IRS Announces New Initiative To Target Unreported Indian Accounts In Northern California

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Late last year at a California Bar conference, an IRS official stated that the IRS will start in 2014 a new Indian initiative targeted at individuals with undeclared Indian accounts.

Nicholas Connors, a supervisory revenue agent with the IRS small business/self employed division stated that the IRS will soon “begin examining US taxpayers suspected of holding undeclared accounts in Indian banks”.

The United States is the only country that requires citizens and residents (i.e. green card holders) to report their worldwide income, no matter where in the world they might live or how many other citizenships they might hold. Also, U.S. citizens and residents are required to file an FBAR with the U.S. Treasury disclosing any foreign financial account over $10,000 in which they have a financial interest, or over which they have signature or other authority. A willful failure to report a foreign account can result in an annual penalty of up to 50 percent of the amount in the account.

Connors stated that the IRS has received the first round of information on accounts from Indian banks. From this batch, there are at least 100 Indian bank account cases that the IRS is sending out for examination (also known as audit) across the country. “I think California, because of the large Indian population, is going to get more than its fair share of cases,” Connors said.

“Within the Northern California/Bay Area, the IRS Northern California/Bay Area office is scheduled to pick up 30 or 40 of those.” Connors further added that “Looking ahead, the offshore bank investigations are just going to grow” and “within the IRS audit division, there’s talk that this could someday become a work issue for every single revenue agent in the IRS where everyone will be working some type of offshore case.”

While much recent publicity has affirmed that the IRS has been targeting Swiss and Israeli banks, India also continues to be a focal point for the United States government. As a result, over the past 5 years, more than a dozen NRI’s have pled or have been found guilty of failure to report foreign income and accounts in U.S. criminal courts. Most recently, Ashvin Desai of San Jose, California was convicted in October 2013 of tax evasion. According to evidence presented at trial, Desai and his family maintained bank accounts worth more than $7 million with The Hong Kong and Shanghai Banking Corporation Ltd. (HSBC) in India. Desai prepared and filed income tax returns for his family members that failed to report the accounts or over $1.1 million in interest generated by them over three years.

Congress has also enacted the Foreign Account Tax Compliance Act, requiring foreign banks to disclose U.S. customer accounts every year or pay a 30% tax on their U.S. investment income.

If you have never reported your foreign investments on your U.S. Tax Returns, 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 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.

Credit Suisse Helped Wealthy Americans Cheat The IRS

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A Senate Report just issued states that Swiss banking giant Credit ­Suisse helped wealthy Americans hide billions of dollars from U.S. tax collectors.

Credit Suisse chief executive Brady W. Dougan and Deputy Attorney General James M. Cole recently appeared at a Congressional subcommittee following the issuance of the 175-page report.  The report was issued after the culmination of a two-year investigation and alleges that from 2001 to 2008 Switzerland’s second-largest bank helped customers disguise Swiss accounts by opening them in the name of offshore shell entities. Bankers used cloak-and-dagger tactics to conceal their misdeeds, according to the report.

Lawmakers have accused the bank of helping wealthy Americans avoid paying taxes on as much as $12 billion in assets held at the institution.

One former customer told investigators that a Credit Suisse banker once handed him bank statements hidden in a Sports Illustrated magazine during a breakfast meeting at a Mandarin Oriental hotel.

About 1,800 Credit Suisse bankers were opening and servicing Swiss accounts for wealthy Americans by 2008. Some of those bankers helped American clients structure large cash transactions to avoid U.S. reporting requirements, in violation of U.S. law. The bank also used outside parties to supply clients with credit cards that enabled them to secretly draw upon the cash in their Swiss accounts, according to the report.

The U.S. Department Of Justice has charged 73 U.S. account holders and 35 bankers and advisers with offshore tax evasion offenses since 2009. The U.S. government has acknowledged that as many as 14 Swiss financial institutions are currently under investigation, and won’t hesitate to indict if and when circumstances merit.

