil FBAR penalty, the standard of proof  is unsettled and remains the subject of debate among legal scholars, practitioners and the judiciary. Practitioners have argued that the standard of proof in assessing the willful civil FBAR penalty should be the clear and convincing standard, citing Chief Counsel Advice (CCA) memorandum released January 20, 2006, CCM 200603026 (See discussion below) in support of using the higher standard of proof.

The correct standard of proof to be applied for assessing the willful civil FBAR penalty often arises in the context of an assessment of the willful civil FBAR penalty by IRS Examinations, an Appeal by the taxpayer, or in defense of an action by the U.S. government to enforce the 31 USC § 5321(a) (5(C) penalty. The proper standard of proof to apply in the context of the willful failure to file an FBAR has been the subject of a number of lower federal court decisions and is also reflected in jury instructions submitted by U.S. District Court in the Southern District of Florida. The Courts in all three cases have cited the preponderance of evidence standard as the correct standard to apply when assessing the 31 USC § 5321(a) (5(C) penalty.

Based upon two recent cases, the stage may now set for the U.S. Court of Appeals for the Fifth and Ninth Circuits to ultimately decide the correct standard of proof to be applied when assessing the31 USC § 5321(a) (5(C) penalty.

The first case, Gubser v Comm’r, 2016 WL. 3129530 (S.D. Tex. May 4, 2015) comes out of the U.S. District Court for the Southern District of Texas. In Gubser, the taxpayer filed a complaint in the District Court asking for a declaratory judgment that the proper standard to be applied in a willful civil FBAR penalty case is the clear and convincing standard. The District Court dismissed the taxpayer’s suit based upon lack of standing. The taxpayer subsequently filed an appeal.

Although the question currently before the Fifth Circuit is limited to standing, some observers believe that if the taxpayer prevails and the matter is remanded back to the District Court for further findings, the standard of proof issue to be applied in a willful civil FBAR penalty will find its way back to the Fifth Circuit.

The second case, U.S. V. August Bohanec and Maria Bohanec (Case No. 215-CV-4347 ddp (FFMx) (filed 12/8/16) involves a decision from the United States District Court for the Central District of California. In Bohanec, the Court rejected the taxpayers’ argument that the clear and convincing standard should be applied in a willful civil FBAR penalty case. Instead, the District Court applied the lower preponderance of the evidence standard of proof. The taxpayers’ attorney has indicated the taxpayers will appeal the decision.

The ultimate determination of the standard to be applied when assessing the willful civil FBAR penalty and its importance cannot be overstated; a decision by the Fifth and/or Ninth Circuits citing the preponderance of evidence as the correct standard will certainly have a chilling effect on taxpayers, who are considering opting out of the OVDP, and will also pose a greater risk to those taxpayers who have  or will submit a  Certification of Non-Willfulness as part of the Streamlined Procedures.  If the Appeals Court finds that the correct standard is the preponderance of evidence, taxpayers can also expect the IRS to be more aggressive in scrutinizing taxpayers who opt Out of the OVDP or those who proceed using the Streamlined Procedures.

This article outlines the concept of “willfulness” in light of U.S.C. §5321(a) (5) (C), CCM200603026, JB Williams, McBride and Zwerner and in anticipation of the Gubser and Bohanec cases making their way to the U.S. Court of Appeals.

A taxpayer who “willfully” fails to file an FBAR faces a penalty equal to the greater of $100,000 or 50% of the foreign financial account balance as of the June 30 FBAR due date,31 U.S.C. §5321(a) (5) (C). Neither the FBAR statute nor the regulations promulgated there under provide any guidance on the standard of proof to be applied in the assessment of the willful civil FBAR Penalty. In Chief Counsel Advice (CCA) memorandum released January 20, 2006, analyzing the issue of willfulness in the FBAR civil context, the IRS compared the burden of proof for the willful civil FBAR penalty to the burden of proof for the civil fraud penalty under 26 U.S. Code §. 6663, explaining that it expects the standard of proof will be the same—clear and convincing evidence, not merely a preponderance of the evidence. Proponents for applying the higher standard often cite CCM 200603026 in support. Despite CCM 200603026, the U.S. District Court, in three cases has cited the lower preponderance of the evidence standard as the correct standard when assessing the willful civil FBAR penalty.

The United States District Court in JB Williams applied the preponderance of the evidence standard,United States vs. Williams, 2010 U.S. Dist. LEXIS 90794 (ED VA 2010). In JB Williams, the government brought an action in the US District Court for the Eastern District of Virginia seeking to enforce the civil willful FBAR penalties assessed against the taxpayer for his failure to report his interest in two foreign bank accounts for tax year2000, in violation of 31 U.S.C. § 5314.  The taxpayer previously plead guilty to two count superseding information for Conspiracy to Defraud the IRS and Criminal Tax Evasion.  As part of the plea, Williams agreed to allocute to all of the essential elements of the charged crimes, including that he unlawfully, willfully, and knowingly evaded taxes by filing false and fraudulent tax returns on which he failed to disclose his interest in the Swiss accounts.

