An Ill-advised IRS Streamlined Filing Compliance Procedure Filing

Yesterday the US Department of Justice announced here the indictment of Mark Anthony Gyetvay, who filed to enter IRS “Streamlined Filing Compliance Procedures in which he attested that his prior failure to file FBARs and tax returns was non-willful.”

Apparently, his Streamlined filing was for foreign accounts valued at over $93 million. Not surprisingly the large account filing was further scrutinized and investigated. Even worse, his filings with the IRS will be now used against him in a criminal prosecution.

Mr. Gyetvay attempted Streamlined Filing Compliance Procedure (SCFP) filing was very ill-advised.

The IRS’ SFCP is for taxpayers who non-willfully failed to disclose foreign assets. Under the SFCP, non-willful conduct is specifically defined as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law”.  The most important first step in analyzing whether a taxpayer is eligible to participate in the streamlined procedures is to ascertain whether the taxpayer’s compliance failure, including the failure to file an FBAR, was actually non-willful. The IRS has defined “nonwillful conduct” as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”

It is extremely important that a taxpayer’s eligibility is carefully analyzed because once the SFCP is elected and the taxpayer claims the violations were non-willful. There are possible risk factors that need to be considered and analyzed such as the evidence of willfulness including the knowledge of laws and violations. The taxpayer needs to be prepared to defend filing an SFCP and be able to demonstrate their non-willfulness.

In our firm’s experience, we have seen great interest and participation by taxpayers in the SFCP program. We have successfully filed hundreds of streamlined submissions for satisfied clients over the years. Taxpayers who have failed to comply with their US tax filing and information reporting obligations should be aware of and seek appropriate legal advice regarding which disclosure program to pursue.

Mr. Gyetvay’s SFCP filing was too large and complex and had willful factors. He should not have filed in the Streamline program. The SFCP will be used against him and he may go to jail as a result.

The indictment announcement is pasted below.

A federal grand jury in Fort Myers, Florida, returned an indictment on Sept. 22 charging a Florida businessman with defrauding the United States by not disclosing his substantial offshore assets, failing to report substantial income on his tax returns, failing to pay millions of dollars of taxes and submitting a false offshore compliance filing with the IRS in an attempt to avoid substantial penalties and criminal prosecution.

According to the indictment, from 2005 to 2016, Mark Anthony Gyetvay allegedly engaged in a scheme to defraud the United States by concealing his ownership and control over substantial offshore assets and by failing to file and pay taxes on millions of dollars of income. After working as a certified public accountant (CPA) in the United States and Russia, Gyetvay allegedly became the chief financial officer of a large Russian gas company. As part of his compensation package, Gyetvay allegedly received lucrative stock options and/or stock-based compensation. Beginning in 2005, Gyetvay allegedly opened the first of two different Swiss bank accounts to hold these assets, which at one point had an aggregate value of over $93 million. Over a period of several years, Gyetvay allegedly took steps to conceal his ownership and control over the foreign accounts and associated assets, such as removing himself and making his then-wife, a Russian citizen, the beneficial owner of the accounts. Despite being a CPA, Gyetvay also allegedly did not timely file his U.S. tax returns, nor did he file all of the required Reports of Foreign Bank and Financial Accounts (FBARs) forms certain U.S. taxpayers are required to file annually that disclose their control over assets maintained in foreign bank accounts. Further, some of the tax returns he did file are allegedly false. The indictment also alleges that Gyetvay submitted a false offshore compliance filing with the IRS through the Streamlined Filing Compliance Procedures in which he attested that his prior failure to file FBARs and tax returns was non-willful.

Gyetvay is scheduled for his initial court appearance today before U.S. Magistrate Judge Douglas Frazier of the U.S. District Court for the Middle District of Florida. If convicted, he faces a maximum penalty of 20 years in prison for each wire fraud count, five years in prison for each failure to file FBAR count, five years in prison for tax evasion, five years in prison for making a false statement, three years in prison for each count of assisting in the preparation of a false tax return and one year in prison for each willful failure to file a tax return count. The case was assigned to U.S. District Judge John L. Badalamenti, who will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division made the announcement.

IRS Criminal Investigation is investigating the case.

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