Beanie Babies tax evasion case signals new era of IRS enforcement
The Chicago-based entrepreneur who created Beanie Babies was charged with felony tax evasion recently for allegedly failing to report millions of dollars of income, which authorities claim he hid in a secret offshore bank account.
On September 18, 2013, a federal court in Chicago issued the tax evasion charges against 69-year-old businessman Ty Warner. Warner is the sole owner of Ty Inc., the Illinois company behind the popular Beanie Baby toys that took the nation by storm in the mid-1990s.
Owing largely to the overwhelming success of Beanie Babies, the Chicago Tribune reported, Warner's net worth ballooned to an estimated $2.6 billion. A recent Forbes ranking listed Warner among America's wealthiest individuals.
According to a statement by Gary Shapiro, U.S. attorney for the Northern District of Illinois, Warner allegedly used a secret Swiss bank account to hide millions of dollars from the Internal Revenue Service and from his own accountants,
Warner admitted to concealing $25 million in the offshore account, pleading guilty on October 2 to one count of tax evasion. According to the Associated Press, Warner apologized in court, saying that there was no excuse for his actions. He faces a $53 million civil fine as well as criminal penalties that include potential prison time. Sentencing is expected to occur in January 2014.
U.S. government cracks down on tax fraud
The Ty Warner case has been widely heralded as a sign of a new era in which it is becoming increasingly difficult for American taxpayers to conceal assets overseas. The federal government has been cracking down on offshore tax fraud in recent years, an issue which costs the U.S. Treasury an estimated $100 billion per year or more, according to a U.S. Senate report.
Recent changes to the bank secrecy laws in Switzerland and other foreign financial centers have made it more difficult for Americans to conceal their offshore holdings. Under the Foreign Account Tax Compliance Act, or FATCA, an international agreement between the United States and several foreign nations, overseas financial institutions may face criminal charges if they refuse to provide information about their American clients to the U.S. government.
Domestically, government programs aimed at rewarding whistleblowers and providing amnesty for those who voluntarily disclose their own hidden assets have also been successful. To date, more than 39,000 taxpayers have taken advantage of programs offering reduced criminal penalties in exchange for voluntary disclosure of offshore accounts, netting over $5.5 billion in recovered tax revenues for the IRS.
Get legal advice for tax concerns
Illinois taxpayers who have concerns about their tax liabilities or related criminal charges are encouraged to consult with a knowledgeable tax attorney. A lawyer with extensive knowledge of the U.S. tax code, as well as with Illinois tax laws, can help clients understand their legal rights and obligations, and will work hard to ensure that the client's best interests are protected under any circumstances.