IRS To Announce New Initiative For U.S. Expats Not Willfully Evading Taxes.

/in , /by

With more than six million U.S. citizens living abroad, the IRS is looking to expand its net to bring in those U.S. Expats who are noncompliant with their tax obligations but are not willfully evading taxes may to come into compliance.  On June 3, 2014, the Commissioner of the Internal Revenue Service, John A. Koskinen, spoke at the U.S. Council For International Business-OECD International Tax Conference in Washington, D.C.

In his speech the Commissioner acknowledged that the 2012 Offshore Voluntary Disclosure Initiative (“OVDI”) and its predecessors (the 2009 Offshore Voluntary Disclosure Program (“OVDP”) and the 2011 Offshore Voluntary Disclosure Initiative) have resulted in many U.S. taxpayers coming into compliance and that the IRS is currently considering making further program modifications to accomplish even more.  Unlike the two previous programs which had set terms and a definite expiration date, the current 2012 OVDI program’s terms are subject to change by the IRS and at any time the IRS may even terminate this program.

While the current attitude of the IRS is to keep the doors open and allow as many taxpayers as possible to come forward, the IRS is mindful of the balance between those taxpayers willfully evading their tax obligations and those taxpayers who lack willfulness.  The IRS is also aware that adjustments in OVDI may be necessary to accommodate those U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives, and that those taxpayers should be treated differently than U.S. resident taxpayers who were willfully hiding their investments overseas.

The Commissioner said that the new changes to OVDI should be announced soon.

Offshore Voluntary Disclosure Initiative (“OVDI”)

This program was first created in 2009 as the Offshore Voluntary Disclosure Program (“OVDP”) but in 2011 was renamed to OVDI.  Generally, the miscellaneous offshore penalty under the OVDI program (the “OVDI penalty”) equals 27.5% of the highest aggregate balance in the foreign assets or entities during the years covered by the OVDI program, but may be reduced in limited cases to 12.5% or 5%.  Certain taxpayers may qualify for even greater savings through a reduction of the offshore penalty.

Taxpayers participating in the ongoing 2012 OVDI generally agree to file amended returns and file FBARs for eight tax years, and in addition to paying pay the OVDI penalty (which is assessed in lieu of all other potentially applicable penalties associated with a foreign financial account or entity) taxpayers would pay the appropriate taxes and interest together with an accuracy related penalty equivalent to 20% of any income tax deficiency

Taxpayers whose highest aggregate foreign account balance is less than $75,000 for each of the years in the OVDI disclosure period may qualify for a reduced 12.5% OVDI penalty.

Taxpayers who fall into one of three specific categories may qualify for a reduced 5% OVDI penalty.  The first category includes taxpayers who inherited the undisclosed foreign accounts or assets.  Second, taxpayers who are foreign residents and who were unaware that they were U.S. citizens may qualify for a reduced 5% OVDI penalty.  Finally, U.S. taxpayers who are foreign residents may also qualify for the reduced 5% OVDI penalty in certain circumstances.

What Should You Do?

If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). If the IRS announces adjustments to this program that are more favorable to U.S. Expats those benefits should apply to current OVDI applicants.  Likewise, if the IRS were to tighten the terms of OVDI and increase the penalty, anyone registered in OVDI before such a change should still be under the pre-existing terms.   But once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

Don’t Miss The FBAR June 30, 2014 Filing Deadline

/in , /by

Despite the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) publishing final regulations for reporting bank accounts, securities accounts and other financial accounts located in a foreign country many taxpayers remain confused regarding the filing requirements, including the fast-approaching and accelerated filing deadline.

Historically, the disclosure of foreign bank accounts was done by filing Form TD 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”) with the U.S. Department Of Treasury. Any person who has a financial interest in, or signature authority over, a foreign financial account (the “foreign accounts”), including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, is required under the Bank Secrecy Act to report the foreign account to the U.S. Department Of Treasury by filing the FBAR by June 30th of the following calendar year. Unlike income tax filings an extension of time to file FBAR after the June 30th due date is not available.

While the requirements and deadline for disclosing foreign bank accounts have not changed, the reporting form and manner of filing has. Now disclosure is made by e-filing FinCEN Form 114. 

