Indian Business Man Prosecuted For Unreported HSBC India Account (FBAR Post)

by Brian M

Although all the media attention on unreported foreign accounts appears to focused on Switzerland, the Justice Department and IRS continue to look worldwide for U.S. taxpayers with undeclared offshore accounts. According to a press release from the United States Attorney’s Office, Sameer Gupta pleaded guilty last week to one count of tax evasion after the IRS discovered he had an unreported bank account at HSBC India. He faces 5 years in prison.

Possessing or having signature authority over an account in India is entirely legal if the account is reported annually to the IRS. Foreign bank and investment accounts must be reported each year on a Report of Foreign Bank and Financial Accounts, also known as an FBAR or form TD 90-22.1. Failure to file an FBAR is a felony.

Prosecutors say that in an effort to conceal his identity, Gupta had some 17 different bank accounts, several in nominee format. Opening an account in a false name or deliberately concealing one’s identity by opening an account in a third party name is considered an affirmative act of tax evasion.

Prosecutors say the tax loss caused by Gupta’s activities was somewhere between $200,000 and $400,000. As part of his plea deal, Gupta agreed to pay the IRS a $259,000 penalty. The judge can impose an additional fine of $250,000 or an amount of his twice the gain from his illegal activity at the time of sentencing.

There is no word on how Gupta was caught.

In recent years, the IRS has been targeting foreign banks and bankers to get the names of U.S. clients. As Gupta discovered, opening an account in a fake name doesn’t always work. Beginning next year, the new FATCA law will require foreign banks to investigate and report any account holder with ties to the United States.

The IRS’ whistleblower program has also resulted in many people getting caught. Disgruntled employees, unhappy vendors and often jilted lovers provide the information which leads to the discovery of unreported foreign accounts.

There is an amnesty that allows those with unreported accounts to come into compliance and avoid audit and criminal prosecution. (The Offshore Voluntary Disclosure Program often called “OVDI”) The program does have a catch; there are some fairly steep penalties and also the need to come into compliance before getting caught. If the IRS finds you first or gets your name from a foreign bank, amnesty is off the table.

For those whose noncompliance is truly one of mistake or ignorance of the law, other options may reduce or eliminate all penalties. Do nothing, however, and you could face criminal prosecution or civil penalties that are the greater of $100,000 per year or 50% of the highest account balance for each year the account was unreported.

That was a well written article. I do not agree with all of it. We have had hundreds of people from India phone us. We have never had a problem. We usually suggest that they file and then opt out. In that way they usually reduce the money that they owe to the IRS. They also have amnesty and have come forth into compliance and have avoided criminal prosecution. If you need help Google Lance Wallach or contact him. His associates have been with the IRS for years in the international division. They are also CPAs etc.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.