Switzerland’s largest bank, UBS, turned over 4,700 accounts of U.S persons in 2009. So far 238 names of Credit Suisse U.S. customers have been turned over to the U.S. through treaty requests.  More names are forthcoming given the U.S. government’s use of civil summonses and a grand jury subpoenas to get information and the Swiss government’s cooperation to now facilitate this release of this information.

The situation at Credit Suisse changed in 2008 when UBS came clean about its role in aiding U.S. tax evasion, which led the bank to disclose thousands of accounts as part of a $780 million settlement with Justice. Credit Suisse embarked on a five-year process of closing the Swiss accounts of Americans who refused to disclose them to U.S. authorities. About 18,900 wealthy Americans closed the accounts rather than pay taxes, according to the subcommittee.

Investigators initiated the probe after a 2008 hearing on UBS, during which Credit Suisse bankers acknowledged having U.S. accounts that had not been disclosed to the IRS. The subcommittee collected about 100,000 documents from the bank and conducted 23 interviews with bankers, U.S. government officials and Americans who evaded taxes using hidden Credit Suisse accounts.

At the heart of the tax evasion mess is a long-running dispute between the United States and Switzerland, whose centuries-old culture of banking secrecy has made the country a sanctuary for the world’s rich.  But in August 2013, the two countries struck a deal to allow some Swiss banks to pay fines to avoid or defer prosecution over tax evasion by wealthy American customers. The deal has attracted 106 Swiss banks, which have agreed to disclose some information about U.S. customers. It does not cover the 14 Swiss banks, including Credit Suisse, that are being investigated by Justice.

Justice officials said the department believes that this deal will produce significant information about Americans who had accounts or moved money around once they learned of prosecutors’ investigations.

Congress has also enacted the Foreign Account Tax Compliance Act, requiring foreign banks to disclose U.S. customer accounts every year or pay a 30% tax on their U.S. investment income.

If you have never reported your foreign investments on your U.S. Tax Returns, 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 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.

Ten Reasons Against Continued Non-Disclosure Of Your Foreign Income And Foreign Accounts.

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As an incentive to drive taxpayers into the Offshore VoluntaryDisclosure Initiative (OVDI) the U.S. government continues to ramp up its efforts in searching for and flushing out income tax evaders who continue to utilize undisclosed foreign accounts, entities or assets to hide income. Because the IRS has devoted massive resources to publicizing the reporting requirements for offshore assets along with implementing the 2009 and 2011 and the current foreign bank account and asset voluntary disclosure initiatives, taxpayers that are investigated or audited for non-compliance surrounding the reporting of foreign bank accounts or overseas assets, will face an uphill battle in proving they were unaware of their tax reporting obligations.

The U.S. Government is currently taking the following types of actions in an attempt to flush out noncompliance concerning foreign accounts, assets or business activity:

1.         Grand Jury Subpoenas directly to taxpayers suspected of income tax evasion surrounding foreign accounts, assets or business activity.

Perhaps the most aggressive strategy for combating foreign income tax evasion surrounding foreign accounts or assets is where the government is currently issuing subpoenas to individuals suspected of housing funds in Swiss or other off-shore bank accounts that demand copies of their foreign bank statements dating all the way back to 2003.

These subpoenas are out of the ordinary in that they ask the investigated individuals themselves rather than the foreign banks for the statements. These grand jury generated subpoenas specifically asks for copies of statements depicting the highest annual balance for each year since 2003. Anyone who fails to comply with the terms of the subpoena risks being held in contempt of court and facing fines or jail time which often will not end until the jailed individual agrees to comply with the terms of the subpoena.

If the IRS cannot identify a particular taxpayer, it has the option of using a “John Doe” summons. For a John Doe summons, the IRS need only establish that the summons relates to an identifiable group or class, there is a reasonable basis to believe such person(s) have unreported income, and the information sought is not readily available through other sources. In April 2011, a U.S. court authorized service of a John Doe summons on HSBC USA, seeking records from the bank with regard to thousands of suspected non-compliant citizens that used banking services in India.