The Purpose of The FBAR Form

The FBAR form is a tool used by the United States government to identify persons who may be utilizing foreign financial accounts to circumvent United States tax laws. Revenue Agents or investigators use the FBAR to help identify or trace funds used for illicit purposes, including counter-terrorism, or to identify unreported income maintained and/or generated abroad.

Who Must File

Any U.S. person, with few exceptions, with a financial interest in, or signature authority or other authority over, any foreign financial account(s) in a foreign country and the aggregated value of these account(s) exceeds $10,000 at any time during the calendar year must file and FBAR. Foreign financial account(s) include, but are not limited to, a checking/savings bank account, brokerage account, mutual fund, trust, or other type of foreign financial account. A U.S. person includes a U.S. citizen, a foreign national who is a U.S. tax resident and a U.S. entity, e.g., a corporation, a partnership, a limited liability company (“LLC”) or a trust that is created, organized or formed under the laws of the U.S., any State, the District of Columbia, the Territories, the Insular Possessions of the U.S. or the Indian Tribes.

What Needs to Be Reported

If a filing requirement exists, personal information, such as name, address and Social Security number, along with the following, must be reported:

  • Maximum value of the account during the calendar year;

  • Type of account (i.e., bank, securities, foreign mutual funds, foreign-issued life insurance/annuity contract with cash value, etc.);

  • Name of financial institution in which account is held;

  • Account number; and

  • Mailing address of financial institution.

The IRS defines maximum account value as the largest amount of currency and/or monetary instruments that appear on any quarterly or more frequently issued account statement during the tax year.

Failure to File

While the FBAR is an information return that imposes no tax, significant civil and criminal penalties may be asserted for failure to file. The civil penalty for willful failure to file an FBAR equals the greater of $100,000 or 50% of the total balance of the foreign account per violation.  The government may also pursue criminal prosecution which can result in up to five years of jail time. Non-willful violations that are not due to reasonable cause incur a penalty of $10,000 per violation.

Offshore Voluntary Disclosure Initiative (“OVDI”)

This program was first created in 2009 as the Offshore Voluntary Disclosure Program (“OVDP”) but in 2011 was renamed to OVDI. Generally, the miscellaneous offshore penalty under the OVDI program (the “OVDI penalty”) equals 27.5% of the highest aggregate balance in the foreign assets or entities during the years covered by the OVDI program, but may be reduced in limited cases to 12.5% or 5%. Certain taxpayers may qualify for even greater savings through a reduction of the offshore penalty. 

Taxpayers participating in the ongoing 2012 OVDI generally agree to file amended returns and file FBARs for eight tax years, and in addition to paying pay the OVDI penalty (which is assessed in lieu of all other potentially applicable penalties associated with a foreign financial account or entity) taxpayers would pay the appropriate taxes and interest together with an accuracy related penalty equivalent to 20% of any income tax deficiency

Taxpayers whose highest aggregate foreign account balance is less than $75,000 for each of the years in the OVDI disclosure period may qualify for a reduced 12.5% OVDI penalty.

Taxpayers who fall into one of three specific categories may qualify for a reduced 5% OVDI penalty.  The first category includes taxpayers who inherited the undisclosed foreign accounts or assets.  Second, taxpayers who are foreign residents and who were unaware that they were U.S. citizens may qualify for a reduced 5% OVDI penalty.  Finally, U.S. taxpayers who are foreign residents may also qualify for the reduced 5% OVDI penalty in certain circumstances. 

What Should You Do?

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

OVDI – Are You In Or Out?

/in , /by

A taxpayer who has not disclosed foreign bank accounts to the IRS can be charged with substantial miscellaneous Title 26 offshore penalties that ultimately can wipe out a taxpayer’s foreign assets.  Disclosure is made by e-filing FinCEN Form 1114 (formerly Form TD F 90-22.1), Report of Foreign Bank and Financial Accounts (“FBAR”).  The civil penalty for willful failure to file an FBAR equals the greater of $100,000 or 50% of the total balance of the foreign account per violation.  The government may also pursue criminal prosecution which can result in up to fice years of jail time. Non-willful violations that are not due to reasonable cause incur a penalty of $10,000 per violation.

The IRS has established a program called the Offshore Voluntary Disclosure Initiative (“OVDI”) whereby taxpayers can avoid criminal prospection and the penalties are reduced.

With the deadline of June 30th approaching for the filing of a 2013 FBAR and the full implementation of FATCA starting July 1st, a taxpayer who is non-compliant with the reporting of foreign accounts and foreign income has an important decision to make. OVDI – Are You In Or Out?

