Taxpayer Charged with False SFCP NonWillful Certification (8/26/19)

DOJ Tax issued a press release titled "Former CPA Indicted for Failing to Report Foreign Bank Accounts and Filing False Documents with the IRS," here.

This is the first time (at least that I can recall) that DOJ Tax has included a charge for false non-willful declaration in a SFCP submission.  Here are the pertinent parts of the press release:

According to the superseding indictment, Booker, a former Certified Public Accountant, owned a cocoa trading company that was organized under the laws of the Republic of Panama.  Booker allegedly operated that company from Venezuela, Panama, and his former residence in Fort Lauderdale, Florida.  The superseding indictment further alleges that, for calendar years 2011 through 2013, Booker failed to disclose his interest in financial accounts located in Switzerland, Singapore, and Panama on annual Reports of Foreign Bank and Financial Accounts (FBARs) as required by law.  Booker also allegedly filed false individual income tax returns for tax years 2010 through 2012 that failed to report to the IRS all of Booker’s foreign bank accounts. 

Booker is also charged with filing a false “Streamlined Submission” in conjunction with the Streamlined Domestic Offshore Procedures. The IRS Streamlined procedures allowed eligible taxpayers residing within the United States, who failed to report gross income from foreign financial accounts on prior tax returns, failed to pay taxes on that gross income, or who failed to submit an FBAR disclosing foreign financial accounts, to voluntarily disclose their conduct to the IRS.  The superseding indictment alleges that Booker’s Streamlined submission falsely claimed that his failure to report all income, pay all tax, and submit all required information returns, such as FBARs, was due to non-willful conduct.

The press release has a link to the superseding indictment here.  The key allegations on Streamlined are in paragraphs 39-41 on p. 11 of the Superseding Indictment.  These allegations are:

39. The Streamlined Domestic Offshore Procedures (the "Streamlined procedures") allowed eligible taxpayers residing within the United States who failed to report gross income from foreign financial accounts on prior tax returns, failed to pay taxes on that gross income, or who failed to submit an FBAR disclosing foreign financial aceounts, to voluntarily disclose their conduct to the IRS.  Taxpayers who were eligible under the Streamlined procedures were subject to substantially lower penalties than those provided by other 1RS programs. 

40.  In order to be eligible for treatment under the Streamlined procedures, taxpayers were required to file amended tax returns for the most recent three years for which the U.S. tax return due date had passed. Taxpayers who wished to take advantage of the Streamlined procedures were required to certify under the penalties of perjury that their failure to report all income, pay all tax or submit all required returns was due to non-willful conduct. Under the terms of the Streamlined procedures, the IRS defined non-willful conduct as conduct that was due to negligence, inadvertence, or mistake, or conduct that was the result of a good faith misunderstanding of the law. 

41. On or about October 14, 2015, BRIAN NELSON BOOKER submitted to the IRS a Certification by U .S. Person Residing in the United States for Streamlined Domestic Offshore Procedures (IRS Form 14654, "Streamlined submission"). In his Streamlined submission, the defendant certified under the penalties of perjury that he "learned about the FBAR filing requirements in 2008" and that he "mistakenly believed that only personal financial accounts had to be reported on the FBAR." The defendant also certified under the penalties of perjury that he was eligible for treatment under the Streamlined procedures and that his failure to report all income, pay all tax, and submit all required information returns, including FBARS, was due to non-willful conduct.

Court Listener has the docket entries, here,

JAT Comments:

1.  As I said, I have not seen a case where an indictment charged false non-willful statements in a Streamlined filing.  DOJ Tax attorneys has periodically said they were coming, but this is the first.  If readers know of others, please let me know by comment or by email.

2. I have viewed the willful and non-willful distinction as being a continuum.  Rarely is a taxpayer at either end of the continuum.  Properly counseling a taxpayer as to where he or she is on that continuum requires a lot of experience and judgment because of the downside consequences of a non-willful certification that could be viewed as false.  I think all of us who have practiced in this area have had clients who we recommended should go into or stay in OVDP rather than Streamlined (or opting out of OVDP) because the facts just were not good.  Given Booker's facts (have to read the whole indictment), his facts were not good.  So the choice to attempt Streamlined was ill-advised.