FBAR – Failure to Report

My colleague, Dana Cole, a prominent criminal tax attorney, has prepared the enclosed summary of the criminal tax issues for failure to report a foreign bank account.

U.S. Taxpayers who fail to report foreign bank accounts may be liable for perjury (or criminal tax evasion).

Under IRS Form 1040, at the bottom of Schedule B, Part III, on Page 2, Question 7(a) states: “at any time during the previous year, did you have any interest in or signatory or other authority over a financial account in a foreign country, such as a bank account, a security account, or other financial account?  The answer is either yes or no.  If yes, Question 7(b) requires the name of the foreign country (with the account).

According to Dana Cole: 
Generally, under the Federal Sentencing Guidelines, an indictment issues for the specific offense of tax evasion (26 USC 7201) rather than the general crime of perjury (18 USC 201) for signing a false tax return under penalty of perjury.  For such offenses, bail is rarely an issue.  The Court generally permits a simple signed promise from a “financially responsible person,” such as a friend or relative, attesting that the defendant will make all court appearances, or the FRP will pay the government an agreed upon sum in the event the defendant flees. Cases usually take approximately 15 months from indictment to sentencing.  Under the guidelines, custody time is very dependent on the amount of tax that has been evaded.  Conviction for federal offenses rarely results in probation.  Most everyone indicted, if convicted, must do custody time.  In fact, the guidelines specifically state:  “Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines.” 

Under the guidelines, a charged defendant for tax evasion typically faces approximately 36 months in custody for tax evasion between $500,000 and $1 million.  The number of custody months can increase or decrease depending on the amount of evaded tax that can be proved.  Therefore, obviously it is important to try and reduce that amount.  Also, a number of other factors, such as cooperation with the government’s investigation, age, health, involvement of others, leadership in a conspiracy, and criminal history, such as DUIs, theft offenses, etc., play a significant role in sentencing.  Custody time is imposed in addition to fines and other monetary penalties.  One usually is permitted to self-surrender to a Federal Correctional Institution (FCI) within 45 days of sentencing.  Upon completion of a custody sentence, one is placed on supervised release for another three years, which usually involves rigorous reporting requirements to a probation officer.

If you have any questions regarding these criminal tax issues, please contact Dana Cole, directly:

Dana M. Cole, Esq.
Cole & Loeterman
1925 Century Park East, Suite 2000
Los Angeles, CA   90067
Tel:  310.556.8300

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