HSBC Records on American Clients with Accounts in India Sought by U.S. Tax Officials

On Thursday the Justice Department announced that it was seeking authorization to get information from HSBC regarding account holders in India that may have evaded paying their taxes.

Business Week reports:

The government asked a federal judge in Oakland, California, for permission to serve a so-called John Doe summons to “obtain information about possible tax fraud by people whose identities are unknown,” according to the statement. The request comes amid a crackdown by the Internal Revenue Service on offshore tax evasion that focused on UBS AG, the largest Swiss bank, and spread to other banks.

In January, a New Jersey businessman was charged with conspiring with five HSBC bankers to hide his Indian bank accounts from the IRS. The businessman, Vaibhav Dahake, is scheduled to plead guilty on April 11 in Trenton, New Jersey.

“The IRS continues to focus its attention on international tax evasion,” IRS Commissioner Douglas Shulman said in the statment. “This summons request is focused on obtaining more information to determine if additional actions are needed.”

Juanita Gutierrez, a spokewoman for HSBC, didn’t immediately return a phone call and e-mail seeking comment.

More here

US to Probe Thousands More Offshore Tax Evaders

From Reuters.com:

The U.S. government expects to probe thousands more cases of wealthy individuals dodging taxes through offshore bank accounts, on top of the high profile case against UBS AG (UBS.N) (UBSN.VX), a U.S. tax attorney said on Monday.

"We expect over the next couple of years, in addition to the UBS cases, to have somewhere between 4,000 and 7,000 more cases coming to us with. These are from banks and governments cooperating," said Kevin Downing, a senior tax attorney of the U.S. Department of Justice, in a lecture in Singapore.

Some private banking clients are choosing to take cash from Swiss accounts and carry it by hand back to the United States, to avoid an electronic trail, only to be caught by U.S. law enforcement officers and penalized for tax evasion and illegal smuggling of money into the country, Downing said.

"When they go in and close their accounts, they are picking up brand new $100 bills ... that are coming in $100,000 shrink-wrapped bundles. Guess what? We can trace that money," he said, adding such cash would be forfeited.

Singapore was one stop in a tour of Asian cities also including Hong Kong, Beijing and Shanghai by Downing and his U.S. Justice Department team. The tour featured meetings with financial and tax regulatory bodies and bankers discussing cross-border tax prosecutions.

Government Goes High-Tech to Catch Tax Offenders

Government agencies are beginning to use more advanced computer analytics to catch tax evaders these days. I was reading on CNN.com that one such example is in New York, where the state is using a program by IBM called Tax Collections Optimizer which searches through filing histories, income patterns, occupations and bankruptcy filings, among other data points, to find discrepancies with current tax filings.

State tax agencies and budget experts estimate that lost revenue from tax evaders averages out to billions of dollars a year per state. At the federal level, the Internal Revenue Service estimates delinquent tax debts amounted to about $300 billion in 2008.

Chances of getting caught as a tax offender are greater with the use of analytics like these. New York had already been collaborating with IBM for more than a decade on another technology called the Tax Audit and Compliance System, which used similar analytics to identify questionable refund claims. Since 2004, IBM's technology has saved New York from losing more than $1 billion, according to state officials.

New York isn't stopping there: The state plans to work with IBM to analyze and collect lost sales taxes from businesses, which amount to billions of lost revenue every year.

Read the full article here.

States Offer Tax Evaders with Offshore Accounts a Deal

The Federal governments popular taxpayer amnesty program has allowed hundreds of Americans with offshore accounts come forward and avoid criminal prosecution and/or excessive monetary penalties. After seeing the success of the Federal program, some states – including Connecticut, New York and Hawaii – are offering similar programs as well. You can find a segment of a USA Today article on this new development below.

The IRS isn't the only government agency urging Americans with secret offshore bank accounts to disclose their holdings and pay overdue taxes. Several states have begun similar efforts.

More than 3,000 offshore account owners have applied for an IRS voluntary disclosure program since it began in March, lured by reduced fines and the prospect of avoiding criminal charges.

