April 13, 2010 - Phil Hodgen

New UBS guilty plea in New Jersey follows the template

Harry Abrahamsen skimmed money off the top of his business with tax deductions for phony expenses.  Parked the money in UBS.  More than $1 million involved.

Penalty:  50% of the account balance for failure to file the FBAR form (Form TD F 90-22.1), and the normal “up to 5 years in prison/$250,000 fine/twice the loss to the IRS” set of penalties.

Key to understanding this:  Harry’s really bad action was taking phony tax deductions and siphoning income out of his company without paying tax on it.  Sending it to foreign corporations and parking it offshore led to two offenses that are inevitable once you start cheating on your taxes:

  • Not filing the right forms to say you have the foreign accounts; and
  • Not reporting interest, dividend, capital gains on the money parked in the foreign accounts.

You wouldn’t do either of those because, well, once you’ve committed tax evasion offenses you’re not going to tell the IRS where you parked the money derived from those offenses.

In prosecuting these cases it’s trivial to whack the taxpayer with the FBAR stick.  All you (as the prosecutor) need to do is show (1) a foreign bank account; and (2) the little box at the bottom of Schedule B wasn’t checked; and (3) Form TD F 90-22.1 wasn’t filed. And if you (the prosecutor) get the entire client file from UBS about the U.S. person, then you’ve been handed everything you need.  Put the UBS documents on the left.  Put the taxpayer’s tax returns on the right.  Compare.   Whammo.  No brains required.  

I’ll save the rant for another day.  But for those of you out there with foreign accounts, please understand that if you are found, it’s fish/barrel/shoot.  That’s how these things play out.

We will see many more of these plea bargains.

Voluntary Disclosure