IRS Continues to Target Accounts in Israel, Caribbean Island Nations: Bank Mizrahi Depositor Pleads Guilty

Kevin Thorn of the Thorn Law Group comments on the recent guilty plea by a United States Taxpayer with undisclosed overseas bank accounts as one in a long line of ongoing IRS and DOJ investigations into U.S. citizens with hidden overseas bank accounts. Thorn observes the U.S. government’s expanded focus from Switzerland to other countries.

Washington, DC (PRWEB) February 28, 2014

Monajem Hakimijoo, of Beverly Hills, CA pleaded guilty on Feb. 13, 2014, in a U.S. District Court to filing a false federal income tax return for tax year 2007, confirmed the Internal Revenue Service (IRS) and the Justice Department (DOJ). [Department of Justice Press Release, http://www.justice.gov/opa/pr/2014/February/14-tax-163.html.] This case signals a potential shift in focus by the U.S. to investigating undisclosed accounts held in Israeli banks and the use of entities in the Caribbean.

Hakimijoo is the latest in a long line of U.S. taxpayers charged in a U.S. District Court with committing tax evasion by using a concealed foreign bank account to hide income and assets from the IRS. [U.S. v. Hakimijoo, U.S. District Court Central District of California, Case Number 2:14-CR-00017.] Hakimijoo, a United States citizen, and his brother had an overseas undeclared bank account in Israel at Mizrahi Bank in the name of Kalamar Enterprises, a Turks and Caicos Islands company they used to hide their ownership of the offshore account. Also included in court documents was a description of how Hakimijoo and his brother used the money in the Israeli account as collateral for back-to-back loans received from the Los Angeles branch of Mizrahi Bank. Although they claimed the interest paid on the back-to-back US loans as a business deduction for federal tax purposes, they did not report the interest income earned in their undeclared overseas account as income on their tax returns. Hakimijoo failed to report nearly $282,000 in total accumulated interest income, and the undeclared Israeli account had nearly$4,030,000 at its highest balance. [As reported in the February 14, 2014 Department of Justice press release, http://www.justice.gov/tax/2014/txdv14163.htm.]

U.S. citizens and residents who own, have an interest in, or maintain authority over financial accounts with a cumulative value in excess of $10,000 in a foreign country are required to disclose the existence of such account on Schedule B of their individual United States income tax returns. They must also file a Report of Foreign Bank and Financial Accounts – more commonly known as an FBAR – with the U.S. Treasury disclosing the financial accounts. Likewise, U.S. citizens and residents who own or have an interest in foreign companies or trusts must report their interests in those entities to the IRS. Failure to disclose the details of offshore accounts and foreign trusts and companies can result in extraordinary penalties or even jail.

Hakimijoo faces a prison term of three years and a fine of $250,000. He will be sentenced on April 28, 2014. In addition, he has agreed to pay a civil penalty to the IRS in the amount of 50 percent of the highest balance of his one-half interest in the offshore account.

Kevin E. Thorn, an international tax attorney who represents hundreds of U.S. citizens and residents with offshore accounts and business interests, states that U.S. taxpayers with undisclosed offshore accounts should come into compliance with the IRS immediately. “The IRS and DOJ are actively prosecuting U.S. persons they find with hidden foreign accounts, as well as U.S. taxpayers with undisclosed foreign companies and trusts,” warns Thorn. Thorn advises American taxpayers to enter the IRS Offshore Voluntary Disclosure program to settle their issues. He points out that the penalty for not disclosing offshore accounts, trusts or companies can be devastating. “The best way to avoid criminal prosecution and protect your interests is to come forward and make a voluntary disclosure of foreign assets to the IRS.”

In light of recent developments, Thorn anticipates the IRS and DOJ will soon have the information they need to go after numerous U.S. taxpayers with hidden foreign accounts. The U.S. Senate is urging the IRS and DOJ to continue to take a more aggressive approach against U.S. persons with undisclosed foreign accounts. [U.S. Senate Permanent Subcommittee on Investigations, Offshore Tax Evasion Hearings, Feb 26, 2014, Bolstered by its success using the “John Doe Summons” procedures to obtain information from Swiss banks, the U.S. filed a John Doe Summons seeking information about Caribbean accounts from the Barbados-headquartered CIBC – First Caribbean International Bank. [See Department of Justice Press Relaese, April 30, 2013, http://www.justice.gov/opa/pr/2013/April/13-tax-488.html.] Also, Thorn observes that “Foreign banks are making voluntary disclosures to avoid prosecution and penalties, and so should account holders. Once the DOJ and the IRS obtain the identities of account holders from these overseas banks, they will more than likely not allow those account holders to enter into the IRS Voluntary Disclosure program.” He adds that “compliance may be significantly more costly and more difficult for taxpayers who do not come forward before the banks identify them to the Department of Justice and the Internal Revenue Service,” and notes that “the IRS and the DOJ will continue to put pressure on all foreign banks in order to obtain U.S. Taxpayer information and bring those who have undisclosed offshore accounts back into compliance.”

Credit: Virtual Strategy Magazine