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U.S. Taxpayers Who Hide Money Overseas May Face Federal Prosecution and Civil Penalties

U.S. Taxpayers Who Hide Money Overseas May Face Federal Prosecution and Civil Penalties

A Jamestown, Kentucky man was recently arrested and charged with tax evasion and conspiring to defraud the United States government by using secret foreign bank accounts to hide assets. According to a press release issued by the U.S. Attorney’s Office for the Southern District of New York, the man stands accused of establishing and maintaining several secret financial accounts in Switzerland using a sham foundation so that he could avoid paying his U.S. tax liability. He will reportedly be arraigned in a Manhattan federal court in early December.


The allegations included in the indictment state the man and his brother inherited the unreported funds from a family member in 2000. Instead of reporting the overseas assets to the Internal Revenue Service, as required by law, the two men purportedly consulted with two financial advisors before choosing to maintain the money in an undisclosed offshore account for their benefit. In 2005, the Kentucky man apparently transferred a portion of his share of the funds to another secret account established in the name of a sham foreign entity at a different Swiss bank. The entity was reportedly created solely to conceal the accused man’s identity.



The allegations in the indictment accuse the Kentucky man of attempting to evade his income tax obligations by deliberately failing to report the money in the offshore accounts as well as the income the accounts generated on his federal tax returns between 2007 and 2010. He is also accused of willfully failing to file the mandatory Report of Foreign Bank and Financial Accounts (“FBAR”) for each year and conspiring with his brother and the two financial advisors to defraud the U.S. government. By the end of 2009, the Kentucky man’s undeclared overseas assets were apparently valued at nearly $800,000. If convicted, the accused man could face up to five years in prison as well as hefty civil penalties.


A U.S. citizen or other taxpayer who has an ownership interest or signature authority over a foreign bank account or other financial asset with an aggregate balance of $10,000 at any time throughout the tax year is required by law to file an annual FBAR and disclose the account on Schedule B of his or her individual income tax return. The FBAR must be filed for overseas assets, including a savings, checking, or secured credit card account, insurance policies that may be cashed out, foreign securities, and mutual funds. In addition to facing potential criminal prosecution, a U.S. taxpayer who does not timely file the FBAR may incur financial penalties of up to one-half of the highest undisclosed account balance.


If you have questions about your international income tax rights and responsibilities, you should contact a skilled tax lawyer. Attorney William Hartsock is a certified tax law specialist with more than three decades of experience advising clients in San Diego and across Southern California about their international income and other tax issues. To speak with a seasoned tax lawyer today, do not hesitate to call Mr. Hartsock at (858) 481-4844 or contact him through his website.


Additional Resources:

Manhattan U.S. Attorney Announces Charges Against Kentucky Resident For Maintaining Secret Swiss Bank Accounts, United States Attorney’s Office for the Southern District of New York Press Release dated November 18, 2014



Photo Credit: DodgertonSkillhause, MorgueFile

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