Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

Offshore Bank Account Crackdown; Analysis of Recent Plea - August 2014

83 year-old “Hot Lips” Pleads to Federal Tax Crimes

As part of our Offshore Voluntary Disclosure and Tax Compliance practice, we follow cases of interest.    Last week, the U.S. Attorney's office announced a guilty plea of conspiracy to defraud the United States and willfully failing to disclose offshore bank account held in Switzerland and Israel.   According to the United States Attorney, for more than 25 years, Bernard Kramer hid at least $1.1 million in an undeclared account at UBS AG (“UBS”), a Swiss bank.  Kramer did not list it on his tax returns (form 1040) and made sure that all disbursements made to him in the U.S. were for amounts less than $10,000.  Kramer and his Swiss bankers referred to the account by the code name “Hot Lips.”

The Charges

83 year-old Kramer was charged with conspiring to defraud the U.S. and one of its agencies (the IRS).  Counts included the following:

·         Attempt to evade or defeat tax. By willfully and knowingly attempting to evade and defeat a substantial part of his income taxes, Kramer was in violation of Title 26, U.S.C. §7201, a felony punishable by fines of up to $100,000 ($500,000 in the case of a corporation), or imprisonment of not more than 5 years, or both, plus the costs of prosecution. 

·         Conspiracy to Commit Offense or to Defraud the United States. Kramer conspired with UBS to evade detection and assessment of taxes, a violation of Title 18, U.S.C. §371, which is punishable by fines or imprisonment of not more than five years, or both.  

·         Subscribing to False Individual Tax Returns. Kramer was charged under Title 26, U.S.C. §7206(1) for willfully and knowingly signing tax returns, which are verified by written declarations made under penalties of perjury although he knew that those statements were false. This is a felony punishable by fines of up to $100,000 ($500,000 in the case of a corporation), or imprisonment of not more than 3 years, or both, plus the costs of prosecution. 

·         Committing an offense by commanding another to perform illegal acts.  Directing UBS to engage in acts intended to defraud the U.S. led to charges against Kramer as the principal party in the crimes under 18 U.S. Code §2.

             

In addition to a large amount of back taxes, Kramer has been ordered to pay $588,042 in penalties and faces up to 8 years in prison. Moreover, the “Hot Lips” are no longer sealed – as part of his plea agreement, Kramer is now aiding the government investigation into his affairs.   

Sentencing is set for February 6, 2015.  We will keep you posted and are especially interested if his cooperation with ongoing government tax investigations will persuade the Court for a variance of the statutory recommendation for sentencing.   Moreover, we are also keeping an eye on the 7th circuit's review of a 5k sentencing variance afforded to Ty Warner in his case involving offshore bank accounts and tax evasion.    ( See government's appeal of a sentencing involving tax evasion / Offshore Bank Accounts).  It will be interesting to see how the Appeals Court reviews the sentencing variance as to tax cases - especially when one of the greatest factors involved in calculating sentencing recommendations is the tax loss to the government.  Click here to listen to the oral arguments. 

The crackdown on Americans hiding money abroad

Kramer is just one of many Americans who have been prosecuted for tax evasion by means of hiding funds in foreign accounts, part of a recent crackdown by the Department of Justice and the IRS. The IRS reports that through voluntary IRS amnesty programs, more than 45,000 Americans have paid $6.5 billion in back taxes, interest and penalties.

Our attorneys are key to your peace of mind

For over 30 years, the Law Firm of Moskowitz LLP has been successfully defending individuals and companies in criminal tax matters for over 30 years.  At the first indication that you are being investigated by the federal government for a tax offense, you need to call our office.  Our seasoned criminal tax attorneys are key to your proper defense and peace of mind.

 

TAX DISPUTE? KNOW YOU RIGHTS

When facing a tax dispute it is perfectly normal (and common) to feel intimidated by the government.  Often, when determining whether or not to contest a tax bill, our clients voice the fear that 'it is not worth it to go against the government.'  This fear is often based in emotion and not in law.    We want you to know your rights.   Even the IRS wants you to know your rights, so you can assert them.  

 

Some of this 'taxpayer education' stems from the recent Lerner email scandal which brought the IRS’ less-than-ideal recordkeeping under public scrutiny. Many were infuriated when they learned that the IRS not only lost key emails, but also backs up only 6 months’ worth of server data—while taxpayers are required to store information for a far longer period of time.

Lost emails is just the tip of the iceberg when it comes to taxpayer grievances with the IRS. Since the 1990s, Congress has enacted various laws regarding taxpayer rights, yet a 2012 study by the IRS Taxpayer Advocate Service (TAS) showed that only 46% of taxpayers knew they had rights and only 11% knew what those rights were.

Finally this past June the TAS announced the IRS Taxpayer Bill of Rights, a compilation of 10 fundamental rights taken from those already embedded in the Tax Code.

The IRS Taxpayer Bill of Rights

1.      The Right to Be Informed

2.      The Right to Quality Service

3.      The Right to Pay No More than the Correct Amount of Tax

4.      The Right to Challenge the IRS’ Position and Be Heard

5.      The Right to Appeal an IRS Decision in an Independent Forum

6.      The Right to Finality

7.      The Right to Privacy

8.      The Right to Confidentiality

9.      The Right to Retain Representation

10.  The Right to a Fair and Just Tax System

Following are some specific examples of what you may expect from the IRS and its representatives if you are involved in an audit or contested tax matter:

Fairness, Courtesy and Respect

Taxpayers have the right to be treated with fairness, courtesy and respect.  No one should feel harassed or intimidated by a government employee.

Privacy and Confidentiality

You have the right to have all information regarding your financial situation, assessments and tax history kept in the strictest of confidences. Note that IRS employees who violate this rule may be subject to criminal prosecution, fines and, of course, dismissal.

Right to Representation

You have the right to have an attorney, accountant or any designated agent present with you or on your behalf during any examination or conference with the IRS.  You are also entitled to have any meeting suspended until you can confer with counsel and to make an audio recording of any call or meeting with IRS agents.

Notice of Interest Charges

You have the right to have all charges – interest and penalties – itemized, and to receive an interest computation upon your request.

Right to Reimbursement, Release and Return

You have the right to reimbursement of your costs and expenses, including bank charges, for erroneous levies, stop payment fees on checks lost by the IRS, fees due to IRS online payment processing errors, etc. You also have the right to have wrongfully levied or seized property (or its value) released or returned to you. 

Appeal

You have the right to appeal IRS decisions.

A tax firm dedicated to defending your rights before the IRS

 

The tax lawyers and accountants at Moskowitz LLP have represented thousands of clients in tax audits and tax disputes, the United States Tax Court, the United States Court of Federal Claims, and the United States District Court, with outstanding results.  If you are seeking professional, efficient and personalized assistance with your tax matter, contact our San Francisco office.