Furthermore, the taxpayer checked “no” in response to the question on Schedule B Form 1040, regarding the existence of a foreign financial account, despite having transferred $7M to a Swiss bank account.  In addition, the taxpayer completed a tax organizer, wherein he answered: “no” in response to a question as to whether he had a financial interest in or was a signatory over a foreign financial account. The taxpayer provided the following statement as part of his allocution.

“I also knew that I had the obligation to report to the IRS and/or the Department of the Treasury the existence of the Swiss accounts, but for the calendar year tax returns 1993 through 2000, I chose not to in order to assist in hiding my true income from the IRS and evade taxes thereon, until I filed my 2001 tax return.”

. . . .

The District Court, held without discussion, that the government’s burden to establish a willful violation of 31 U.S.C. § 5314only requires proof by a preponderance of the evidence.The District Court further held that the Taxpayer’s eventual filing of the delinquent FBARS, “negated” willfulness.  In reversing the District Court’s decision, the U.S. Court of Appeals for the Fourth Circuit, dodging the standard of proof question, held that the District Court clearly erred  in finding that the Government failed to prove that Williams willfully violated 31 USC § 5314.

In U.S. v. McBride, [908 F. Supp.2d 1186, 1201 (D. Utah 2012)], the District Court for the District of Utah Central District, relying on Williams held that the correct standard for imposition of the willful civil FBAR penalty is the preponderance of the evidence standard. Likewise, in U.S. v Zwerner, a 2014 Florida Case, the Federal District Court for the Southern District of Florida submitted the issue on willfulness to the jury using a preponderance of evidence standard.The U.S. Court of Appeals has yet to weigh in on the correct standard of proof to be applied in a 31 USC § 5321(a) (5(C) willful FBAR penalty case. However,  two recent lower court cases make clear that the higher court will ultimately be called upon to determine the correct standard of proof question.

In Gubser v. Comm’r, 2016 WL, 3129530 (S.D. Tex. May 4, 2016), the taxpayer, a Swiss citizen by birth and later naturalized asa U.S. Citizen maintained a Swiss account, which he opened when he was a young man. The purpose for opening the account was to enable the taxpayer to accumulate savings for his retirement in Switzerland.  Since its opening, the account was always held in Gubser’s name and the funds in the account represented after tax earnings. Grubser retained the services of a CPA, who prepared the taxpayer’s U.S. tax return for over 20 years. During this time, the CPA never raised the question whether the taxpayer had an interest in any foreign financial account. The matter first came to the taxpayer’s attention in 2010 when someone from the CPA’s office raised the question of the existence of foreign financial accounts. Gubser promptly filed an FBAR report for 2009 and subsequent years.  In addition, the taxpayer entered the OVDP, covering the tax years 2003-2010.   Subsequently, Gubser opted out of the OVDP, which resulted in the IRS sending Gubser a  3709 Letter (the FBAR 30 day letter), proposing the50% willful civil FBAR penalty pursuant to 31 USC § 5321(a)(5(C) for the tax year 2008. The penalty in the amount of $1.3M reflected approximately 50% of the taxpayer’s entire life savings.  Grubser filed a timely protest letter with Appeals.  When the taxpayer discussed the matter with the Appeals officer, the Appeals officer told Gubser that the IRS could prove willfulness by using the preponderance of the evidence standard, but not by the clear and convincing standard. The Appeals officer also asked for guidance on the proper standard.

Grubser thereafter filed a declaratory judgment action with the U.S. District Court for the Southern District of Texas, requesting that the Court declare that the IRS must prove willfulness by clear and convincing evidence. In response the government filed a motion to dismiss based upon lack of standing, arguing that the taxpayer’s injury could not be redressed by a declaratory judgment, since such a judgment would be non-binding on the IRS. The government’s motion was granted and Gruber appealed to the Fifth Circuit.

The second case to watch isU.S. V. August Bohanecand Maria Bohanec (Case No. 215-CV-4347 ddp (FFMx) (filed 12/8/16). In Bohanec, the taxpayers had previously applied for and were denied participation in the Offshore Voluntary Disclosure Program (“OVDP”), in part, due to several misrepresentations made during the OVDP process. The U.S. District Court for the Central District of California rejected the taxpayers’ argument that the government had to show willfulness under the clear and convincing standard of proof, and instead applied the preponderance of evidence standard of proof.  The Court found that the taxpayers’ failure to file FBAR’s for three accounts the taxpayers maintained for over a decade was at least “recklessly indifferent to a statutory duty.” The taxpayers’ attorney has indicated that the taxpayers will appeal the District Court’s decision.

Taxpayers currently participating in the OVDP, who are considering opting out of the Program or those who are thinking of making a disclosure using the Streamlined Procedures certainly need to proceed with caution.  The U.S. Court of Appeals for the Fifth and Ninth Circuits will ultimately address the correct standard to be applied in the assessment of the willful civil FBAR penalty. These decision(s) will undoubtedly have a significant impact on both current and future taxpayers who have made or are considering making a voluntary disclosure.

