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Oh God Why Can't The Pastor Live High and Pay No Taxes?

According to Law360, The leader of a religious group objects to the federal criminal charges in New Jersey that he and another church official evaded taxes on about $5.3 million they took from the organization, blasting the case as part of a system designed to oppress blacks and Hispanics.

“And I’m part of that oppressing, but God is not gonna let that go down,” Grant said as the crowd erupted in applause.

After they pled not guilty at an arraignment inside a federal courthouse in Newark, Jermaine Grant, head of the Israelite Church of God in Jesus Christ, said outside the building that the charges are false, frivolous and “inconsistent with the facts of the case.”

Grant, 43, of Burlington Township, New Jersey, and Warrington, 48, of Teaneck, New Jersey, were each indicted last month on one count of conspiring to defraud the United States. Grant also was charged with five counts of personal income tax evasion.

The government has alleged that for nearly a decade, Grant and Warrington used their leadership positions to divert millions of dollars belonging to the religious organization and its members for Grant’s personal use and benefit. The two men allegedly concealed that income from the Internal Revenue Service, authorities said.

Grant and Warrington are accused of failing to report a total of $5,342,920 in income diverted from the church between 2007 and 2015, leading to a tax loss of $1,982,470 to the U.S., authorities said.
 

What Happened to the Vowel of Poverty
for Priests and Pastors? 

As part of the conspiracy, the two men created Black Icon Entertainment, or BIE, in part to portray Grant as an “entertainment industry mogul whose wealth was derived from his success in the industry and thereby conceal from ICGJC members that his lifestyle was supported entirely by the ICGJC and member donations,” according to the indictment.

“BIE conducted virtually no legitimate business and was funded almost exclusively by money taken from the ICGJC,” the indictment states. The two men each owned a 50 percent stake in the business, the indictment states.

Grant and Warrington caused the religious organization to transfer about $1.038 million in church funds to BIE, and falsely characterized some of those transactions as “loans,” the indictment states. They also used another roughly $1.35 million in church money to pay for BIE’s expenses, according to the indictment.

The Two Men Failed to Report the Nearly $2.4 Million Provided to Bie on the Company’s and Grant’s Federal Income Tax Returns, the Indictment States. 

Authorities Also Alleged They Used about $2.9 Million in Church Funds for Various Personal Expenditures Benefiting Grant and His Family Members.
The expenditures included buying luxury clothing, electronic products and home furnishings; purchasing and leasing real estate and luxury vehicles; and spending money on trips to Disneyland, according to the indictment.

Grant also used church funds to cover expenses related to some of his children’s private school education, “including daily transportation to the school in a chauffeured Mercedes Benz paid for with funds from an ICGJC bank account,” the indictment states.

 The case is USA v. Grant et al., case number 2:18-cr-00179, in the U.S. District Court for the District of New Jersey.

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Read more at: Tax Times blog

Supreme Court Agrees That Recklessness = Willful Failure To File FBAR!


On December 20, 2016 we posted Recklessness = Willful Failure ToFile FBAR For Partial Disclosure in OVDP Filings? where we discussed that a district court had found that the taxpayers' failure to timely file a Foreign Bank and Financial Accounts Report (FBAR) was willful where, among other things, they stopped employing a bookkeeper or keeping any books after opening a foreign bank account and made several misrepresentations under penalty of perjury when they applied to participate in IRS's Offshore Voluntary Disclosure Program (OVDP).

The taxpayers were Mr. and Mrs. Bohanec and Mr. Bohanec owned a camera shop in California. The Bohanecs arranged with Leica, a German camera manufacturer, to become an exclusive Leica dealer. Commissions for international sales were deposited into an account at UBS AG in Switzerland in the Bohanecs' name.

On Jan. 6, 2010, the Bohanecs executed an application to participate in the OVDP. The Bohanecs' application, submitted under penalty of perjury, represented that the "original balance and all funds deposited into the Swiss UBS account were after-tax earnings from our camera business." On May 19, 2011, the Bohanecs executed and filed FBARs and federal income tax returns for 2003, 2004, 2005, 2006, 2007, and 2008.
While those FBARs included the UBS account, they did not include the Austrian or Mexican accounts. The Bohanecs were ultimately rejected by IRS for the OVDP. In June 2013, IRS assessed a penalty of approximately $1.2 million penalty against Bussell for failing to disclose her financial interests in an overseas account on her 2006 tax return, which she was required to report in 2007. Bussell did not pay the penalty, and IRS filed suit. 