Offshore Voluntary Disclosure Initiative (“OVDI”)

This program was first created in 2009 as the Offshore Voluntary Disclosure Program (“OVDP”) but in 2011 was renamed to OVDI. Generally, the miscellaneous offshore penalty under the OVDI program (the “OVDI penalty”) equals 27.5% of the highest aggregate balance in the foreign assets or entities during the years covered by the OVDI program, but may be reduced in limited cases to 12.5% or 5%. Certain taxpayers may qualify for even greater savings through a reduction of the offshore penalty. 

Taxpayers participating in the ongoing 2012 OVDI generally agree to file amended returns and file FBARs for eight tax years, and in addition to paying pay the OVDI penalty (which is assessed in lieu of all other potentially applicable penalties associated with a foreign financial account or entity) taxpayers would pay the appropriate taxes and interest together with an accuracy related penalty equivalent to 20% of any income tax deficiency

Taxpayers whose highest aggregate foreign account balance is less than $75,000 for each of the years in the OVDI disclosure period may qualify for a reduced 12.5% OVDI penalty.

Taxpayers who fall into one of three specific categories may qualify for a reduced 5% OVDI penalty.  The first category includes taxpayers who inherited the undisclosed foreign accounts or assets.  Second, taxpayers who are foreign residents and who were unaware that they were U.S. citizens may qualify for a reduced 5% OVDI penalty.  Finally, U.S. taxpayers who are foreign residents may also qualify for the reduced 5% OVDI penalty in certain circumstances. 

What Should You Do?

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

OVDI Myths

/in , /by

U.S. taxpayers with previously undisclosed interests in foreign financial accounts and assets continue to analyze and seek advice regarding the most appropriate methods of coming into compliance with their U.S. filing and reporting obligations. Many are pursuing participation in the current IRS Offshore Voluntary Disclosure Initiative known as OVDI (the current version began in 2012 and is modeled after similar programs in 2009 and 2011 which initially were called the Offshore Voluntary Disclosure Program or OVDP). But what all the confusion and misinformation out there – what should you do? In this blog I attempt to clear some misconceptions.

Myth #1: An individual will be better off “explaining” the undisclosed foreign bank accounts through amended tax returns, rather than opting into OVDI.

Even outside of OVDI, any disclosure to the IRS requires that the taxpayer file amended tax returns and be prepared to provide the foreign bank information and statements to support the new income being reported. Such returns are signed by the taxpayer that they are true and complete. Being outside of OVDI the government can develop a case supporting severe penalties and even criminal prosecution using the combination of original filed tax returns which omitted the foreign income and amended tax returns reporting the foreign income as admissions of intent to evade U.S. income tax.  

Myth #2: Once an individual enters into OVDI, you cannot dispute the amount of penalties imposed by the program.

Just because the penalty rate structure is set in OVDI does not mean the amount of penalty can never be disputed. Agents assigned to OVDI cases do make mistakes and do misinterpret foreign bank income and transaction activity including those accounts, assets and transactions that should not be part of any penalty calculation. These disputes or differences can still be contested and challenged through different means and channels while still remaining in OVDI.

Myth #3: An individual who enters into OVDI opens up all years for examination since becoming a U.S. person for tax purposes with undisclosed foreign bank accounts and unreported foreign income.

While the normal Statute Of Limitations to examine a tax return is three years, it can be extended to six years where there is a substantial omission of income and where the government can show fraud, the government has no limitation on how far back it can go. Furthermore, the government has a six-year Statute Of Limitations to pursue criminal prosecution. A person who is in OVDI avoids criminal exposure and any income tax return amendments are limited to the last eight years or if shorter, from the time the individual becomes a U.S. person for tax purposes.

Myth #4: An individual who enters in OVDI is forfeiting assets, including entire lifetime savings and more to the government so that any income, inheritances, or gifts these people may receive in the future will belong to the IRS. 

Outside of OVDI, the MINIMUM penalty is 50% of the value of your foreign assets. But for taxpayers participating in OVDI, the MAXIMUM penalty is 27.5%. That means for taxpayers who are in OVDI, they will still get to keep at least 72.5% of their foreign assets.   