The takeaway here is that any decision  involving making an offshore voluntary disclosure should not be made based upon an internet search. Instead, those faced with the decision of making an offshore voluntary disclosure should consult with a knowledgeable and experienced tax attorney, who can assess the specific facts of each case and assess the risks associated with choosing one method of disclosure over another. At the Law Office of Anthony Verni, we know that there is no one size solution to fit all, contact us today or leave a comment below.

© 2017 Anthony N. Verni, Attorney at Law, CPA

The U.S Department of Justice, Tax Division:
Federal Tax Prosecutions Continue Unabated

tax evasion lawyer to help with criminal tax prosecutions by the IRSMany taxpayers are skeptical of the IRS and feel that the system is “rigged” against the small guy. These taxpayers may also feel that those with substantial means or political connections can get away with cheating the U.S. government out of its fair share of taxes.  Contrary to public perception, when it comes to criminal prosecution of tax cheats, the U.S. Department of Justice, Tax Division is an affirmative action prosecutor.

The following examples illustrate that, even those working within the U.S. tax system are subject to prosecution.  It makes no difference whether you are a politician, tax attorney, judge or IRS agent.

Be aware that in the eyes of the U.S. government, a tax cheat is a tax cheat.

Florida State Representative Pleads Guilty To Wire Fraud And Failure To File Federal Income Tax Returns

On September 30, 2016,Reginald Fullwood, a member of the Florida House of Representatives was convicted of one count of wire fraud and one count of failure to file federal income tax returns. According to the documents filed with the court, during his first election bid as well as his campaign for reelection, Fullwood made a number of wire transfers from the “Reggie Fullwood Campaign” bank account to a bank account in the name of Rhino Harbor, LLC, a nominee entity wholly owned by Fullwood.  Fullwood created the nominee entity to conceal his diversion and use of approximately $65,000 in campaign contributions which he used to pay for personal expenses including restaurants, groceries, retail shopping, jewelry purchases, flowers, fuel and liquor.

Former IRS Revenue Officer And Owner Of Tax Consulting Business Pleads Guilty To Tax Evasion

 On October 4, 2016 a former Internal Revenue Service (IRS) revenue officer pleaded guilty to one count of tax evasion and one count of corruptly endeavoring to impede the due administration of the Internal Revenue laws. The plea was taken in the United States District Court, for the Middle District of North Carolina.

According to plea agreement filed with the court, Henti Lucian Baird (“Baird”), a North Carolinian, filed tax returns each year but did not paythe income taxes reflected on his returns,dating back to 1998.  Prior to starting HL Baird’s Tax Consultants in 1989, Baird was a revenue agent with the IRS for 12 years. Baird advertised himself to clients as specializing in “IRS problems, delinquent returns, offer-in-compromise, tax problems, delinquent employee taxes and release of liens and levies.”

Baird evaded paying his federal income taxes  from 1998 to 2013by:(i)creating over 10 nominee bank accounts in the names of his children to hide hundreds of thousands of dollars; (ii) submitting false Form 433-A to an investigating revenue officer that did not reveal all of his nominee bank accounts; (iii) filing a bad faith, Chapter 13 bankruptcy petition wherein Baird submitted a cash offer in compromise, made a request for discharge and an application for subordination of his federal tax lien; and (iv)transferring funds out of nominee accounts to avoid impending IRS levies. During this time period, Baird continued to pay the mortgage on his 4,300 square-foot home, annual fees for a timeshare he owned in Florida and car payments on a BMW.  In an admission to the revenue officer, Baird stated that he did not keep money in bank accounts because he feared a levy or garnishment.

The documents filed with the Court further reveal that Baird used his stepson’s identity, without his knowledge, to apply for a Preparer Tax Identification Number (“PTIN”). ThereafterBaird used his stepson’s PTIN in order to file over 900 income tax returns for clients, as well as his own income tax returns.  Furthermore, despite having his authorization to represent taxpayers revoked by the IRS, Baird submitted, under penalties of perjury, at least 120 Forms 2848, Power of Attorney and Declaration of Representative, on behalf of clients that falsely stated he was an enrolled agent.

As of September 20, 2016 the total amount due in tax, penalties and interest for the tax years 1998-2013 was approximately $477,028.80. It seems that Mr. Baird failed to fully read 26 U.S. Code §7201, the tax evasion statute, which includes willful attempts at evading or defeating the payment of any tax in the definition of tax evasion.

