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Amato Case: 5-Years in Prison for Secret Russian Bank Accounts | FBAR News

Failure to file FBARs for secret Russian bank accounts and income tax evasion led to the imposition of a five-year prison sentence on a New Jersey chiropractor. This is the essence of the new IRS victory in the Amato case. Let’s explore this case in more detail, because the case demonstrates the long reach of the FBAR requirement even in unusual jurisdictions, like Russia.

The Amato Case: Factual Background

Mr. Amato is a US citizen. He was a chiropractor who resided and worked in New Jersey. He practiced medicine through two corporate entities: Chiropractic Care Consultations, Inc. (“Chiropractic Care”) and Accident Recovery Physical Therapy, Inc. (“Accident Recovery”).

It appears that, between January 1, 2013 and December 7, 2016, Mr. Amato over-billed at least six insurance companies. In many cases, he was simply billing for services that he never actually rendered. For these crimes, he was separately charged by the US Department of Justice. On April 9, 2018, in his guilty plea, Mr. Amato admitted that his over-billings were over $1 million.

In order to hide these illegal proceeds, sometime between January 1, 2013 and December 7, 2016, Mr. Amato opened bank accounts in Russia and wired over $1.5 million to these accounts.

On September 14, 2015, Mr. Amato filed his 2014 tax return, stating that he had no taxable income and he owed no taxes. In reality, his 2014 taxable income was about $561,258.

At about the same time, Mr. Amato also deposited checks from his businesses into accounts owned by his minor children. He never disclosed these checks as part of his earnings on his US tax returns. Additionally, there were more funds deposited in his corporate accounts which he also never disclosed on his personal and corporate tax returns.

The Amato Case: IRS investigation and Criminal Prosecution

It appears that the 2014 return was the trigger and huge contributing factor to the commencement of the subsequent IRS investigation of Mr. Amato’s dealings. In 2018, the US Department of Justice (the “DOJ”) filed criminal charges against Mr. Amato with respect to two different types of violations.

The first charge was tax evasion pursuant to 26 USC 7201. It was directly tied to his 2014 tax return, stating that Mr. Amato knowing and willfully attempted to evade his income taxes due.

The second charge was made under 31 USC 5314 & 5322(b) – these are FBAR criminal penalties. Again, the DOJ chose to focus only on 2014 FBAR.

The Amato Case: Tax Evasion and FBAR Criminal Sentence

As part of his deal with the DOJ, Mr. Amato pleaded guilty to both counts. On May 7, 2019, as a result of his failure to pay a large amount in taxes and failure to file FBARs, the New Jersey federal court sentenced him to five years in prison.

Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts

The Amato case is one more reminder of the legal dangers that US taxpayers with undisclosed foreign accounts face. You do not want to be in Mr. Amato’s position.

This is why you need to contact Sherayzen Law Office for professional help with the reporting of your undisclosed foreign bank and financial accounts. We have helped hundreds of US taxpayers with the voluntary disclosure of their foreign assets and foreign income, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

Italian Bank Accounts | International Tax Lawyer & Attorney New York New Jersey

US tax requirements concerning Italian bank accounts can be quite burdensome and complex. The chief three US reporting requirements applicable to Italian bank accounts are: worldwide income reporting, FBAR and FATCA Form 8938. Let’s discuss each of these requirements in more depth.

Italian Bank Accounts: US Tax Residents and US Persons

Before we delve into the discussion of these requirements, we need to identify who is required to comply with these requirements. This task is complicated by the fact that each of aforementioned three requirements has its own definition of a required filer.

Nevertheless, we can readily identify the categories of required filers shared by all three requirements. These categories correspond most closely, but not exactly to the concept of US tax residents. “US tax residency” is a broad term which includes US citizens, US permanent residents, residents who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.

This definition of a US tax resident is fully applicable to the worldwide income reporting requirement and very closely corresponds to the concept of the Specified Person of Form 8938. FBAR’s concept of “US Persons”, however, does differ more significantly from the definition of a “US tax resident”, but only in more unusual circumstances. The most common differences arise with respect to the treaty “tie-breaker” provisions to escape US tax residency and persons who declare themselves tax residents of the United States.

Additionally, I wish to caution the readers that even the definition of US tax residents which I just stated has a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test.

In other words, the issue of who the required filer is, requires careful analysis of the facts and circumstances of an individual. This is definitely the job of your international tax attorney; it is just too dangerous to attempt to do it yourself.

Italian Bank Accounts: Worldwide Income Reporting

All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS. In the context of the Italian bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.

Italian Bank Accounts: FBAR Reporting

The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Italian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.

I wish to emphasize again that, while the term “US persons” is very close to “US tax residents”, it is not the same. The term “US tax residents” is slightly broader than “US persons”. I encourage you to search our website – sherayzenlaw.com – for articles concerning the definition of a US Person.

One aspect of the FBAR requirement, however, deserves a special mention here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.

Finally, no discussion of FBAR can be considered complete without mentioned the much-dreaded FBAR penalty system. It is complex and severe to an astonishing degree. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). The next layer of penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Finally, FBAR imposes penalties even on non-willful taxpayers.

All of the civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the Italian bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).

Italian Bank Accounts: FATCA Form 8938

FATCA Form 8938 has been in existence since 2011. Unlike FBAR, it is filed with a federal tax return and considered to be an integral part of the return. This means that a failure to file File 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.

Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency. For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.

The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.

Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities. You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.

Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Italian Bank Accounts

Worldwide income reporting, FBAR and Form 8938 do not constitute a complete list of US reporting requirements that may apply to Italian bank accounts. There may be many more.

This is why, if you have Italian bank accounts, should contact Sherayzen Law Office. We have a highly knowledgeable international tax compliance team headed by an experienced international tax attorney, Mr. Eugene Sherayzen. We have helped hundreds of US taxpayers with their US international tax issues, including reporting Italian bank accounts, and We can help You!

Contact Us Today to Schedule Your Confidential Consultation!