2.         Investigations surrounding Switzerland’s banking industry

Whenever the U.S. Justice Department obtains evidence of wrongdoing by one or more employees of a corporate entity, through the principle of respondeat superior, the U.S. has a legal basis to file criminal charges against the entity itself. Using the threat of indictment, the U.S. can leverage disclosures of accountholder information and often targeted banking institutions will yield to the request rather than risk the fallout and possible damage to its brand or reputation.

Switzerland’s perceived role as being the world capital in suborning and facilitating U.S. income tax evasion via its 1934 law mandating total privacy of bank accounts has been ground zero for the U.S. government’s attack on income tax and foreign asset noncompliance. It is estimated that Switzerland houses $2 trillion in global capital.

UBS, the biggest Swiss bank, paid $780 million and turned over details concerning 4,450 U.S. account holders to end prosecution by the U.S. Government. The U.S. Justice Department is currently conducting criminal investigations of 11 other Swiss Banks including Credit Suisse, Julius Baer and Basler Kantonalbank.

3.         Investigating Correspondent Banking

Switzerland’s Wegelin & Co. was the employer of three Swiss bankers charged with conspiring to help U.S. clients hide more than $1.2 billion from American tax authorities by making sales pitches to U.S. taxpayer-clients who were fleeing UBS. The indicted bankers allegedly told American clients not to worry about the IRS because their bank “had a long tradition of bank secrecy,” adding that they had advised “their U.S. taxpayer-clients that the bank was less vulnerable to U.S. law enforcement pressure because, unlike UBS, the bank did not have offices outside Switzerland.”

The Wegelin & Co indictment shed light on an obscure corner of hidden offshore wealth concerning the relationships some smaller banks have with bigger banks for moving clients’ money around the world called correspondent banking. In correspondent banking, the smaller bank is the customer of the larger bank, which acts as an agent, or conduit, by accepting deposits, processing other wire transfers and handling other business transactions on behalf of the smaller bank’s clients. Correspondent banking is a staple of the global financial system which allows smaller banks around the world without an overseas presence to send money to clients in other countries via larger banks in those countries.

4.         Pending settlement with Swiss Banking Industry and Swiss Government

A large sector of the Swiss banking industry and the Swiss Government is attempting to hammer out a civil settlement with the U.S. Government covering any wrongdoing. As part of any such settlement, the U.S. Treasury Department is expected to obtain the identity of all Swiss accounts owned by U.S. taxpayers. In order to facilitate the identification of U.S. account holders the banks are increasingly using sophisticated technology, such as face recognition software, to prevent depositors from hiding their true identity.

5.         The implementation of FACTA

The new tax rules that are a part of the Foreign Account Tax Compliance Act (FACTA) of 2010, which applies to individuals and financial institutions, were specifically enacted as part of an effort to cut down offshore tax evasion. Banks worldwide are bracing for new U.S. regulations aimed at reducing tax evasion, which are expected to affect hundreds of billions of dollars’ worth of deposits worldwide. The new tax rules come into full effect starting July 1, 2014.

6.         The implementation of Form 8938 starting with the 2011 tax filing season

A new filing requirement for 2011 and for tax years thereafter is that if the value of your foreign assets is greater than $100,000 at the end of 2011, or if they exceeded $150,000 at any point during 2011, then you need to file Form 8938, Statement of Foreign Financial Assets. This form is specifically designed to identify Foreign Income Generating Assets that have previously not been reported for tax purposes.