Former United States Tax Court Judge Pleads Guilty To Conspiring To Defraud The IRS Of $450,000 In Taxes

On October 21, 2016 Diane L. Kroupa, a former U.S. Tax Court Judge, pleaded guilty to conspiring to defraud the United States. According to the plea agreement and Kroupa’s testimony, Kroupa was appointed to the United States Tax Court on June 13, 2003 for a term of 15 years. Kroupa was married to Robert E. Fackler, a lobbyist and political consultant who was also named in the indictment. Fackler was the owner/operator of a business known as Grassroots Consulting. For tax purposes, Grassroots Consulting was treated as a sole proprietorship.

From 2004 to 2013, the defendants maintained their principal residence in Plymouth, Minnesota. The defendants also leased a second residence in Easton, Maryland from 2007-2013. The home was leased in order to provide Kroupa with a place to live, while serving as a Judge on the U.S. Tax Court in Washington DC.

The court documents and Kroupa’s testimony further substantiate that between 2002 and 2012, Kroupa and Fackler would annually compile numerous personal expenses that would be included on Schedule C for Grassroots Consulting under the pretext that the expenses constituted ordinary and necessary “business expenses.” The Schedule Cexpenses included: rent and utilities for the Maryland home; utilities, upkeep and renovation expenses of the Minnesota home; Pilates classes; spa and massage fees; jewelry and personal clothing; wine club fees; Chinese language tutoring; music lessons; personal computers; and expenses for vacations to Alaska, Australia, the Bahamas, China, England, Greece, Hawaii, Mexico and Thailand.

In addition, Kroupa would sometimes prepare and provide Fackler with summaries of personal expenses falsely describing the expenses according to business expense category. Kroupa on occasion would also compile and provide fraudulent personal expenses to their tax preparer.The ongoing scheme to defraud the IRS resulted in the defendants deducting $500,000 of personal expenses as ordinary and necessary business expenses on Schedule C.

In addition to the bogus deductions claimed by Kroupa and Fackler,Kroupa made a series of other false claims on the defendants’ tax returns, including failing to report approximately $44,520 that she received from a 2010 land sale in South Dakota and falsely claiming financial insolvency to avoid paying tax on $33,031 on cancellation of indebtedness income that she and her husband received.

In furtherance of their nefarious scheme, Kroupa and Fackler also concealed documents from their tax preparer and an IRS Tax Compliance Officer during an audit of their 2004 and 2005 tax returns.

According to the plea agreement and Kroupa’s testimony at the plea hearing, Kroupa and Fackler delivered false and misleading documents to an IRS employee, during a second audit in 2012,to bolster their claim that certain personal expenses were actually business expenses of Grassroots Consulting. After the IRS requested documents pertaining to their tax returns, Kroupa and Fackler removed certain items from their personal tax files before giving them to their tax preparer because the documents contained potential evidence that Kroupa and Fackler illegally deducted numerous personal expenses.

During the audit, Kroupa also falsely denied receiving money from the 2010 land sale. Later, when they learned the 2012 audit might progress into a criminal investigation, Kroupa instructed Fackler to lie to the IRS about her involvement in preparing the portion of their tax returns related to Grassroots Consulting.

Kroupa and Fackler’s scheme to defraud the IRS resulted in the deliberate understating of their taxable income for the tax years 2004-2010 by approximately $1,000,000, resulting in approximately $450,000 in federal income taxes evaded.

Shea Jones, Special Agent in Charge of the St. Paul Field Office put it in perspective by stating:

“Those charged with upholding the laws are not above the law. While serving as a United States Tax Court Judge, Diane Kroupa conspired to break the law by evading the taxes she owed. Her actions were not only unlawful and dishonest, but they were a theft from the American public. No matter what your position, it is unacceptable to cheat the system that provides the government services and protections that we all enjoy. IRS Special Agents will continue to pursue tax cheats at all levels of society, regardless of position or status.”

Former IRS Criminal Investigation Special Agent Charged

On October 26, 2016 a federal grand jury in Sacramento, California charged a former Internal Revenue Service–Criminal Investigation (IRS-CI) special agent with six counts of filing false income tax returns, one count of corruptly endeavoring to obstruct the Internal Revenue laws, one count of theft of government money and one count of destroying records during a federal investigation.

According to the allegations in the amended indictment, Alena Aleykina (“Aleykina”), a certified public accountant and former IRS-CI special agent, filed false individual income tax returns for the years 2009, 2010 and 2011 by claiming false filing statutes, dependents, deductions and losses and tax returns on behalf of two trusts.

The indictment also alleges that, between 2008 and 2013, Aleykina attempted to obstruct the IRS by preparing false tax returns for herself, family members, trusts and partnerships and by making false statements to representatives of the Department of the Treasury.  In addition, Aleykina attempted to obstruct a federal investigation by destroying evidence on a government computer.  Finally, Aleykina was charged with fraudulently causing the IRS to issue IRS Tuition Assistance Reimbursement payments to her.

Tax Attorney And CPA Indicted For Tax Evasion And Diversion Of Tax Shelter Fees From Major Manhattan Law Firm

On October 26, 2016 Harold Levine (“Levine”), a Manhattan tax attorney, and Ronald Katz (“Katz”), a Florida certified public account, were charged in the U.S. District Court in New York with an eight-count indictment related to a multi-year tax evasion scheme. According to the indictment, the defendants diverted millions of dollars of fees from Levine’s Manhattan law firm and failed to report millions of dollars in fee income to the Internal Revenue Service.

