What to do? Criminal Tax Fraud

Our law firm represents clients all over the country and many times we’re asked to step in when tax fraud or tax evasion is an issue. Fortunately, the IRS has a program in place for clients who ‘come clean’ before the IRS can criminally prosecute. The program is called THE VOLUNTARY DISCLOSURE PRACTICE and it is not for everybody and not every client qualifies. However, when the client qualifies for the program they can avoid criminal charges and get a fresh start with the IRS.

This program is for taxpayers who have ‘willfully’ failed to comply with tax or tax-related obligations and is the official means to resolve willful non-compliance and limit exposure to criminal prosecution. The Voluntary Disclosure Practice has a long history at the IRS and is part of the function of the Criminal Investigation (“CI”) team. Taxpayers who participate in the Voluntary Disclosure Practice intend to seek protection from potential criminal prosecution. While a voluntary disclosure will not automatically guarantee immunity from prosecution, it’s the only option to correct willful non-compliance (i.e. tax fraud) and receive assurances from the IRS that prosecution will not be pursued.

What is a Voluntary Disclosure:

 Voluntary disclosure occurs when you provide a truthful, timely, and complete disclosure to CI through designated procedures. It also requires the taxpayer to:

  1. Cooperate with the IRS in determining your correct tax liability and

  2. Make good faith arrangements with the IRS to pay - in full - the tax, interest and any applicable penalties you owe.

 A disclosure is timely if the IRS receives the disclosure before the IRS has:

       1.      Commenced a civil examination or criminal investigation

      2.     Received information from a third party (e.g., informant, other governmental agency, John Doe summons, etc.) alerting the IRS to your noncompliance

      3.     Acquired information directly related to the taxpayer’s specific noncompliance from a criminal enforcement action (e.g., search warrant, grand jury subpoena, etc.)

How to Disclose:

There is a two-part process to request to participate in the Voluntary Disclosure Practice. To apply for the Voluntary Disclosure Practice, you must first complete Part 1 of the FORM 14457 (attached) and request preclearance to the program. This initial disclosure determines the taxpayers eligibility to participate in the program but does not guarantee acceptance. Acceptance is based on truthfulness and whether the information disclosed was timely. Second, once the taxpayer has received the pre-clearance confirmation, Part II of the same form must be submitted. If both Part I and Part II are approved then the CI Team will refer the matter to the civil section of the IRS and withdraw the file from the criminal team.

 What To Expect:

 An examiner will contact the taxpayer once pre-clearance has been confirmed and the taxpayer will then participate in an audit of the past 6 years. If the time frame for the non-compliance does not go back as far as 6 years, the examiner has the authority to shorten the audit to fewer than 6 years. Once the examination is completed, the examiner will determine the amount of additional tax owed as well as penalties and interest. Most common for the Voluntary Disclosure Practice are Section 6663 or 6651(f) penalties which equal 75% of the portion of the underpayment attributable to the fraud. However, the examiner does have the authority to re-characterize those penalties under Section 6662 which would reduce the penalties to 20% of the underpayment. As with most audits, the penalties and interest assessed against the taxpayer will be based on a number of factors including degree of fraud, willingness to cooperate, truthfulness and discretion of the examiner.

Call Us Today

If you are facing potential criminal issues due to non-payment of tax or because of not reporting income from your business you can avoid serious charges by acting first.

Call our office today at 480 330-5003 and we’ll discuss all of your options in a free and confidential case review.


Letter From Your Foreign Bank? Blame FATCA.

Yes….your bank in Switzerland, Argentina, Brazil, India or (insert most any other foreign country) is reporting to the U.S. government that you have a foreign bank account.

Here’s the typical scenario, a client calls us and says that their foreign bank sent them a letter in the mail with the word FATCA in the subject line and they want to know what FATCA means and what they need to do. Short answer? Your foreign bank is confirming with you that you are a “U.S. Person” and giving you a heads up that they’ll be telling the IRS about your account soon.

I've tried to outline generally what you should do if you receive a FATCA letter from your bank. 


The first answer is that FATCA isn't a "who". FATCA is a law or act that stands for FOREIGN ACCOUNT COMPLIANCE ACT. FATCA was passed here in the United States and, among other things, requires banks located in foreign countries to disclose the account and financial information for U.S. taxpayers that have accounts in their foreign banks.

The great majority of foreign banks world-wide are willing to provide this information to the United States Treasury to avoid financial penalties and pressure from the United States. So if you have a bank account or other type of financial account located in a foreign country, it's likely you will receive a FATCA letter. 


