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False Form 8854 Used As Part Of “Willful” FBAR Prosecution



The primary story is of a U.S. professor who pleaded guilty to an FBAR violation and was subjected to a 100 million FBAR penalty. Notably the “tax loss” was 10 million dollars and the FBAR penalty was 100 million dollars. It appears that Mr. FBAR is becoming an important tool in the arsenal used by the United States Treasury.

The more interesting (for the purposes of expatriation) was the role that a false Form 8854 “Expatriation Statement” may have played in the guilty plea.

What is most interesting is the description from the Department of Justice site which includes:

Horsky directed the activities in his Horsky Holdings and other accounts maintained at the Zurich-based bank, despite the fact that it was readily apparent, in communications with employees of the bank, that Horsky was a resident of the United States. Bank representatives routinely sent emails to Horsky recognizing that he was residing in the United States. Beginning in at least 2011, Horsky caused another individual to have signature authority over his Zurich-based bank accounts, and this individual assumed the responsibility of providing instructions as to the management of the accounts at Horsky’s direction. This arrangement was intended to conceal Horsky’s interest in and control over these accounts from the IRS.

In 2013, the individual who had nominal control over Horsky’s accounts at the Zurich-based bank conspired with Horsky to relinquish the individual’s U.S. citizenship, in part to ensure that Horsky’s control of the offshore accounts would not be reported to the IRS. In 2014, this individual filed with the IRS a false Form 8854 (Initial Annual Expatriation Statement) that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.

Horsky also willfully filed false 2008 through 2014 individual income tax returns which failed to disclose his income from, and beneficial interest in and control over, his Zurich-based bank accounts. Horsky agreed that for purposes of sentencing, his criminal conduct resulted in a tax loss of at least $10 million. In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed false FBARs for 2012 and 2013.

The point is that the false Form 8854 (used primarily to provide information about whether one is a “covered expatriate” and to calculate the Exit Tax) was used as evidence of part of a conspiracy to evade taxes. This is an interesting use of the Form 8854, which is primarily an “information return”.

Obviously this a “general interest” post with extremely unusual circumstances. But, it is an example of how associations with others, in the “Wide and Wonderful World of U.S. Tax Forms” can become a problem.

This is also a reminder the “information returns” DO matter!

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The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a dual citizen. I am a lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:

“What’s said in my office, stays in my office.”

I am also a member of the American Citizens Abroad Professional Tax Advisory Council (PTAC). This is an advisory panel focused on assisting American Citizens Abroad in an FBAR and FATCA world.

The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.

FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.