The District Court found that Bussell had willfully failed to file a FBAR, granting partial summary judgment to IRS, but reducing the fine. U.S. v. Bussell, DC CA 12/8/2015, 117AFTR 2d 2016-439. The court rejected all the various arguments offered by the taxpayer, including that the fine was excessive and violated treaty provisions.

  • The district court was not persuaded by the taxpayer's argument that the fine was excessive under the Eight Amendment because the offense was solely a reporting offense, not a serious crime.
  • The court reasoned that while the taxpayer's offense, tax evasion, was not as serious as some crimes that ultimately trigger civil forfeiture actions, it clearly fit into the class of persons targeted by the Bank Secrecy Act, namely those evading taxes through the use of offshore bank accounts.
  • Further, the district court found that the taxpayer had not carried her burden to show that the money at issue was derived from a lawful source, which would trigger stronger Eight Amendment protections.

After weighing the factors relevant to the an excessive fines inquiry, the district court concluded that IRS's assessment raised some Eighth Amendment concerns because the assessment exceeded the maximum penalty set out in the applicable criminal and civil statutes. The maximum authorized penalty for a willful criminal FBAR violation was a five year sentence and a $250,000 fine. (31 U.S. Code § 5322(a)) The taxpayer's FBAR penalty was $1,221,806, which was almost five times the maximum amount allowed in the criminal statute. The district court decreased the penalty imposed from $1,221,806 to $1,120,513, which represented the maximum amount permitted under the applicable civil statute.

The district court also rejected the taxpayer's vague assertion that IRS illegitimately obtained information concerning her Swiss Account from the Swiss government. She contended that, pursuant to the treaty between the U.S. and Switzerland, the U.S. could only receive information from the Swiss government pertaining to tax violations. However, the district court concluded that the instant case was clearly a tax collection case, and it was unclear how IRS's conduct ran afoul of the treaty.

Bussell appealed the district court's decision and while she admitted that she willfully failed to disclose her financial interests in her overseas account on her 2006 tax return, she raised several arguments on appeal; the Ninth Circuit Court of Appeals affirmed the district court, rejecting all the arguments offered by the taxpayer. 

Bussell then petitioned the Supreme Court to review the Ninth Circuit's decision. She argued (1) that the Eighth Amendment prohibition against excessive fines did not allow a forfeiture of half of an account's value (in this case, more than $1 million) merely because of a failure to report the account; and (2) that the treaty between the U.S. and Switzerland on dual taxation, which was restricted to disclosure of tax information, couldn't be used to obtain information for non-tax uses, such as the existence of a foreign account held in violation of FBAR.


On Apr. 30, 2018, the Supreme Court refused to review the Ninth Circuit's decision. Accordingly, that decision is now final.

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Source:
Thomson Reuters Tax & Accounting News

 



 

Read more at: Tax Times blog

Nail Salon Supplier Get Nailed For Filing A False Tax Return

According to the DoJ a resident of Troy, Michigan, pleaded guilty on April 26, 2018 to filing a false tax return. According to court documents, Mythi Nguyen co-owned Y & B Nail Supply, a nail salon wholesale business located in Madison Heights, Michigan. 

 

 

From 2009 through 2011, Nguyen underreported more than $1.1 million in business gross receipts from her tax returns, which caused a total tax loss of $272,680.72.
 
U.S. District Judge Gershwin A. Drain scheduled sentencing for September 13, 2018:
  1. Nguyen faces a statutory maximum sentence of 3 years in prison
  2. She also faces a period of supervised release, restitution, and monetary penalties.

Have Undeclared Income?
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    Read more at: Tax Times blog

    1st Taxpayer Victory in a “Willful” FBAR Penalty Case Appealed!

    On March 7, 2018 we posted 1st Taxpayer Victory in a "Willful" FBAR Penalty Case! where we discussed that on September 20, 2017, the Eastern District of Pennsylvania issued an important taxpayer friendly opinion regarding the "willfulness" standard in FBAR penalty matters. 

    In Bedrosian v. United States, Case No. 2:15-cv-05853-MMB (E.D. Pa., Sept. 20, 2017), the court held that the government had not met its burden in proving that Bedrosian had willfully violated FBAR reporting requirements. This opinion could have a major effect on future IRS decisions in the offshore compliance arena and may cause some taxpayers, to seek a more aggressive approach in addressing prior non-compliance.