Myth #5: Once the IRS learns of an individual entering into OVDI, the IRS will remove or prevent the individual from the program and the IRS will prosecute that person using the very information provided by the taxpayer as part of the OVDI process.    

To encourage taxpayers to come forward into OVDI, the government will respect the transactional or use immunity it offers to taxpayers participating in the program.  At this time the government would prefer cases to be dispensed in OVDI even though the government gives up criminal prosecution and takes a “hair-cut” on the penalties that can be imposed.  

Myth #6: The IRS Criminal Investigation Division (“CID”) in evaluating your OVDI application will characterize your offshore transactions to involve the crimes of money laundering, wire fraud, mail fraud or tax evasion to prevent you from qualifying for the program.

Unless you are involved in drug trafficking, weapons trafficking or some other illegal activity that another government agency would have you on a watch list, the government would rather see a taxpayer come forward in OVDI and as a result for those that do the government will not pursue criminal prosecution and will apply the reduced penalties outlined in the OVDI structure.  

Myth #7: Since there is no public follow-through by the IRS of its threats to individuals who have not entered the OVDI, it is a safe bet to avoid OVDI and instead pursue a Quiet Disclosure.

Whenever a taxpayer files an original or amended income tax return, the government will have at least three years from the due date of the return or date the return was filed (whichever is later) to examine that return. This is still the case even if the return that was filed showed an overpayment that was refunded to you. But with OVDI, you do not have this cloud of uncertainty hanging over you. At the conclusion of your OVDI case, the government will issue a closing agreement that when signed off by the taxpayer closes the case.

Myth #8: Those taxpayers outside of OVDI are assessed far less in taxes and penalties than individuals who have elected to make a disclosure through OVDI.

With the government encouraging taxpayers to come forward in OVDI, why would the government undermine the integrity of the program by offering a better deal to people who do not come forward and look to avoid detection by the IRS? If a taxpayer did not disclose his foreign bank accounts AND did not report foreign income, you will fare worse than entering into OVDI and end up loosing the entire value of your foreign accounts.

Myth #9: By entering into OVDI, you fully waive all constitutional rights.

Some people have stated that participants entering into the OVDP must waive Constitutional Protections against: self-incrimination (5th amendment), unreasonable search and seizure (4th amendment), and excessive fines (8th amendment).  What they fail to recognize is that the same constitutional protections apply to OVDI participants as to people who file original or amended income tax returns with the IRS.

Myth #10: The IRS favors a Qualified Quiet Disclosure over a Quiet Disclosure.

Some people have stated that a “Qualified Quiet Disclosure” is different from a “quiet disclosure” for which the latter the IRS has promised a detection and punishment campaign.  Truth is that unless you enter into OVDI, any other form of disclosure is a “Quiet Disclosure” that can subject you to the full wrath of the IRS and with the IRS then looking to impose the maximum in penalties you can likely end up loosing all of your foreign account funds and perhaps be subject to criminal prosecution.

If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

Avoiding OVDI – Pitfalls Of Other Forms Of Disclosures

/in , /by

A taxpayer who has not disclosed foreign bank accounts to the IRS and to cure this delinquency and avoid criminal repercussions applies to the Offshore Voluntary Disclosure Initiative (“OVDI”), generally must pay a miscellaneous Title 26 offshore penalty, in lieu of traditional penalties that would apply to foreign assets or entities outside of OVDI.  The most significant penalty that the offshore penalty replaces is the penalty for failure to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”).  The civil penalty for willful failure to file an FBAR equals the greater of $100,000 or 50% of the total balance of the foreign account per violation.  Non-willful violations that are not due to reasonable cause incur a penalty of $10,000 per violation.

Individuals with previously undisclosed foreign assets and/or income have come to understand the need to be come compliant with the IRS and with all the confusion out there on how best to become compliant. The avenues to be compliant that are most widely discussed are (1) the Offshore Voluntary Disclosure Initiative (“OVDI”), (2) making a Quiet Disclosure, or (3) making a Present Tax Year Only Disclosure.

Offshore Voluntary Disclosure Initiative (“OVDI”)

This program was first created in 2009 as the Offshore Voluntary Disclosure Program (“OVDP”) but in 2011 was renamed to OVDI. Generally, the miscellaneous offshore penalty under the OVDI program (the “OVDI penalty”) equals 27.5% of the highest aggregate balance in the foreign assets or entities during the years covered by the OVDI program, but may be reduced in limited cases to 12.5% or 5%. Certain taxpayers may qualify for even greater savings through a reduction of the offshore penalty. 

