Willfulness and Streamlined Disclosure Leads to Criminal Prosecution

Willfulness and Streamlined Disclosure Leads to Criminal Prosecution

Taxpayer Indicted for Streamlined Offshore Tax Fraud

Taxpayer Indicted for Streamlined Offshore Tax Fraud: It is NEVER a good idea for a Taxpayer to enter the Streamlined Program when the Taxpayer was willful. While some Taxpayers are willing to take the risk, other times it is simply because the Taxpayer misunderstood the parameters and requirements of the program. In fact, most of the time it is not really the Taxpayer’s fault at all — but rather it is because the Taxpayer was goaded into the Streamlined Program by an unscrupulous Tax Attorney.

In these situations, the Tax Attorney convinces the Taxpayer to submit to the Streamlined Program — even though the Taxpayer is clearly willful. These attorneys submit the Taxpayer into the Streamlined Program by assuring the Taxpayer there is no risk of criminal prosecution, because the amount of unreported income was only “minor.” 

The attorney then glosses over the fact that that there is no de minimis rule for willfulness and if the Taxpayer gets caught, they may be prosecuted.

These attorneys usually work in tandem with outside CPAs. Together, the Attorney and CPA intentionally misapply the principles of “Kovel,” to try to shield themselves from a malpractice lawsuit.

Here is a case study example of how an attorney convinces a willful taxpayer to go Streamlined.

Criminal Prosecution for Willful Streamlined Disclosure

If a person is willful, they do not qualify for the streamlined program — there are no exceptions. Knowingly submitting to the Streamlined Program when a person is willful is a form of Quiet Disclosure and is illegal.

Recently, the Internal Revenue Service has sought criminal enforcement for quiet disclosures — and specifically against willful Taxpayers who submit to the Streamlined Program when they are willful. 

US v. Rahman is one recent example of an indictment by the US government against the taxpayer who was allegedly willful, but still submitted to the streamlined program.

Businessman Indicted for Not Reporting Foreign Bank Accounts and Filing False Documents with the IRS

    • ALEXANDRIA, Va. – A federal grand jury returned an indictment today charging a Herndon man with failing to file Reports of Foreign Bank and Financial Accounts (FBARs) and filing false documents with the IRS.

    • According to the indictment, Azizur Rahman, 70, had a financial interest in and signature authority over more than 20 foreign financial accounts, including accounts held in Switzerland, the United Kingdom, the Republic of Singapore, and Bangladesh. For the years 2010 through 2016, Rahman allegedly did not disclose his interest in all of his financial accounts on annual FBARs, as required by law. Rahman also allegedly filed false individual tax returns for the tax years 2010 through 2016 that did not report to the IRS all of his foreign bank accounts and income.

    • Rahman is also charged with filing a false “Streamlined Submission” in conjunction with the IRS Streamlined Domestic Offshore Procedures. Those procedures allowed eligible taxpayers residing within the United States, who failed to report gross income from foreign financial accounts on prior tax returns, failed to pay taxes on that gross income, or who failed to submit an FBAR disclosing foreign financial accounts, to voluntarily disclose their conduct to the IRS and to pay a reduced penalty if their conduct was non-willful. The indictment alleges that Rahman’s Streamlined Submission did not truthfully disclose all the foreign bank accounts in which he had an interest, and falsely claimed that his failure to report all income, pay all tax, and submit all required information returns, such as FBARs, was non-willful.

    • If convicted, Rahman faces a maximum sentence of three years in prison for each of the counts related to filing false tax documents. Rahman also faces a maximum sentence of five years in prison for each count relating to his failure to file an FBAR or filing a false FBAR. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

    • Raj Parekh, Acting U.S. Attorney for the Eastern District of Virginia; Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division; and Kelly R. Jackson, Special Agent in Charge, Washington, D.C. Field Office, IRS-Criminal Investigation, made the announcement.

    • Assistant U.S. Attorney Jamar Walker and Trial Attorneys Sean Beaty and Brian Flanagan of the Justice Department’s Tax Division are prosecuting the case.

    • A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:21-cr-22.

    • An indictment is merely an accusation. The defendant is presumed innocent until proven guilty.

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