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Criminal Tax Evasion Case Reminds California Heirs to Report Secret Offshore Accounts to the IRS

Criminal Tax Evasion Case Reminds California Heirs to Report Secret Offshore Accounts to the IRS

Earlier this month, a judge delayed sentencing for a member of a prominent New York family who pleaded guilty to tax evasion in 2010. In the case, the woman’s father apparently left her and her siblings millions of dollars that were stored in a secret offshore account. Rather than report the Swiss bank account to authorities, however, the siblings allegedly developed and implemented a tax-evasion scheme using the advice of a financial adviser. Although the woman was the first member of the family scheduled to be sentenced in the conspiracy, the federal judge determined that her sentencing should be postponed pending the outcome of the financial adviser’s trial. At this time, no trial date has been set.

 

According to the United States Attorney’s Office, the scheme was established in 2001 when the secret foreign account was discovered following the death of the siblings’ father. The siblings purportedly decided to continue hiding the funds overseas in order to avoid paying over half of their inheritance in estate and other taxes. The conspiracy was reportedly uncovered in 2009 after Swiss bank UBS provided the U.S. government with information regarding American account holders. The information disclosure was reportedly made in connection with a deferred-prosecution agreement that was entered into by the financial institution and the U.S. Since then, about 40,000 American taxpayers voluntarily paid millions of dollars in overdue tax liabilities in connection with their ownership interest in a foreign bank account. Dozens of taxpayers also faced criminal prosecution.

 

In the New York woman’s case, the federal judge apparently decided to put off sentencing due to conflicting evidence provided to him by the family’s former financial adviser. Although the woman agreed to offer truthful testimony in connection with her guilty plea, the evidence apparently calls her cooperation into question. Since the tax-evasion scheme was discovered, the woman has filed amended tax returns and paid her overdue tax liability. Still, she currently faces a sentence of up to 11 years in federal prison. Three of the woman’s siblings also pleaded guilty to similar charges and now await sentencing in separate cases.

 

 

As this situation demonstrates, offshore financial accounts can spell trouble for an heir. According to the U.S. Government Accountability Office, about half of U.S. taxpayers who paid a substantial penalty on a foreign financial asset in 2013 inherited the asset from a relative. Owners and inheritors of foreign financial assets that exceed $10,000 are required to file an annual Report of Foreign Bank and Financial Accounts (FBAR) or risk being penalized. A taxpayer who does not timely file the FBAR can be forced to pay up to one-half of an overseas bank account’s highest balance and face possible criminal prosecution. In addition to FBAR penalties, an estate that includes a previously undisclosed overseas account will normally be required to pay back taxes, interest, and penalties.

 

If you have questions about your international tax law obligations, you should speak with a knowledgeable international tax lawyer. Attorney William Hartsock is a certified tax law specialist who has more than three decades of experience advising clients in San Diego about international tax law matters. To speak with a seasoned tax lawyer, do not hesitate to call Mr. Hartsock at (858) 481-4844 or contact him online.

 

Additional Resources:

Seggerman’s tax-evasion sentence postponed, by Aaron Elstein, Crain’s New York

 

Sentencing near for Seggerman heir, by Aaron Elstein, Crain’s New York

 

 

Photo Credit: DodgertonSkillhause, MorgueFile

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