Taxpayers participating in the ongoing 2012 OVDI generally agree to file amended returns and file FBARs for eight tax years, and in addition to paying pay the OVDI penalty (which is assessed in lieu of all other potentially applicable penalties associated with a foreign financial account or entity) taxpayers would pay the appropriate taxes and interest together with an accuracy related penalty equivalent to 20% of any income tax deficiency

Taxpayers whose highest aggregate foreign account balance is less than $75,000 for each of the years in the OVDI disclosure period may qualify for a reduced 12.5% OVDI penalty.

Taxpayers who fall into one of three specific categories may qualify for a reduced 5% OVDI penalty.  The first category includes taxpayers who inherited the undisclosed foreign accounts or assets.  Second, taxpayers who are foreign residents and who were unaware that they were U.S. citizens may qualify for a reduced 5% OVDI penalty.  Finally, U.S. taxpayers who are foreign residents may also qualify for the reduced 5% OVDI penalty in certain circumstances. 

Making A Quiet Disclosure

While promoted under different names such as “Explained Disclosure”, “Qualified Quiet Disclosure” or “Silent Disclosure”, they all mean the same as Quiet Disclosure.

There are strong indications that going forward, the IRS will be cracking down more stringently on the practice of “quiet disclosures”.  Under a quiet disclosure, a taxpayer through normal IRS filing channels files new or amends past tax returns and FBAR’s to report previously unreported offshore accounts and foreign income in an attempt to avoid potential civil penalties and fines.

The danger in doing this, however, is that if the IRS discovers a quiet disclosure, the taxpayer will be exposed to higher civil penalties than he would have if he voluntarily came forward under OVDI.  Where a taxpayer has been discovered by IRS in this process, that taxpayer who made the quiet disclosure will not be eligible for the 27.5% OVDI penalty.  Instead the traditional penalties of 50% would apply.  Also, if appropriate, the IRS may recommend criminal prosecution to the Department of Justice. 

The IRS does encourage those who have already quietly disclosed to come forward under the OVDI to avail themselves of the lower penalty rates and avoid potential harsher consequences but you must act quickly because OVDI is not available to you if the IRS has already selected you as a target.

Making A Present Tax Year Only Disclosure

Some tax advisors are recommending that taxpayers merely get into compliance on a go forward basis and do nothing to address the past non-compliance gambling that the IRS does not have the resources to detect the foreign account. I call this “Present Tax Year Only Disclosure”. This could be the worst advice ever.  In my opinion this option is also not viable because of the ease with which the U.S. government can flag Foreign Bank Account Reports (FinCEN 114 formerly TDF 90-22.1) commonly known as “FBAR′s”. Furthermore, the IRS Criminal Investigation Division (“CID”) has created a group of special agents to monitor for just this occurrence.

The IRS has clearly indicated its disdain for those who make quiet disclosures instead of participating in OVDI and to discourage taxpayers from pursuing this route, the IRS has implemented procedures at the Service Centers to intercept those filings reporting foreign income for further review and investigation by the IRS.  Where a taxpayer has been discovered by IRS in this process, that taxpayer who made the quiet disclosure will not be eligible for the 27.5% OVDI penalty.  Instead the traditional penalties of 50% would apply.  Also, if appropriate, the IRS may recommend criminal prosecution to the Department of Justice. 

What Should You Do?

If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

June 16 Tax Deadline Nears for Taxpayers Living Abroad

/0 Comments/in , /by

U.S. taxpayers living abroad qualifying for an automatic two-month extension must file their 2013 Federal individual income tax returns by Monday, June 16, 2014.

The June 16th deadline applies in the following two situations: (1) U.S. citizens and resident aliens living overseas, or (2) U.S. taxpayers serving in the military outside the U.S. on the regular April 15th due date. Eligible taxpayers get one additional day because the normal June 15th extended due date falls on Sunday this year. To use the two-month extension, taxpayers must attach a statement to their tax return explaining which of these two situations applies.

Many taxpayers living abroad are still not aware that the Internal Revenue Code requires U.S. citizens and resident aliens to report all worldwide income, including income from foreign trusts and foreign bank and securities accounts on their federal income tax return. Not surprisingly, there are many taxpayers based here in the U.S. who are also not aware of this law requiring the reporting of all worldwide income.