The allegations in the indictment assert that Levine, the former head of the tax department at a major New York City Law Firm schemed with Katz, to divert from the Law Firm over $3 million in fee income from tax shelter and related transactions that Levine worked on while serving as a partner of the New York Law Firm.  The indictment further alleges that Levine failed to report that fee income to the IRS on his personal tax returns during the period 2005-2011.  Not to be excluded, the indictment also charged Katz with receiving and failing to report over $1.2 million in fee income to the IRS.

In order to carry out the nefarious scheme, Levine caused tax shelter fees paid by Law Firm clients to be routed to a partnership entity he co-owned with Katz, rather than being paid directly to the Law Firm. Thereafter, it is alleged that Levine used approximately $500,000 of those fees to purchase a home in Levittown, New York.  In an attempt to conceal the diversion, Levine purchased the Levittown home in the name of a Law Firm Employee with whom Levine had a personal relationship with.

For a period of five years Levine allowed the Law Firm Employee to reside in the Levittown house without paying rent. Even though the Law Firm Employee lived at the residence rent free, Levine and Katz prepared tax returns for the partnership through which the home was purchased and treated the home as a rental property thereby falsely claiming deductions related to the property.

When Levine was questioned by IRS agents concerning his involvement in the tax shelter transactions and the fees received for those transactions, Levine falsely represented that the Law Firm Employee paid him $1,000 per month in rent while living in the Levittown home.  In addition, after the Law Firm Employee was contacted by the IRS and summoned to appear for testimony, Levinecoached the employee to represent falsely to the IRS that she had paid $1,000 per month in rent to Levine.

IRS-CI Special Agent in Charge Shantelle P. Kitchen said:

“Tax and accounting professionals who conceal their incomes, evade income taxes, and otherwise obstruct the Internal Revenue Service simply have no excuse for violating the very laws their professions are centered on.  IRS-Criminal Investigation works hard to ensure that everyone pays their fair sure and we take particular interest in allegations involving professionals who should simply know better.”

Former Business Professor Pays $100 Million Penalty in Tax Fraud Case

On November 4, 2016, Dan Horsky (“Horsky”), age 71, pleaded guilty to his role in a financial fraud conspiracy involving a foreign bank account totaling more than $200M and further agreed to pay a civil penalty in the amount of $100M.

According to the statement of facts filed with the plea agreement, Horsky is a citizen of the United States, the United Kingdom and Israel. He was employed for more than 30 years as a professor of business administration at a university located in New York.  On or about 1995, Horsky started making investments in a number of start-up companies. The investments were made using financial accounts, which Horsky set up, at various offshore banks, including one bank in Zurich, Switzerland.  Horsky created “Horsky Holdings,” a nominee entity, to hold some of the investments. He used the Horsky Holdings account, and later, other accounts at the Zurich-based bank, to conceal his financial transactions and financial accounts from the IRS and the U.S. Treasury Department.

Horsky made various investments in Company A through the Horsky Holdings account. The funds used to make the investments represented Horsky’s own money, money provided by his father and sister, and margin loans from the Zurich-based bank.  Company A was purchased by Company B for $1.8 billion in an all cash transaction. At this time, Horsky held a 4% interest in Company A.  Horsky received approximately $80 million in net proceeds from the sale of Company A’s stock, but he only disclosed approximately $7 million of his gain from that sale to the IRS. As a result, Horsky paid taxes on just that fraction of his share of the proceeds.  In 2008, and in subsequent years, Horsky invested in Company B’s stock using funds from his accounts at the Zurich-based bank and by 2013, his investments in Company B, combined with other unreported offshore assets, reached approximately $200 million.

To further conceal his ownership in the foreign financial accounts, in 2011, Horsky caused another individual to have signature authority over his Zurich-based bank accounts, and this individual assumed the responsibility of providing instructions as to the management of the accounts at Horsky’s direction.  This arrangement was intended to conceal Horsky’s interest in and control over these accounts from the IRS as well as to conceal the income generated from these accounts.


The average taxpayer can find comfort in knowing that in the world of U.S. tax compliance, no one gets a pass.  The U.S. tax system is based upon voluntary compliance and the principle that each U.S. taxpayer has an obligation to report his income honestly and further is expected to pay his fair share of federal income tax.  The preceding examples are just a sampling of recent prosecutions and are not intended as an exhaustive list.

“No matter what your position, it is unacceptable to cheat the system that provides the government services and protections that we all enjoy. IRS Special Agents will continue to pursue tax cheats at all levels of society, regardless of position or status.”

Shea Jones, Special Agent in Charge of the St. Paul Field Office commenting on the Kroupa conviction.