The IRS started the program amid what proved to be a successful federal court battle to force Swiss banking giant UBS to turn over the names of thousands of Americans with undeclared accounts. UBS recently began notifying American clients their names would be disclosed.

As the Oct. 15 application deadline for federal leniency nears, Connecticut and Hawaii are mounting efforts modeled on the IRS program. Oregon, New York and at least four other states have disclosure programs or amnesties that are open to offshore-account owners.

"It is only a matter of time before we find these taxpayers," said Richard Nicholson, head of Connecticut's Department of Revenue Services, as he announced its program last week.

That's because income-tax-return adjustments and other data the IRS develops under its program may be shared with local tax counterparts, said IRS spokesman Bruce Friedland. The state efforts could get that data faster — and generate tax revenue at a time of budget shortfalls.

Tax Evaders Rush to Beat Amnesty Deadline

Now that the government has reached a settlement with UBS, American tax evaders have until September 23 to reveal their overseas holdings or risk serious legal troubles if their names appear on the list UBS is preparing to turn over to the IRS. If taxpayers do decide to turn themselves into the amnesty program, they will still need to pay a fine but will not face criminal prosecution.

The IRS expects to find some tax evaders soon. UBS AG, the Swiss banking giant, agreed to hand over to the IRS the names of about 4,450 secret accounts as part of a court settlement reached last month.

"This is sort of their last, best chance if they are going to get off with lenient treatment," said Evan Stewart, a regulatory lawyer at the firm Zuckerman Spaeder.

"If you're sitting there and you've sheltered $50 million from the U.S. government, are you willing to gamble with the (list of) 4,500 (names) and live in terror for a year?" Stewart said.

The IRS said that, in one week of July, about 400 individuals turned themselves in under the amnesty program. That was four times higher than the number of tax evaders who stepped forward in all of 2008, according to the agency.

Continue reading at Reuters.com…

Video on Wealthy Tax Evaders

Embedded below is an interesting video on the current problems our country is facing with tax evasion. According to the video, the government loses about $100 billion in revenue from tax evasion, which makes up a huge part of the tax gap. Just for comparisons sake, $100 billion is more than what the federal government spends on education and training, triple what they spend on the environment and natural resources, and nearly five times what they spend on temporary assistance for families in need. Thanks to the American News Project, and TaxProfBlog, for the video.

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Joe Francis Claims Innocence in Tax Fraud Case

After months of publicity surrounding his legal affairs, Girls Gone Wild creator Joe Francis has pleaded not guilty in a federal tax court on Monday. The government has accused Francis of taking more than $20 million in bogus business deductions from the tax years 2002 and 2003.

"No matter how much the government pursues me because of what I do for a living, I will be vindicated again because ultimately the truth will come out," claimed Francis outside the courtroom.

Although Francis may presume that he is being targeted because of the nature of his business, U.S. Justice Department officials were quick to point out that Francis "concealed millions of dollars in income" in violation of federal tax law, not because of his line of work.

Fed Cut Tax Evaders Utilities

According to the Associated Press, the federal government has cut the utilities on convicted tax evaders Ed and Elaine Brown. The couple insists that federal income tax laws are invalid and were sentenced to 5 1/2 years in prison in April 2007. Authorities surrounded their property last week and cut their phone, power and Internet service in an effort to get the couple to report to prison. U.S. Marshal Steve Monier acknowledged that waiting out the couple could take months, but that time was on authorities' side. He said he hoped prison would seem like an agreeable option for the Browns after a summer without air conditioning and possibly a winter without heat.

Tax Evader Sentenced to 63 Months in Prison

Earlier today a federal judge sentenced convicted tax evader Elaine Brown to 63 months in prison. She and her husband Ed Brown were both convicted of tax evasion. He is expected to receive a similar sentence later this afternoon. The two were found guilty by a jury of hiding Elaine’s income from 1996 to 2003, which was $1.9 million, as well as using $215,890 in postal money orders to purchase a compound for Elaine’s dental office. The couple has defended themselves by saying that federal tax laws do not exist, but the prosecuting attorneys claim their theories are "contrary to common sense," and that Elaine "had no excuse for not paying her taxes." Source: BostonHerald.