The first thing I tell all of my clients whenever they are dealing with the U.S. Treasury Department or the IRS is that they should never ignore their letters. Ignoring international tax issues is not a winning strategy. The second thing I tell them is that they should seek qualified legal counsel right away. U.S. taxpayers have legal reporting obligations on certain bank and financial accounts that should be filed every year depending on the type of accounts, who owns the accounts and how much money is in the account. For example, if you are a U.S. Person with accounts overseas that total more than $10,000 any time during the year then you likely need to file an FBAR or other similar tax forms.

There are severe penalties for failing to report these accounts but there are also options to avoid criminal or severe civil penalties and get back in the good graces of the U.S. government. To learn more about some of these options call us for a FREE & CONFIDENTIAL CONSULTATION at 480 330-5003 or fill out our contact sheet HERE and we'll contact you right away.  Usually within 15 minutes!

Foreign Financial Accounts & FBARS (FINCEN Form 114)

One of the most common calls we get at Randall & Associates is about foreign bank accounts. Many times the caller does not realize that having a foreign financial account could trigger a reporting requirement to the IRS, often referred to as an FBAR. 

Officially speaking, an FBAR (Report of Foreign Bank Account) is a form that is required to be filed by any U.S. persons, which includes United States Citizens, resident aliens, trusts, estates and U.S. entities that have interest in any foreign financial accounts that qualify or meet the reporting requirements. The official name of the FBAR form is FINCEN Form 114 Foreign Bank and Financial Account. Based on information provided by the IRS, we've compiled a the summary below.

When Do I Have To File An FBAR? 

A United States person with interest in or signature authority over any foreign financial account(s) must file an FBAR with the IRS when the aggregate value exceeds $10,000 at any time during the calendar year. So, if you are (1) a U.S. person and (2) have signature authority over financial accounts then an FBAR might be in your future. This doesn't mean you can have several accounts, all with $9,999 to avoid the FBAR filing requirement.  Any time the combined value of all of your accounts exceeds $10,000 then an FBAR must be filed disclosing all of your accounts for that year.  Recently the IRS updated the due date for filing the FBAR from June 30th to April 15th.

The IRS does list some exceptions to the FBAR reporting requirements here.  Some of these include, accounts owned by government entities or international financial institutions, correspondent/nostro accounts and others. It is crucial that anyone deciding whether or not to rely on an exception speak with a qualified international tax attorney to avoid unnecessary penalties or problems. 

How Do I Know If I'm A "United States Person"?

This is a common question and the IRS has outlined very clearly who does and does not qualify as a "United States Person" for purposes of FBAR reporting. The IRS considers you a U.S. Person if you are a U.S. citizen, U.S.  resident alien, U.S. entities (corporations, LLC's, partnerships), U.S. trust or any estate formed under U.S. law.  It's also important to note that dual citizenships or tax treaties with other countries typically do NOT affect FBAR reporting obligations. Also important to remember is that FBAR is a report, not a tax return or an obligation to pay more in taxes. Just because you find yourself with the obligation to report a foreign financial account does not mean you will have to pay the IRS money.

Do I Have Interest Or Signing Authority?

Again the IRS has published it's thoughts on this common question. They consider interest in a financial account to mean any  "U.S. Person" (see the paragraph above) holding legal title (regardless of who the account benefits) even if you are on title and are acting on behalf of the real owner as an agent, attorney or nominee. 

In regards to Signing Authority the IRS states, "Signature authority is the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account." 

What If I Don't File A Required FBAR?

The United States Treasury and the IRS take offshore reporting very seriously. Penalties for non-filed FBARs may include a hefty financial penalty and potential criminal consequences for certain cases that show a pattern of negligent activity or a WILLFUL failure to file an FBAR. The point is that hiding the foreign accounts from the IRS is never a good plan and there are programs available for those who want to get back on track and avoid large penalties and criminal prosecution.  These programs are updated from time to time by the IRS which is why we always offer a free and confidential case review.

What Are My Options If I Haven't File A Required FBAR?

The good news is that there are several options to get back into compliance and the good graces of the IRS and FinCEN. If you were not WILLFUL then these options will eliminate the potential for criminal penalties and greatly reduce any financial penalties. Generally speaking there are three main methods for resolving offshore reporting non-compliance (i) Streamlined Filing Compliance Procedures, (ii) Offshore Voluntary Disclosure Program or (OVDP) and (iii) Reasonable Cause Filing. The decision to file a delinquent FBAR is important and should be made with the help of an international tax attorney. For any questions related to FBAR's, foreign financial accounts or other international tax law issues please contact us for your free consultation. (480) 330-5003

*UPDATE: The OVDP or Offshore Voluntary Disclosure Program has been eliminated by the IRS. It is important to meet with an experienced international tax attorney if you may have been willfully hiding or not disclosing foreign assets so that you can eliminate the risk of criminal prosecution and get back into compliance the right way.