The Internal Revenue Code also requires U.S. persons with foreign accounts whose aggregate value exceeded $10,000 at any time during 2013 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Form 114 replaces TD F 90-22.1, the FBAR form used in the past. It is due to the U.S. Treasury Department by Monday, June 30th and can only be filed electronically through the U.S. Treasury’s BSA E-Filing System website. This due date cannot be extended and Federal income tax extensions do not extend the FBAR filing due date. The civil penalty for willful failure to file an FBAR equals the greater of $100,000 or 50% of the total balance of the foreign account per violation. The government may also look to file criminal charges for will failure to file. Non-willful violations that are not due to reasonable cause incur a penalty of $10,000 per violation.

Taxpayers who cannot meet the June 16th deadline to file their 2013 Federal individual income tax return can get an automatic extension until October 15, 2014. But remember, this is an extension of time to file, not an extension of time to pay. Interest, currently at the rate of three percent per year compounded daily, applies to any payment made after April 15, 2014. In some cases, a late payment penalty, usually 0.5 percent per month, applies to payments made after June 16, 2014.

Now for some taxpayers, an additional extension beyond October 15th may be available. For example, members of the military and others serving in Afghanistan and other combat zone localities normally have until at least 180 days after they leave the combat zone to file their returns and pay any taxes due.

If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (“OVDI”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

Tax Attorney, Jeffrey B. Kahn, Esq. of Kahntaxlaw on ESPN – May 22, 2014 Show

/0 Comments/in /by

Topics Covered:

1. Lessons learned from the criminal tax evasion Conviction of Rashia Wilson a/k/a “Queen Of IRS Tax Fraud”.
2. What should you do where you have undisclosed foreign bank accounts and unreported foreign income?
3. Understanding the IRS Criminal Investigation Process and what signs to be on the lookout for that you may be subject to an IRS Criminal Investigation.
4. Questions from our listeners:

When would I need to hire a tax attorney?
What constitutes IRS and State Tax Disputes that a tax attorney should be involved?
What constitutes Complex Legal Tax Issues that a tax attorney should be involved?
What questions should I ask when interviewing tax lawyers?

U.S. Hammers Credit Suisse – Bank Pleads Guilty in Criminal Tax Case

/0 Comments/in , /by

Credit Suisse Agrees to Pay $2.6 Billion to Settle Probe by U.S. Justice Department

Credit Suisse Group AG became the first financial institution in more than a decade to plead guilty to a crime on May 19, 2014 when the Swiss bank admitted it conspired to aid tax evasion and agreed to pay $2.6 billion to settle a long-running probe by the U.S. Justice Department.

Attorney General Eric Holder, in announcing the charges, said the bank engaged in an “extensive and wide-ranging” scheme to help U.S. taxpayers hide assets.

The criminal charge filed Monday in federal court outlined a decades-long, concerted attempt by Credit Suisse to “knowingly and willfully” help thousands of U.S. clients open accounts and conceal their “assets and income from the IRS.” Mr. Holder said the bank destroyed account records sent to the U.S. for client review, concealed transactions and “failed to take even the most basic steps to ensure compliance with tax laws.”

Even after a U.S. crackdown on Swiss accounts in 2008 led Credit Suisse and rival UBS AG to tighten restrictions on the kinds of services they would provide to American customers, they continued to take steps that hindered investigators, the filing said. Credit Suisse didn’t conduct a thorough inventory of the accounts its managers oversaw, and some managers helped clients move their assets to other offshore banks so they would remain hidden to the U.S., according to the filing.

When it became clear in 2010 that the Justice Department was investigating the bank’s conduct, Mr. Holder said Credit Suisse “failed to retain key documents, allowed evidence to be lost or destroyed, and conducted an inadequate internal inquiry.”

“This conspiracy spanned decades,” Mr. Holder said. “Credit Suisse not only knew about this illegal, cross-border banking activity; they willfully aided and abetted it. Hundreds of Credit Suisse employees, including at the manager level, conspired to help tax cheats dodge U.S. taxes.”

Prosecutors have also charged eight former Credit Suisse employees with helping aid tax evasion.