7.         Scrutiny over those that renounce citizenship

More and more Americans living outside the U.S. are renouncing their U.S. citizenship on account of increasing tax obligations and stringent reporting requirements. In the Philippines during 2010 for example, more than 1,500 people gave up their U.S. citizenships. Citizens suspected of doing so for the sole purpose of avoiding taxes are barred from re-entering the U.S. under a little known provision in immigration reform called the “Reed Amendment,” which was enacted in 1996. Additionally, if a taxpayer decides to leave the U.S. and declare a different country as their tax home in an attempt to avoid paying U.S. taxes, they must follow an official exit procedure.

8.         Foreign Non filer investigations

The U.S. has income tax treaties with more than 42 countries through which the IRS can ferret out foreign tax filing information by U.S. citizens living in those countries and thus compile a list of persons who have not been filing their U.S. income tax returns. Tax delinquents who subsequently return to the U.S. after living abroad for so many years may likely find themselves swamped by tax assessments and penalties and may be faced with property seizures.

9.         Expats in Asia under investigation

American expats living in Asia are specially coming under close inspection, with their Asian bank accounts being targeted and criminal investigations being intensified since there are suspicions that a lot of overseas companies were set up specifically to avoid payment of U.S. taxes.

10.        Treaties and Mutual Information Exchange Agreements

The U.S. is not the only nation seeking greater compliance and preservation of its taxing authority. There is increasing international pressure for greater transparency with regard to foreign account financial information. The Organization for Economic Co-operation and Development (OECD) and the EU has pushed for the adoption of a model agreement containing provisions allowing for information exchange. In general terms, the model agreement provides for information exchange “without regard to whether the conduct being investigated would constitute a crime under the laws of the requested party if such conduct occurred in the requested party.” Additionally, the agreement would also allow for tax examiners from the requesting country to travel to the requested country to conduct its investigation, including interviews of witnesses and document review.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS.  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.

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.

Is “Present Tax Year Only Disclosure” your answer to IRS Voluntary Disclosure?

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We handle a lot of inquiries from taxpayers trying to figure out if they really need to enter into the 2012 IRS Offshore Voluntary Disclosure Program. Tax preparers have also questioned us on what to do now that they have learned that a client has never reported their foreign income and foreign accounts.  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 (TDF 90-22.1) commonly known as “FBAR′s” and I have heard rumors that the Criminal Investigation Division (CID) has created a group of special agents to monitor for just this occurrence.

How would Present Tax Year Only Disclosure actually work in the real world? 

So let’s think about this first FBAR that a taxpayer is going to file to get into present and future compliance. This FBAR will list the following information – the bank, the account number and the value of the account.

Seems harmless enough. But the truth is that this information tells the IRS a lot more than that. For instance, let’s suppose that the IRS knew, through intense data collection, that any Credit Suisse bank account that starts with “240″ and was opened between 1997 and 1999.  Now it just so happens that this taxpayer’s 2013 FBAR includes a Credit Suisse bank starting with 240 with a balance of $750,000.

So what is this 2013 FBAR really saying? “Hey IRS, here is a foreign bank account that I opened around 1997-1999. I never had an FBAR filing obligation before because the account must have been under $10,000. But now, out of the blue, this account has blossomed from next nothing to $750,000 overnight.”

So then what would the IRS do with that information?  

Well if I were a CID special agent my thought process would be as follows:

The taxpayer has just reported a $750,000 account balance at Credit Suisse. Let’s take a look at his prior returns. Hmmmm… for the last 3 years he has made $50,000 a year or so… Thus… the deposit could not have come from previously taxed U.S. income. Did the taxpayer inherit this money? If he did he better have filed a form 3520 to report the inheritance or I get to hit him with a 35% penalty on the amount of the inheritance! Hmmmm…. No 3520 was filed. Gee… Since I can determine that the funds did not come from previously taxed earnings or from an inheritance there must be something fishy afoot here… Let’s audit this taxpayer. Matter of fact; let’s have the criminal investigation division take a look as well…

As you can see, this is not a viable option.

The IRS Civil Division has the ability to assess FBAR penalties, and the penalty is 50% of that account’s value for the year. Armed with a John Doe summons, the IRS could assess FBAR penalties for each of the years.