    This Was a Big Win for Taxpayers! 

    However now according to Law360, The U.S. government has urged the Third Circuit to reverse a Pennsylvania federal judge’s decision to let a pharmaceutical CEO avoid a nearly $1 million tax penalty over an undisclosed Swiss bank account, arguing the lower court wrongly raised the bar for showing willful conduct. 

    U.S. District Judge Michael M. Baylson in September had found that Arthur Bedrosian, the CEO of generic drug maker Lannett Co., may have been negligent when he failed to report a Swiss bank account with UBS that held roughly $2 million to the Internal Revenue Service in a 2007 Foreign Bank and Financial Accounts form. However, Judge Baylson stopped short of concluding that Bedrosian willfully skirted the reporting requirements and accordingly ordered the government to return the 1 percent partial penalty payment he had made.

    In pressing the Third Circuit to reverse and remand Judge Baylson’s decision, the government on said the willfulness standard in civil cases only required knowing or reckless conduct, not subjective bad intent. The district court strayed from this benchmark by not judging willfulness based on Bedrosian’s knowledge of his FBAR violation, but by his intent to do wrong, according to the government.

    “The District Court’s Opinion Cannot Be Squared with the Civil Standard of Willfulness That Applies in FBAR Penalty Cases, Requiring Only That Bedrosian Acted Knowingly or Recklessly,” the Government Said in Its Brief.
    

    The question of whether a taxpayer willfully avoided filing an FBAR form, or just didn’t know about the reporting requirements, can make a substantial difference in the civil penalties the IRS ultimately assesses. In Bedrosian’s case, he was hit with a maximum penalty of nearly $1 million, or 50 percent of the undisclosed account.

    After Bedrosian sued to claw back his nearly $10,000 partial penalty payment, the federal Zovernment lodged counterclaims for full payment of the penalty, plus interest.

    Following a one-day bench trial, Judge Baylson on Sept. 20 found that the evidence against the CEO, including the inaccurate FBAR form itself and the fact that he may have known about the account he didn’t disclose, didn’t clear the bar to show a willful violation of reporting requirements.

    “None of These Indicate ‘Conduct Meant to Conceal or Mislead’ or a ‘Conscious Effort to Avoid Learning about Reporting Requirements,’ Even If They May Show Negligence,” Judge Baylson Said, Quoting a Separate Case in Which an Fbar Penalty Had Been Sustained.

    The district court’s reliance on this and other cases as the minimum threshold for finding willfulness was an incorrect assumption, the government said Tuesday.

    The district court compared Bedrosian’s conduct to situations where individuals used Swiss banks to carry out complex tax avoidance schemes, the government said, noting that Judge Baylson ultimately concluded that Bedrosian’s behavior was less “egregious,” and therefore not willful.

    “The district court erred in concluding that because Bedrosian’s conduct was not as egregious as the conduct in those cases, he should not be liable for a willful FBAR penalty,” the government said. 

    Recklessness, However, Can Be Used To Judge Willfulness in a Civil Case, the Government Said, Adding That the District Court Also Erred under This Standard.
     
    The government pointed out that Bedrosian was a "sophisticated businessman” who failed to disclose his account for 35 years even though his longtime accountant had told him that he was breaking the law every year.

    According to court papers, after the accountant learned in the 1990s that Bedrosian had used the account since the early 1970s, he advised his client to ultimately “just leave it alone because the damage was already done” and that the situation would be resolved automatically one way or the other when Bedrosian died.

    The government also noted that after Bedrosian’s accountant died, the CEO did not mention his Swiss bank account to his new accountant, who prepared a 2007 tax return and FBAR for Bedrosian, disclosing only the smaller of two UBS accounts, which had about $240,000 in it.

    “Bedrosian professed to have simply signed and filed his FBAR notwithstanding that he had no idea how his accountant knew to prepare an FBAR or what it included, and notwithstanding that the filing constituted his first disclosure following decades of willfully violating the law,” the government said. “This cavalier disregard of his legal obligation to fully disclose his foreign accounts was reckless.”

    Have Undeclared Income from an Offshore Bank Account?
     
     
    Been Assessed a 50% Willful FBAR Penalty?

     
     
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    Marini& Associates, P.A. 
     
     
    for a FREE Tax Consultation
    Toll Free at 888-8TaxAid (888) 882-9243
     

    Read more at: Tax Times blog

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