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California Man Sentenced to Prison Time, Incurs Hefty Financial Penalties for Using Foreign Bank Accounts to Commit Tax Fraud

California Man Sentenced to Prison Time, Incurs Hefty Financial Penalties for Using Foreign Bank Accounts to Commit Tax Fraud

A California medical device inventor was recently sentenced to six months in prison followed by six months of house arrest after he was convicted of using offshore bank accounts to hide assets from the United States government. In United States v. Desai, a San Jose man apparently used numerous overseas bank accounts to conceal nearly $8 million in assets between 2007 and 2009. Although the man reportedly earned at least $1.2 million in interest from the offshore bank accounts over the course of three years, he only paid a total of $17,000 in federal income taxes.

 

Last fall, a jury convicted the medical device inventor of committing eight counts of tax fraud. Following his conviction, the man faced a possible prison sentence of up to 10 years. According to the United States Department of Justice, the inventor under-reported his income tax obligation by more than $357,000 from 2007 to 2009. In order to fund his offshore accounts, the man purportedly asked several foreign customers to wire funds directly to his overseas banks. He also mailed checks to foreign banks and transferred money between his offshore accounts. Evidence offered at trial demonstrated that the man asked foreign banks not to mail his financial statements to his home in an attempt to avoid his income tax liability. The convicted man was also accused of lying on his annual Reports of Foreign Bank and Financial Accounts (FBAR). As a result of his FBAR violations, the Internal Revenue Service assessed a $14.2 million penalty against the San Jose inventor.

 

As this case reveals, a U.S. taxpayer can face both hefty fines and criminal penalties for a willful failure to comply with the nation’s income tax laws. Each year, American taxpayers who have an ownership or signatory authority over certain foreign financial assets totaling at least $10,000 must file a completed FBAR by June 30. If a taxpayer fails to timely file the FBAR, he or she can face a financial penalty of $10,000 or up to one-half of the highest balance of the financial asset per occurrence. According to the IRS, the FBAR must be filed for any overseas bank, brokerage, mutual fund, trust, or other financial account. Unfamiliarity with this requirement will not shield a U.S. taxpayer from incurring a penalty. Navigating international tax law requirements on your own can be confusing. William Hartsock is a certified tax law specialist with decades of experience assisting clients in San Diego with international and other tax law matters. To speak with a hardworking tax lawyer about your circumstances, please call Mr. Hartsock at (858) 481-4844 or contact him through his website.

 

Additional Resources:

Medical Device Inventor Sentenced to Prison for Tax Fraud, U.S. Department of Justice Press Release dated July 8, 2014

 

Indian American sentenced to 6 months in jail for hiding offshore accounts from the IRS, by Deepak Chitnis, The American Bazaar

 

 

Photo Credit: xandert, MorgueFile

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