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Tax preparers and criminal charges: a Los Angeles case

The key role played by tax return preparers in tax compliance is one of the recurring threads in this blog.

Earlier this year, for example, we noted how the IRS had forced many preparers it had found to be fraudulent to close down. We discussed that in our April 16 post.

In this post, we will discuss another tool that authorities can wield against questionable tax preparers: the threat of criminal charges.

Last week, the U.S. Department of Justice announced the criminal convictions of two tax preparers in California for conspiring with their clients to hide offshore accounts. The convictions came from a federal jury in Los Angeles

The two preparers had worked for a tax preparation service with numerous locations across the U.S. These locations included Newport Beach and Costa Mesa, California.

Federal prosecutors charged the two tax preparers, a father and a son, with preparing false tax returns for clients that deliberately did not disclose large foreign accounts and the income earned from them. Prosecutors also charged that the two preparers took an active role in facilitating tax evasion.

This included role included concealing clients’ ownership interests by setting up offshore companies in a small Central American country (Belize) and other locations. It also included creating secret accounts in a small European country (Luxembourg) at the branches of two Israeli banks.

Formally, the convictions were for one count of conspiracy to defraud and two counts of willful failure to file a required tax form. That form was the Report of Foreign Bank and Financial Account (FBAR).

Source: US Department of Justice, “Tax Return Preparers Convicted of Assisting Wealthy Clients Hide Millions in Secret Offshore Accounts at Israeli Banks,” Dec. 19, 2014

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