Additionally, because the taxpayer failed to include the interest earnings on his Credit Suisse account and most likely checked the box “no” on schedule B which asks about the existence of foreign accounts, the taxpayer has also filed false and fraudulent income tax returns for which he has exposure to the 75% civil fraud penalty. Unlike the normal six year statute of limitations for tax evasion, there is no statute of limitations for the civil fraud penalty.

So when doing the math from the fallout of a Present Tax Year Only Disclosure, the amount due could exceed the value of the accounts meaning the taxpayer could wind up with nothing, the accounts totally wiped out, or even a tax bill placing all of the taxpayer’s wealth at risk, not just his offshore accounts.  And the taxpayer could still face criminal charges.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS.  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.

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.

Final FATCA rules are issued – Deadline Is July 1, 2014 For Foreign Banks To Disclose U.S Account Holders To IRS

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Last week the IRS released a large package of regulations needed to implement 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.

One significant change is to accommodate direct reporting by certain entities about their substantial U.S. owners to the IRS rather than to withholding agents.  What this means is that your foreign bank can now directly report U.S. account holders directly to IRS without going through any third party or foreign government agency and be in compliance with FATCA.

The IRS has also made it easy for foreign banks to report U.S. account holders through an online FATCA registration system IRS has launched.  FFIs that are required to participate or else face withholding on their U.S. investments include:

  • Depository institutions, such as banks;
  • Custodial institutions, such as mutual funds;
  • Investment entities, such as hedge funds; and
  • Certain insurance companies that have cash-value products or annuities.

If you have never reported your foreign investments on your U.S. Tax Returns, 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 Los Angeles 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.

IRS Grants Limited Relief For U.S. Persons Owning Mexican Property In A Fideicomiso

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In June 2013, the IRS handed down Rev. Rul. 2013-14 which states that Mexican Land Trusts (MLTs), also known as “fideicomisos”, are not trusts for purposes of IRS tax law.  Prior to the ruling, there was confusion over whether these MLTs were trusts subject to onerous tax reporting requirements involving foreign trusts.  As a result of the ruling, those who hold MLTs, which include many individuals who own vacation or retirement homes in Mexico, are not required to comply with burdensome tax reporting requirements typically applicable to foreign trusts.

Under the Mexican Federal Constitution, non-Mexican persons cannot directly own real property located in “restricted zones” in Mexico.  The restricted zones include real property located within 100 kilometers (63 miles) of Mexico’s inland borders and 50 kilometers (32 miles) of its coastline.

However, non-Mexican persons, with the help of a Mexican bank, can indirectly own real property through MLTs.  Under an MLT, documents are drawn up whereby the MLT entity would be set up, the Mexican bank would nominally hold bare legal title and the beneficial ownership would be retained by the non-Mexican person.

Rev. Rul. 2013-14 essentially disregards the MLT as a true entity and treats the non-Mexican person as the owner of the real property.  The great advantage of this is that the U.S. taxpayer does not need to file forms typically required for foreign trusts.

U.S. persons who receive money from foreign trusts are required to file Form 3520 “Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts” and owners of foreign trusts are required to file Form 3520-A, which is a return for the trust.  In addition, if the aggregate value of taxpayer’s interest in foreign assets exceed $10,000, he or she is required to file an FBAR form and may need to file Form 8938.

One caveat – the ruling is expressly limited to situations in which the Mexican bank holds only bare legal title.  It the non-Mexican person has a bank account out of which the Mexican bank, on its own initiative pays taxes or other expenses related to the property, the IRS could treat the MLT as a trust for U.S. tax purposes.  In addition, U.S persons would still be required to disclose ownership of foreign accounts in Mexico and elsewhere and report foreign interest income and foreign rental income on a U.S income tax return.

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.