The financial terms of the settlement include a $100 million payment to the Federal Reserve, more than $715 million to the New York Department of Financial Services, and about $1.8 billion to the Justice Department. Credit Suisse already has set aside more than $800 million, or about a third of the total settlement, to deal with the issue.

In addition Credit Suisse is handing over information that Deputy Attorney General James Cole said would lead to the IRS identifying specific non-compliant U.S. account holders.

The settlement marks the Justice Department’s biggest victory in its crackdown on tax evasion since UBS agreed to pay $780 million as part of a deferred-prosecution agreement in 2009. As part of that deal, UBS acknowledged aiding U.S. tax evasion but didn’t plead guilty.

Still, Credit Suisse’s relationships with its clients and partners may take a hit. Many pension and mutual funds have guidelines that prevent them from dealing with institutions that have pleaded guilty to criminal charges.

With big wins by the U.S. against UBS and Credit Suisse, the momentum to break Swiss Bank Secrecy Laws that historically fostered tax evasion grows stronger. Roughly a dozen Swiss banks are still subjects of criminal investigations by U.S. authorities and all of Switzerland’s 106 banks are taking part in a self-reporting program run by the U.S. Justice Department.

In response to a government crackdown on Americans hiding money overseas, more than 43,000 taxpayers joined a voluntary Internal Revenue Service disclosure program to acknowledge previously unknown accounts. The IRS estimates that Credit Suisse had more than 22,000 U.S. customers with Swiss accounts Although it is not clear how many of those were hidden from the IRS, a Congressional panel has concluded that Credit Suisse actively recruited Americans to open secret Swiss accounts.

Don’t think that only Swiss banks are being targeted. Federal prosecutors also are negotiating a multibillion-dollar settlement with French bank BNP Paribas to end an investigation into alleged evasion of sanctions.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

What Should You Do When Your Swiss Bank Sent You A Letter That Your Foreign Account Is To Be Disclosed To the IRS?

/0 Comments/in , /by

Since the last quarter of 2013, an increasing number of U.S. taxpayers with accounts in Swiss banks have received letters from Swiss Banks regarding participation in the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). The Program was established by the Department Of Justice (“DOJ”) and along with the provisions of the Foreign Account Tax Compliance Act (“FATCA”) has been ratified by the Swiss Parliament thus conferring a legal obligation on all 106 Swiss Banks to comply. If you have a Swiss bank account and received one of these letters, pay close attention to this blog.

Letters from Swiss Banks: What They Usually Say

In these letters from Swiss Banks, the taxpayers are typically advised (sometimes with the somewhat offensive phrase “as you almost certainly know”) of the fact that their Bank will participate in the Program and disclose the taxpayer’s accounts in Switzerland. Then, the letters typically discuss three issues.

First, the letters from Swiss Banks ask the taxpayer to confirm whether he has already properly disclosed their Swiss bank accounts to the IRS. Some banks, like Banque Cantonale Vaudoise (“BCV”) even go as far as asking the taxpayers to confirm that other international tax compliance forms, such as Forms 5471, 3520 and, surprisingly, PFIC From 8621, have also been filed with the IRS. Other banks just ask for some sort of documentation that everything has been properly declared to the IRS.

Second, the letters from Swiss Banks ask the taxpayers are asked to verify if his Swiss bank accounts were disclosed as part of the official IRS Offshore Voluntary Disclosure Program (“OVDP”).

Third, the letters from Swiss Banks inform the taxpayers with undisclosed Swiss Bank accounts about the existence of the OVDP and encouraging you to enter into the OVDP, obtaining more information about the OVDP from the Bank, and, finally, offering to provide the necessary bank statements for the taxpayer to enter the OVDP. Some banks (for example, Nue Privat Bank) will even later offer to supply the tax information (though, these reports should be approached with a great deal of skepticism because these statements could contain a number of mistakes, such as failure to recognize the application of PFIC rules). Most letters from Swiss Banks also provide space for the taxpayers to express their consent to the disclosure of their undisclosed Swiss bank and financial accounts to the IRS.

Consequences for U.S. Taxpayers Who Received Letters from Swiss Banks

It is difficult to overstate the great impact that these letters from Swiss Banks may have on the taxpayer’s position. I want to concentrate on two most important effects of the letters from Swiss Banks. First and foremost, they provide notice to the taxpayer about the requirement to disclose their Swiss bank and financial accounts (and, in case of BCV and some other banks, other foreign assets such as business ownership) to the United States. Even if a taxpayer simply did not know about the FBAR requirement in the past, his behavior as a result of receiving these letters from Swiss Banks will now be subject to scrutiny – failure to act on these letters for a long time and willful disregard of them may change the taxpayer’s position from non-willful to willful, subjecting him to draconian FBAR willful penalties, including opening the possibility of criminal penalties to be applied.