Why the Liberal Elites Will Never Leave the USA Despite Claiming Otherwise

5th amendment fbar tax for celebrities that want to expatriate now that Donald Trump has been elected President of the United States of America

With the presidential election in our rear view mirror, we are now able to turn our attention to those in the entertainment industry — and their veiled threats of leaving the United States.

Many of the liberal elite have threatened to leave the United States in the event of a Trump victory.

 I say that they are bluffing.

In truth, these entertainers have enlisted the assistance of the liberal media as an excuse for more face time and for them to remain relevant as “celebrities”.  Late night talk show hosts have also jumped in, as well as mainstream pundits.

Despite Trump’s resounding victory, liberal elites continue their rants of “racist” “homophobe,”“sexist,” “islamophobe, and “xenophobe” as well as the absurd assertion that Clinton should have been anointed the first woman President since she carried the popular vote. Please see the United States Constitution!

Hilary’s epitaph should now read:

“To me, being a gangster was better than being the president of the United States.” Henry Hill: “Goodfellas” 1990.

If history teaches us anything about entertainers, bombastic statements are rarely, if ever, followed up with any meaningful action. While Rosie, Miley, Amy, Whoopi, Chelsea, Samuel, Brian, Al, and others, publicly excoriated the President Elect throughout his campaign, vowing to leave the United States in the event of a Trump victory, it would appear these declarations were nothing more than veiled threats designed to influence the outcome of the election and enhance the respective entertainer’s stock.

The following examples show just how desperate and disingenuous these pseudo intellectuals are and also demonstrate the liberal elite’s penchant to evasively pivot when responding to a simple question that requires an honest answer.

  • Whoopi Goldberg  recently walked back her threat to leave the United States by stating on the View that I’m not leaving the country I was born and raised in,’ The cryptic statement, however, fails to answer the  question: Whoopi, why are you still here?
  • Likewise, Miley Cyrus recanted her promise to leave the country the morning after the election by treating us to a teary eyed emotional video where she conceded the election results and accepted Trump as her President. Like Whoopi, Miley has offered no explanation why she is still here.
  • After being called out on her promise to leave, Amy Schumer offered up a lame excuse in an Instagram statement that the threat of leaving was just a ‘joke.’ Despite dubious explanation, Schumer could not resist the “pivot” by attacking Trump supporters with the following rant: ‘Anyone saying pack your bags is just as disgusting as anyone who voted for this racist homophobic openly disrespectful woman abuser.’

My favorite and perhaps the most creative non-responsive answer came from Samuel L. Jackson.

  • After referring to Trump as a ‘motherf****r’ during a skit on the Jimmy Kimmel show, Jackson threatened to move to South Africa if Trump was elected. However, Jackson later announced via twitter that he is staying, but not without first expressing his indignation for those pressing him for an answer. Jackson said ‘When you learn the difference between My Actual Opinion and A Kimmel Skit….. Maybe we can talk. Till then, I’m Barbed Wire Up Your Asses!! [sic].’  Jackson also seized the moment to Pearl Harbor Trump and his supporters comparing Trump’s victory to the introduction of the Jim Crow laws, which enforced segregation: ‘The Last Time I survived Jim Crow I was Poor.’ He then added: ‘Guess what Motherf*****S.. Not This Time!! Enjoy your newfound win, Bigly!!’
  • Chelsea Handler offered a more civil, but equally disingenuous explanation on her Netflix Show as to why she will not be leaving the United States by stating: ‘ It’s easy to throw in the towel and say that we’re going to leave, or I’m gonna move to Spain.’ She added: ‘Because I want to move to Spain, I really, really want to move to Spain right now. But everyone in my office is like, “you have a responsibility. You have a voice, you need to use it and you have to be here.”’Chelsea, you still haven’t answered the question. Why are you still here?

There are also others who have threatened to leave in the event of a Trump victory.

Like their colleagues, these entertainers have failed to explain why they are still in the United States, instead electing to pivot.

  • Singer Cher, who threatened to move to the Planet Jupiter, has yet to address the question of why she is still living in the United States. Instead, Cher, who has not had a lucid thought since her divorce to the late Sonny Bono, provided her flock via social media with the following words of wisdom: ‘The world will never be the same. I feel sad for the young. [Trump] will never be more than the toilet; I’ve used as a symbol 4 Him. U Can’t Polish [a t***].’

The preceding examples illustrate the hypocrisy behind the liberal mantra: “When they go low, we go high.”  This list is by no means complete, but just a sampling.

The lame excuses as well as the assault on those who dare disagree with these traitors and other dilatory tactics make one thing clear. The liberal elites will never provide us with an honest answer as to why they will not leave. But do not despair. The real answer may be found in the provisions of the Internal Revenue Code and the application of the Exit Tax.

Here is how it works. For purposes of this discussion we will assume expatriation takes place in the year 2016.

A U.S. citizen who renounces her citizenship or a long term resident who terminates her U.S. resident status may be subject to what is sometimes referred to as an “Exit Tax.”  The Exit Tax only applies to “Covered Expatriates.”

