What happens when you take billions in assets and attempt to hide them for the Internal Revenue Service (IRS) using foreign accounts? You get a series of cases that catch media attention and serve as a warning for taxpayers throughout the country.
The first case involves billionaire Robert F. Smith. Mr. Smith received media attention last year for paying the student debt of the entire graduating class of Morehouse College, just one example of his extensive philanthropy. He built his wealth as an investor, most notably with Vista Equity Partners, a giant in the private equity market. Feds recently gathered enough evidence to move forward with allegations that Mr. Smith’s actions were not always above board. In fact, they state that for more than a decade he has used foreign accounts to actively evade his tax obligations.
Ultimately, Mr. Smith chose to work with authorities and provide information about another taxpayer facing accusations of evasion, leading to case number two. In this case, the government suspected Robert Brockman was hiding billions from the Internal Revenue Service (IRS).
One of the key lessons from this case is the importance of cooperation. Although Mr. Smith protected his rights by seeking legal counsel, he and his team also cooperated with authorities. For this portion of negotiations, at least, the authorities did not report an attempt to destroy evidence or evade the investigator’s efforts. This cooperation worked in his favor and helped to reduce potential penalties.
Another important lesson: options. Those who are in similar situations have options. The IRS has various options for those who need to come into compliance with reporting requirements. The feds have many tools to help gather information about foreign accounts, most notably the Foreign Account Tax Compliance Act (FATCA). Foreign financial institutions that do not abide by the reporting requirements of the FATCA can face stiff penalties. This has led to a deluge of information used by the IRS to go after U.S. taxpayers that are not properly reporting these assets.