Second, upon fulfilling the Notice requirement with these letters, the Swiss banks are free to disclose certain information to the IRS under the US-Swiss FATCA treaty. Once the IRS receives such information from the Swiss Banks, the exposed U.S. taxpayers most likely will not be able to participate in the OVDP.

Hence, once the taxpayers receive these letters, time becomes a crucial factor, because, if the decision to enter the OVDP is made by these taxpayers, it should be implemented as soon as possible.

What Should You Do Upon Receipt of Letters from Swiss Banks?

Your initial response to the letters from Swiss Banks may determine the entire course of your case.

1. Consult an OVDI/FBAR Tax Attorney

The first and most crucial step is not to panic and contact an OVDI/FBAR tax attorney who specializes in the voluntary disclosure of the foreign bank and financial accounts as well as other assets.

I want to emphasize that you need to contact an experienced OVDI/FBAR tax attorney, not an accountant. Offshore voluntary disclosure is a legal issue and its venue should be determined by an attorney, not an accountant. I have seen too many cases where accountants horribly mishandled their clients’ cases (on both strategic and tactical issues) because the accountants overstep the limitations of their profession and enter the world of legal advice.

The geographic location of your OVDI/FBAR tax attorney should not matter; a much more important factor should be the attorney’s experience in the case and you personal feeling of trust. If the attorney immediately advises you to enter the OVDP program without even considering the facts of your case, consider it a red flag and seek second opinion.

2. Try to Obtain As Much Information As Possible While Preparing for the Initial Consultation

During the initial consultation, the attorney will have no choice but to rely on you for the initial information required to assess the state of your case. So, try to get as much information as possible regarding your foreign bank accounts while preparing for the initial consultation. You should not have to wait for the foreign bank account statements or bring your originally filed U.S. tax returns in order to have a productive initial consultation.

3. Retain an OVDI/FBAR Tax Attorney to Handle Your Case According to the Proposed Strategy

After the initial consultation, you should have a pretty good idea of what your options are. Think about these options and the attorney’s recommendations, but not take too much time to do so (remember, time is of the essence in these cases). Make your decision and retain an OVDI/FBAR tax attorney that you like for your case.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California have helped numerous U.S. taxpayers with the voluntary disclosure of their foreign bank and financial accounts as well as other foreign assets. Let us qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

U.S. Citizens And Permanent Residents Living Abroad Have No Where To Hide From IRS

/2 Comments/in , /by

It is quite easy for U.S. Citizens and permanent residents (green card holders) who reside in a country other than the U.S. to either forget or not be aware of their U.S. tax obligations. The rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same even if you do not live in the U.S. Citizens and permanent residents of the U.S. like U.S. Citizens are taxed on their worldwide income. Your income is reportable even if you did not receive a form W-2 or Form 1099.

The increased attention by the U.S. government on its overseas citizens might have caught your attention especially with the introduction of the Foreign Account Tax Compliance Act (FATCA). FATCA, enacted as part of the Hiring Incentives to Restore Employment Act of 2010, P.L. 111-147, requires U.S. withholding agents to withhold tax on certain payments to foreign financial institutions (FFIs) that do not agree to report certain information to the IRS regarding their U.S. accounts and on certain payments to certain nonfinancial foreign entities (NFFEs) that do not provide information on their substantial U.S. owners to withholding agents. FATCA withholding goes into effect July 1, 2014.

You may be thinking that you are already paying taxes in the country where you are now living and therefore not obligated to pay taxes to the U.S. as well. But U.S. tax law requires U.S. Citizens and permanent residents (green card holders) to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

If you have been delinquent with your taxes, living overseas does not provide relief from your obligations. Given the increased efforts on the part of the U.S. government to discover delinquent U.S. taxpayers worldwide and the increased pressures on foreign governments and financial institutions imposed by FATCA, it is in your best interest to comply voluntarily before the IRS discovers your delinquency.

You should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI).  Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.  Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in San Francisco, Los Angeles, San Diego and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.