Go For The Gold And Pay Your Tax – Olympic Medals Taxable

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While millions of Americans were glued to their televisions to watch American athletes compete in this year’s Winter Olympics, the Internal Revenue Service was quietly getting ready to make sure that all our Olympic winners pay taxes on their victories.

It’s true. The Internal Revenue Code mandates that If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $100 prize in a marathon, you must report this income on your Form 1040. If you refuse to accept a prize, do not include its value in your income.  Prizes and awards in goods or services must be included in your income at their fair market value.

That being the case, any athlete who accepts his or her Olympic medal will have to report its value as income and pay taxes on it.  Considering that the value of each medal ranges from $10,000 to $25,000, this can be a hefty tax bill of up to $9,000. That’s true even though the competition took place in Russia and not the United States.

Contrast this to winning Olympic athletes from most other countries don’t have to worry about their medals being taxed.  This unfairness has resulted in considerable debate during each session of Congress when a Summer or Winter Olympics is held but any legislation to change the tax law has never made it out of Congress.

You would think most Americans would be in favor of the legislation but there appears to be some backlash. For example, should an Olympian who comes home with 4 medals conceivably make $100,000 tax free while millions of hard working Americans struggle to support their families on far less income yet have to pay taxes? Also consider the millions dollars from endorsements that medal winners can make as a result of winning a medal.

It’s clearly a decisive issue with arguments on both sides. But what you need to remember that even income earned outside the U.S. may be taxable. Every year, thousands of taxpayers learn that lesson the hard way. If you live, compete or work outside the United States, you must still file tax returns here.  In addition, if you win a prize or award, you must claim the value of that prize or award on your tax return as income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and make sure you are fully utilizing all benefits under the tax laws.

IRS Warning: Beware Of Sophisticated Fraudulent Tax Collection Notice Scam Targeting Taxpayers

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From time to time the IRS issues consumer warnings on the fraudulent use of the IRS name or logo by scamsters trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet, it is called phishing.

Suspicious e-Mail/Phishing

Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity.  Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.

2013/2014 Tax Season Fraudulent Tax Collection Notice Scam

The most recent scam that the public has told our office involves a sophisticated fraudulent tax collection notice scam targeting taxpayers for which the IRS has filed a Federal Tax Lien.

Here is how it works: The scamsters will search public records for the filing of a Federal Tax Lien by IRS and with the information gathered from that filing will generate a form letter and mail it to the targeted taxpayer.  The letter is designed to mimic an IRS notice but it is really coming from a third party having nothing to do with the IRS.  If the recipient of the notice contacts the number listed, the person answering your call will purport to be working for the IRS.  The intended victim is told he or she owes money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, he or she is then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the person who answered your call becomes hostile and insulting.

The IRS is aware of this scam too and has confirmed that this scam has hit taxpayers in nearly every state in the country.  The IRS does not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer.

If you receive a notice regarding your taxes which do not bear the official seal of the Internal Revenue Service and an official verifiable address of an IRS office or Service Center, that is a sign that it really isn’t the IRS sending you a notice.

Other characteristics of this scam include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling you back.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts.

Employment Verification Contacts

If you receive a telephone call or a fax from someone claiming to be with the IRS and you are not comfortable providing the information, you should get that person’s name, badge number and office location and then contact the IRS customer service line at 1-800-829-4933 to verify the validity of the call or fax. Upon getting verification from this IRS customer service line, you may then contact the IRS employee who requested the information and provide the required information.

To Report Fraud

You may also report the fraudulent misuse of the IRS name, logo, forms or other IRS property by calling the IRS toll-free fraud hotline at 1-800-366-4484.

What You Should Do If You Really Do Have Tax Issues?

The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles and California know exactly what to say and handle the IRS.  Our experience and expertise not only levels the playing field but also puts you in the driver’s seat as we take full control of resolving your tax problems. 

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people avoid collection action by the IRS and State tax agencies. Working with one of our tax attorneys in Los Angeles or elsewhere in California is the best bet for reducing or eliminating the amount you owe.

