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FBAR Case on United States v. Carl Zwerner settled for $1.8 Million

FBAR Case: United States vs. Carl Zwerner is settled for $1.8 Million

The IRS U.S. Court building in Washington DC, a courthouse where cases on the Trust Fund Recover Penalty (TFRP) are held

The United States v Carl Zwerner FBAR case has been finally settled despite the many speculations regarding the Eighth Amendment rights. Carl Zwerner has entered a settlement agreement with the U.S. Department of Justice contrary to what most tax practitioners and attorneys thought. “Mr. Zwerner believed that a settlement at this time was in his best interests,” Press told Bloomberg BNA. “The Eighth Amendment issue will have to be litigated at some future date by others. We were fully prepared to litigate that issue.” This settlement agreement therefore finally closes the case of United States v. Zwerner.

Background

Zwerner opened an account in Switzerland in the 1960s, under the name of two different foundations he created. He used the proceeds of the account for personal expenses. Zwerner failed to report his financial interest in the Swiss bank account on an FBAR and also failed to report any income earned from the Swiss bank account on his original tax returns for 2004 to 2007.  He represented on Schedule B of his original tax returns for those years that he did not have an interest in a foreign financial account by answering “no” in response to question 7(a). Check here for more details on the case.

The Tax Law

U.S. District Court for the Southern District of Florida jury scrutinized the evidence and found that Zwerner knew of his obligation to file FBARs. According to the jury, Zwerner’s failure to file FBARs for the years 2004 through 2006 was willful. See (U.S. v. Carl Zwerner, Civil Docket Case #1:13-cv-22082-CMA). The balance of the account for each of the years at issue exceeded $1.4 million and Zwerner committed FBAR violations by not complying with the law as required by 31 U.S.C. § 5314 and its implementing regulations. The law requires that U.S. citizens who have an interest in or signature authority over, a financial account overseas are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, U.S. citizens must file an FBAR with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signatory or other authority. Those who willfully fail to file their FBARs on a timely basis, due on or before June 30 of the following year, can be assessed a penalty of up to 50 percent of the balance in the unreported bank account for each year they fail to file a required FBAR.

Settlement

The FBAR Case on United States v. Carl Zwerner was finally settled for $1.8 Million. Zwerner agreed to pay about $1.8 million in penalties and interest to settle the case.

The penalties Zwerner will pay for failure to file the FBAR include; $723,762 for 2004 and $745,209 for 2005. Zwerner also agreed to pay the U.S. interest of $21,336.11 for the 2004 failure and $20,947.52 for the 2005 failure. In addition, he will pay statutory penalties of $128,016.64 for 2004 and $125,685.11 for 2005.

The defendant agreed to make all of these payments by Sept. 2. Once the payment is made, the parties will stipulate to dismiss the action with prejudice, according to the court document. Check here for more information.  Zwerner’s attorney, Martin Press, told Bloomberg BNA on June 10 that the final settlement was less than half of the amount originally sought by the government for the four-year period. Press said it was his client’s decision to settle the case. “The government is looking at multiple FBAR penalties and will increase the assertion of multiple FBAR penalties in the future,” Press said. “And this may apply to both civil cases and criminal cases. I believe this is an initiative by the Justice Department to assert penalties in more than one year.”

FBAR Case on United States v. Carl Zwerner is just an eye opener to U.S. Citizens and Residents with foreign financial accounts that are not reported.

“As this jury verdict shows the cost of not coming forward and fully disclosing a secret Offshore bank account to the IRS can be quite high,” said Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division. She added that “Those who still think they can hide their assets offshore need to rethink their strategy,” http://www.woodllp.com/Publications/Articles/pdf/Zwerner.pdf.

About Anthony Verni

Anthony N. Verni is a Tax Attorney and Certified Public Accountant with over 20 years’ experience practicing before the Internal Revenue Service.Mr. Verni’s practice is focused on representing Expatriate and other U.S Taxpayers who have criminal and civil tax issues related to offshore tax evasion, money laundering, failure to file income tax returns, failure to report offshore income, failure to file FBAR reports and other tax related compliance and reporting concerns. Mr. Verni also represents individuals and businesses in connection with tax controversies involving income, estate and gift and employment taxes.
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