Getting an inheritance can come with certain obligations. In some cases, these obligations can include filing paperwork with the Internal Revenue Service (IRS). But what happens if you do not?
The answer depends on the details of the situation. A recent case provides an example of the severe penalties that can come with a failure to meet tax obligations.
In this case, four children realized an asset inherited from their father was set up in a complicated process with one goal: evade tax obligations.
It worked. The father’s account had evaded the IRS for decades. Now the children had to decide whether to report the asset and give the IRS a significant portion in unpaid tax obligations, penalties, and fees or continue to hide the asset.
They chose to follow their father’s lead.
The children set up an elaborate scheme which required travel to Switzerland, removal of cash from the account, and an attempt to bring the money back, unreported, to the United States. To better ensure success, the children decided to keep the withdrawals below $10,000. Any withdrawal over this amount would likely trigger additional paperwork and a potential investigation.
The plan appeared to work. The siblings were slowly bringing the $12 million back into the United States without getting the attention of the IRS.
Or so they thought.
The siblings did not realize the Swiss bank had provided U.S. authorities with the names of thousands of American account holders … and their names were on this list. The government investigated and ultimately charged the siblings with tax evasion. In addition to financial penalties, each sibling was sentenced to time in jail for their role in the scheme. The judge found the older sibling most guilty and sentenced him to a six-month prison term. The other siblings received four-month sentences.
The case provides an example of the severe penalties that can come with a failure to meet one’s tax obligations. As a result, those who find themselves in a similar situation are wise to seek the counsel of an experienced tax professional. The attorneys at Goldburd McCone can review your case and better ensure your legal rights are protected.