On May 28, a federal jury seated in Miami, Florida, handed down a stiff penalty for tax evasion to an 87-year-old Florida man. The jurors decided that the defendant had intentionally failed to file documents with the Internal Revenue Service declaring his assets in a Swiss bank. Jurors found that the defendant failed to file a U.S. Treasury form known as a Report of Foreign Bank and Financial Accounts for over a period of three years — 2004, 2005 and 2006.
The jury found that the defendant should pay a civil penalty to the U.S. government for his deception in the amount of 50 percent of the annual value of the foreign account for those three years. The government had also been seeking a penalty for the defendant’s 2007 filing, but the jury found him not liable in that instance.
Both the government and the defendant’s attorney admit that this was an unusually high penalty, especially because it is a civil case and not a criminal matter. By percentage, this is the largest ever penalty imposed in such a case. The IRS primarily targets criminal operations using FBAR as a weapon against people attempting to secret away money overseas.
The FBAR strategy has worked well for the IRS. It is reported that the majority of 70 defendants charged with tax evasion since 2009 have pleaded guilty in addition to stiff financial penalties.
The strategy appears to be a way to convince people with overseas accounts to voluntarily come into the IRS’ amnesty program rather than receiving criminal charges. Part of the terms of the amnesty program requires that participants identify the banks that helped enable their deception, in addition to paying back taxes and other fines. Since amnesty began back in 2009, over 43,000 Americans have joined its ranks. So far, the program has recovered $6 billion. Additionally, the increased pressure on financial institutions may have played a role in one Swiss bank paying a $2.6 billion penalty and offering up a guilty plea to the charge of assisting Americans in avoiding taxes.
People facing charges of tax evasion should know that the government issues serious penalties for failing to file certain information. It is also important to know that settlements can sometimes be reached in which a defendant might pay substantially less in penalties and fines than they would if a jury later returns an adverse judgment against them.
Source: Lawyer Herald, “Federal jury finds Florida senior citizen owes the IRS 1.5 times more than Swiss bank account” No author given, May. 29, 2014