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Two recent Los Angeles cases show the potential consequences of failing to report offshore accounts to the IRS.

In one case, a businesswoman pleaded guilty to a criminal charge in connection with international money transfers. The charge was conspiracy to defraud the U.S. government.

The case concerned funds that were transferred first from Israel to Luxembourg, and then from Luxembourg to accounts in the U.S. The plea agreement identified the amount of interest income on these accounts that was not properly reported as $220,000.

In a similar case, a U.S. taxpayer residing in California pleaded guilty to a comparable conspiracy charge. Undisclosed Israeli bank accounts were also involved in this case. The amount of income that went unreported was $382,000.

Clearly the game has changed when it comes to bank secrecy. The guilty pleas in these two cases are a reminder of that.

But many questions remain about exactly who must file the Report of Foreign Bank and Financial Accounts (FBAR). For account holders, the threshold for reporting is $10,000 or more. Given recent revisions to the Bank Secrecy Act, filing responsibilities are not necessarily only for account holders. Money managers and administrators who are involved with offshore accounts, for example, may have filing responsibilities as well.

The IRS states on its website that those with “signature authority” on foreign accounts of $10,000 are covered by the FBAR filing requirement. The American Bar Association’s taxation section has asked the IRS to clarify what this means in practice.

With the FBAR filing deadline coming up on June 30, it is important for questions such as this to be resolved sooner rather than later.

Source: “Moves in Secret Offshore-Accounts Cases Continue,” The Wall Street Journal, Laura Saunders, 4-12-13

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