 

Your Foreign Bank Is Disclosing You To The IRS

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The IRS has various ways to find out about international or overseas bank accounts.  The Foreign Account Tax Compliance Act (“FATCA”) which was passed by Congress in March 2010 requires foreign financial institutions to register with and report to the IRS certain information about their U.S. account holders.

The foreign financial institutions include, but are not limited to depositary institutions (e.g., banks), custodial institutions (e.g., mutual funds), investment entities (e.g., hedge funds or private equity funds) and certain types of insurance companies that have cash value products or annuities.

The foreign financial institutions are required to report information such as the identities of their U.S. account holders, the social security numbers of the U.S. account holders, the account numbers, account balances and income, such as interest and dividends earned on the foreign account.  If the foreign financial institutions do not register and agree to report, they face a 30% withholding tax on certain U.S.-source payments made to them.  With July 1, 2014 being the deadline under FATCA for compliance, virtually all foreign financial institutions have now established procedures to identify U.S. account holders and have each U.S. account holder sign a Form W-8 BEN or face closure of their account.

Under these procedures, the foreign bank will send you a letter that you have been identified as a U.S. accountholder to be reported to the IRS.  As such, the bank will ask you to submit proof that you have entered into the IRS’s Offshore Voluntary Disclosure Initiative (OVDI) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS.  If you have engaged tax counsel and entered into this program, you need not worry.

In addition, under the Bank Secrecy Act of 1970 financial institutions are required to report any deposit, withdrawal and transfer of $10,000 or more to the IRS.  These reporting requirements include international transactions and have been used as a basis to investigate taxpayers who have assets overseas.  So even if a U.S. taxpayer were to refuse to cooperate with the foreign financial institution and that bank were to close the account, the transfer of the funds out of that institution would be reported to IRS.

If you have never reported your foreign investments on your U.S. Tax Returns, 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.

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.

IRS Warning: Beware Of Sophisticated Telephone Scam Targeting Taxpayers

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From time to time the IRS issues consumer warnings on the fraudulent use of the IRS name or logo by scamsters trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet, it is called phishing.

Suspicious e-Mail/Phishing

Phishing (as in “fishing for information” and “hooking” victims) is a scam where Internet fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity. Current scams include phony e-mails which claim to come from the IRS and which lure the victims into the scam by telling them that they are due a tax refund.

2013/2014 Tax Season Telephone Scam

The most recent scam that the public has told our office involvesa sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.

Here is how it works: Victims receive a call from someone purporting to be working for the IRS.  The intended victim is told he or she owes money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, he or she is then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

The IRS is aware of this scam too and has confirmed that this scam has hit taxpayers in nearly every state in the country.  The IRS does not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer.

If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.  When the IRS is first contacting a taxpayer on a tax issue is likely to occur via mail.

Other characteristics of this scam include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

The IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts.

Employment Verification Contacts

If you receive a telephone call or a fax from someone claiming to be with the IRS and you are not comfortable providing the information, you should get that person’s name, badge number and office location and then contact the IRS customer service line at 1-800-829-4933 to verify the validity of the call or fax. Upon getting verification from this IRS customer service line, you may then contact the IRS employee who requested the information and provide the required information.

To Report Fraud

You may also report the fraudulent misuse of the IRS name, logo, forms or other IRS property by calling the IRS toll-free fraud hotline at 1-800-366-4484.

What You Should Do If You Really Do Have Tax Issues?

The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles and California know exactly what to say and handle the IRS.  Our experience and expertise not only levels the playing field but also puts you in the driver’s seat as we take full control of resolving your tax problems. 

Description: The Law Offices of Jeffrey B. Kahn, P.C. has helped many people avoid collection action by the IRS and State tax agencies. Working with one of our tax attorneys in Los Angeles or elsewhere in California is the best bet for reducing or eliminating the amount you owe.