For 2016, an individual is considered to be a Covered Expatriate if any of the following apply:

  1. Your average annual net income tax for the preceding 5 tax years ending before the date of expatriation or termination of residency is more than a specified amount adjusted for inflation. (For 2016 the average annual net income tax amount is $161,000);
  2. Your net worth is $2 million or more on the date of expatriation or termination of long term resident status; or
  3. You fail to certify on Form 8854 that you have complied with all U.S. federal tax obligations for the five years preceding the date of your expatriation or termination of your residence.

Based upon the above criteria and Celebrity Net Worth, the celebrities mentioned in this discussion would be considered Covered Expatriates.

If an individual is considered a Covered Expatriate, that individual is subject to income tax on the net unrealized gain from the sale of the individual’s property.

The IRS treats all property owned by a U.S. citizen or long term resident as if the property was sold at its fair market value on the day before expatriation. In other words the individual is taxed on the market to market net gain of all his or her assets.

The total amount of gain is reduced by an exclusion amount which is adjusted for inflation. For 2016 the exclusion is $693,000. The net gain, after allowance for the exclusion,is subject to income tax at the capital gains rate of 20% plus an additional 3.8% surtax. This rate is based upon the assumption that the Covered Expatriate is subject to the top tax bracket of 39.6%.

To illustrate how the Exit Tax is applied, consider the following example:

John, a famous Hollywood actor and producer, is considered a Covered Expatriate.  During a radio interview with ABC news on September 12, 2016 John threatens he will leave the country if that “asshole” Trump is elected. John follows through on his threat. On November 13, 2016 John renounces his U.S. citizenship. The fair market value of all property owned by John immediately preceding his expatriation is $75 million. John’s basis in the property is $25 million. The IRS will treat John’s property as if sold on the day before expatriation. The net unrealized gain on the “deemed” sale is $50 million. After allowance for the $693,000 exclusion, the net gain recognized for tax purposes is $49,307,000.Since John is in the top tax bracket of 39.6%, he would be subject to a capital gains rate of 20% and an additional 3.8% surtax. As such, John would owe $11,735,066.At first blush, a tax of 23.8% may seem a small price to pay in order to be free of Trump’s despotic rule, provided the assets are liquid. In this case, however, John’s assets primarily consist of non-liquid assets, such as real estate, luxury automobiles, a personal jet, two yachts, and a collection of antique cars. A “deemed sale” of these assets results in a cash crisis, causing John to “fire sale” his Ferrari, private jet, 2 yachts and his mountain home in Steamboat Springs, Colorado in order to satisfy the Exit Tax.

The above example provides insight as to why U.S. entertainers will never leave the states.

I would be remiss if I did not mention Al Sharpton. No A-List of celebrities would be complete without him. For those of you who are saddened at the prospect of Al Sharpton expatriating, you can relax. Mr. Sharpton is not going anywhere.  Al Sharpton, considered by some to be a serial tax evader, would be considered a Covered Expatriate based upon his reported net worth of $5 million. Furthermore, Mr. Sharpton’s unpaid federal income and employment taxes are substantial and well chronicled. There is no indication, at least in the foreseeable future that he will pay up.While Obama has been able to provide cover and insulate Sharpton from IRS Collections for the past eight years, the situation has now changed.  “Just Keepen’ It Real.”  Now back to Sharpton as a Covered Expatriate.

Since Certification is an integral part of the expatriation process, “Big Al” or Al “Slim Shady” Sharpton as he is affectionately referred to by radio talk show host, Curtis Sliwa, is currently unable to Certify on Form 8854 that he has complied with all U.S. tax obligations for the preceding five years. Slim Shady has two choices. He can pay his back taxes as well as the Exit Tax and Certify on Form 8854 that he is in compliance, at which point he would be free to leave the U.S. The alternative would be for him to falsely Certify on Form 8854 that he is in compliance and move to a non-extradition country. The latter alternative, however, may be foreclosed if Sharpton’s passport is revoked in accordance with Section 7345 of the Internal Revenue Code.  To date, no response. Cat got your tongue Al?

Finally, I’m a “little bit” disappointed that De Niro has yet to depart for Italy as rumored. Bob’s October 8, 2016 video rant has many in the public concerned. This Goodfella seems to have come unhinged.  Nevertheless, we still do not have an answer. Bob, why are you still here?

The liberal elites would have you think that they are selfless and concerned with championing the causes of those who are less fortunate and converting the masses who voted for Trump. These charlatans would also have you believe that they are concerned with the equitable treatment of all and the redistribution of wealth.  Unfortunately, they are not interested in redistributing their wealth nor are they interested in paying the “vig” in order to leave the States.

While it’s unfortunate that we are stuck with these hypocrites, at least for the foreseeable future, the public can take solace in knowing the real reason why we are unable to rid ourselves of these Hollywood elites. It’s the Exit Tax.

