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Feds Push Jail For Tax Crimes: Like Your Cell, Keep Your Cell

Feb 16 2014, 3:54pm CST | by

Does jail work is a large and complex question. But prosecutors are trained to want it and to push hard, in some sectors more than others. Tax charges are not violent but the tax system works on...

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23 weeks ago

Feds Push Jail For Tax Crimes: Like Your Cell, Keep Your Cell

Feb 16 2014, 3:54pm CST | by

Does jail work is a large and complex question. But prosecutors are trained to want it and to push hard, in some sectors more than others. Tax charges are not violent but the tax system works on self-reporting and honesty.

That’s one reason indictments, prosecutions and convictions are trumpeted during tax filing season. In the run-up to April 15, the government wants to remind you to fly right. You sign tax returns under penalties of perjury. The numbers you report must be true—they’re Not an Opening Offer .

A report by the Transactional Records Access Clearinghouse, a Syracuse University research group, says the government is cracking down hard. It reports that average tax crime prosecutions sought by the Justice Department have grown to 1,568 annually. While IRS offshore account efforts continue to rake in money, the government keeps pushing hard for jail time. Cash isn’t enough.

After Beanie Babies founder H. Ty Warner plead guilty to tax evasion, he was sentenced on January 13 to 2 years of probation and 500 hours of community service, but not to jail. So the feds have appealed to the Seventh Circuit. Prosecutors say Warner, Forbes’ 209th richest American worth $2.6 billion, should be jailed.

Warner agreed to pay penalties of over $53 million after evading taxes. Judge Charles Kocoras cited Warner’s charity work in choosing probation so his good works could continue. Mr. Warner opened an account with UBS in 1996. In 2009, the IRS launched its first Offshore Voluntary Disclosure Program (OVDP) , a variant of which is still open today.

It encourages people to come forward and avoid prosecution. UBS paid $780 million to the U.S. government and the banking world will never be the same. Some Swiss banks have closed, some are still working out deals, and FATCA now promises worldwide tax transparency. But when Warner applied for amnesty in 2009, he was rejected because the IRS already had his identity.

Few people are turned down, but the IRS policy is not to accept taxpayers who are already being investigated. Mr. Warner (#209 on Forbes 400 list ) is not the first Forbes 400 member to draw tax charges. Leandro Rizutto (#296 ), founder of Conair, had his own run in. So did Igor M. Olenicoff (#184 ), a California real estate developer with a net worth of $2.9 billion.

Mr. Warner still paid considerable tax on the nearly $50 million of 2002 income he did report. But he shorted the IRS by about $1.2 million. That was a painful omission, not only drawing the tax evasion charge, but huge FBAR penalties too. It was the FBAR penalties that topped $53 million.

The staggering figures tie into criminal penalties. A tax evasion conviction carries up to 5 years in prison and a $250,000 fine. Tax convictions even draw prosecution costs on top of all the back taxes, interest and penalties. And the penalties can be huge. Civil fraud penalties alone can add another 75%.

When it comes to penalties, FBARs—even civil penalties—are the real gravy train. An annual report of foreign accounts in the law since 1970, FBARs target money laundering. They were not widely known—or widely enforced—until the UBS scandal of 2008 and 2009. Now they are ubiquitous, requiring reporting of foreign accounts even by those with mere signature authority but no beneficial interest.

A willful failure to file an annual FBAR can trigger a civil penalty of up to 50% of the account balance at the time of the violation. More garden-variety taxpayers can find themselves facing the awkward combination of failing to report foreign account interest and failing to file FBARs. Even if unreported income is small, the combination of amending tax returns to report it plus quietly filing past-due FBARs is a classic “quiet disclosure.”

The IRS advises against them and says it can prosecute taxpayers who do it anyway. The IRS wants taxpayers to join the Offshore Voluntary Disclosure Program . As under the 2009 and 2011 programs preceding it, taxpayers must file up to 8 years of amended returns and up to 8 FBARs. It isn’t perfect, but for many, it’s a way to know you’ve resolved a potentially explosive situation.

You can reach me at Wood@WoodLLP.com . This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Source: Forbes Business

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Raky ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broke ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by th ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri His ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Moh ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involvi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Schem ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kid ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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