Former U.S. citizen pleads guilty to tax fraud

No one, not even U.S. citizens who renounce their citizenship can avoid the long arm of the Justice Department when they are hunting for concealed tax dollars. Earlier this week, one such person pleaded guilty to one count of filing a false tax return.

U.S. citizens and companies must pay a tax on their global earnings, which is why the Justice Department pursues offshore assets, to account for those taxes. One individual utilized a web of companies and bank accounts stretching from Hong Kong to Switzerland to evade U.S. tax authorities. In 2012, he even walked into the U.S. embassy in Slovakia to renounce his citizenship.

This particular individual pleaded guilty to filing a false tax return for his 2007 and 2008 taxes. Specifically, he failed to report interest income earned on Swiss bank accounts amounting to $77,298 and $206,408, respectively.

The reason he was able to avoid paying his taxes for nearly 10 years is because of the way he structured his companies and accounts. He established a Hong Kong company in 2006 called Dragonflyer. He then used that company to open a Swiss bank account in the company’s name. Later that year, Dragonflyer received $12 million from a Panamanian company. That Panamanian company is named after the individual that pleaded guilty.

So, according to the court filings, he used a roundabout collection of companies and bank accounts to funnel his money through several countries with the assumed goal of avoiding U.S. taxes. Regardless, the Justice Department was able to track the financial transactions and catch him in Switzerland. He faces a maximum sentence of three years in prison, a $250,000 fine and $84,849 in restitution to the IRS.

Most people won’t go through such loops to avoid paying their taxes. However, if you fail to report income on your tax return, then you may face criminal consequences. In that case, you may want to consult with a defense attorney.

Source: Department of Justice, “Former U.S. Citizen Pleads Guilty to Tax Fraud Related to Swiss Financial Account,” Office of Public Affairs, Feb. 3, 2016