Serious about leaving?  Put up or shut up!

© 2016 Anthony N. Verni, Attorney at Law, Certified Public Accountant

Wednesday, November 16, 2016




Offshore Tax Compliance Update fbar penalties for tax evasion can include imprisionment if the IRS seeks to criminally prosecute you

Offshore Tax Compliance Update – Recent IRS Tax Prosecutions

The following convictions represent recent successful prosecutions by the Department of Justice, Tax Division and reinforce the Government’s commitment to ferret out tax cheats, wherever they may be located.

Case 1

On October 7, 2016 a Michigan business man and owner of several mining related businesses, pleaded guilty to concealing $2.6 million held in a Swiss bank account.

According to the facts set forth in the plea agreement, the defendant transferred $2.6 million from his parents trust account to a bank account at Credit Suisse. In order to conceal the account from IRS detection, the defendant set up Hong Kong Company and had the Credit Suisse account held in the company name. The Hong Kong Company’s only business purpose was to act as the named account holder. The defendant falsely states on his 2008-2012 federal income tax returns that he had no interest in a foreign financial account and also failed to report the income from the Credit Suisse account. To exacerbate matters, in 2010 the defendant filed an amended tax return for the tax year 2008. Once again, the defendant failed to report the income generated in 2008 from the Credit Suisse account.

Case 2

On September 28, 2016, a New York City resident pleaded guilty to using a sham foreign entity and numbered accounts in Switzerland and Israel in order to evade taxes.

From 1987 to 2008 the defendant maintained a number of undeclared foreign financial accounts and accounts at UBS held in the name of Contactus Partnership Associated, SA (Contactus) a sham entity organized in the British Virgin Islands.In 2008 the defendant closed the UBS accounts and transferred the assets to a newly opened account at Clariden Leu. The newly opened account was held in the name Contactus.

Shortly thereafter the defendant closed the account at Clariden Leu and transferred the assets to a newly opened Swiss bank account in the name of the same sham entity. The defendant was successful in getting the Swiss Bank to falsely record the defendant’s Belgian cousin as the owner of the assets in the Contactus account. Six months later the defendant closed the Contactus account at the Swiss Bank and transferred the assets to a newly opened bank account in Israel held in the name of a different cousin.From 2005-2011 the defendant also maintained an undeclared account at Bank Leumi in Israel   under the name of a non-resident alien, residing outside of the United States.

In 2010 the defendant was able to obtain an Israeli Identity Card. The defendant then opened an account in his own name at Bank Leumi, claiming that the defendant resided in the United Kingdom. He also signed a document under penalty of perjury affirming that he was not a U.S. Citizen.

Subsequently, the defendant repatriated the funds from his undeclared accounts to the United States.  In order to carry out the scheme, the defendant had his attorney draw up a sham loan agreement between the defendant and Contactus and then caused the funds to be transferred to his attorney escrow account.

The defendant filed fraudulent federal and New York State tax returns by deliberately omitting the income from the foreign financial accounts and by failing to pay income taxes on the omitted income. As a result, the defendant was able to evade paying $653,580 in federal income tax for the tax years 2002-2005 and 2007-2010.

The defendant also failed to report his ownership and control of his foreign financial accounts on FinCen Form 114 despite being advised by an accounting firm that he had an obligation to file FinCen Form 114 and that failure to do so could result in civil and criminal penalties being imposed.

Case 3

On September 21, 2016 a Weston Connecticut man pleaded guilty to concealing over 1.5 million in income from an undeclared foreign financial account.

According to the DOJ press release, the defendant conspired with another individual in the United States and others to conceal his assets and income. The scheme was designed to evade paying income tax derived from the sale of duty free alcohol and tobacco products. The defendant used a sham entity, Centennial Group, a registered Panamanian corporation to buy and sell duty free products. In order to carry out the scheme, the defendant arranged to have alcohol shipped through a custom bonded warehouse in the Foreign Trade zone in Southern Florida. The tobacco products passed through a customs bonded warehouse in North Bergen, New Jersey. In total, the defendant was able to transfer $1,627,832 to his undeclared bank account in Panama. The defendant repatriated some of the proceeds from his Panamanian account for the purchase of a Mercedes and to pay $19,000 in interior design goods. The defendant failed to report the income earned on his Panamanian account and also failed to file an FBAR for the relevant tax years.

Deputy Assistant Attorney General Ciraolo reaffirmed that “the Department of the Treasury will: “continue to vigorously pursue and prosecuted those who conceal their assets and income in offshore accounts in an effort to evade paying their fair share of taxes.”

The above prosecutions have common some common elements including:

  • The establishment of a Foreign Financial Account.
  • The creation of a sham entity for purposes of becoming the named account holder of the Foreign Financial Account.
  • Actions taken by the true account holder to conceal the existence of the Foreign Financial Account as well as the income generated from the account.

©2016 Anthony N. Verni, Attorney at Law, Certified Public Accountant