Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses the IRS, Investments, and New Developments on OVDP and FATCA On ESPN Radio – October 23, 2015 Show
Topics Covered:
- Are You Looking To Pay A $100 Million Tax Bill? If So, IRS Will Turn You Away If You Pay With A Check!
- Investing In Charter-Schools
- Fall 2015 Report Card Out By IRS On OVDP Milestones And FATCA Implementation.
- Question from our listeners: I just got in the mail a Notice from IRS. It is identified as Notice Number CP504 and says – “Urgent!! They intend to levy Certain Assets.” I don’t agree that I owe this amount. How can I appeal? Will that stop the levy action?
*******************************************************************
Jeff states: Yes sometimes we just have to take the money and run!
Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
Windus states:
And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.
Jeff states:
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!
Windus states:
And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.
Jeff states:
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Jeff states:
For today’s show we have coming up:
Segment 2 material: Investing In Charter-Schools
Windus states:
Also coming up is:
Segment 3 material: Fall 2015 Report Card Out By IRS On OVDP Milestones And FATCA Implementation.
And of course towards the end of our show, we will be answering some of your questions.
Jeff starts chit chat with Windus.
Jeff states: So for today’s top story:
Are You Looking To Pay A $100 Million Tax Bill? If So, IRS Will Turn You Away If You Pay With A Check!
Jeff continues: This story was first reported by the Associated Press on September 14, 2015.
Starting in 2016, your check won’t be any good at the IRS if you’re making a tax payment of $100 million or more.
Windus states: Jeff you are saying that if you walk into an IRS Service Center with a check for $100 million dollars, the IRS will not accept it?
Jeff replies: It’s true. The IRS says it will reject all checks for more than $99,999,999 because check-processing equipment at the nation’s Federal Reserve banks can’t handle checks that big. Checks of $100 million or more have to be processed by hand, increasing the risk of theft, fraud and errors, according to a pair of memos from the IRS and the Treasury Department.
Windus states: And you would think that if someone was paying that much money, they would get special treatment anyways for the processing of that payment.
Jeff states: I guess the richest among us will have to pay their taxes just like everyone else and either wire their tax payments electronically or write multiple checks for less than $100 million apiece.
Windus: I bet the conservatives have latched on to this.
Jeff states: The Article does touch on this recognizing that conservatives have been complaining for years that President Barack Obama is trying to stick it to the rich, regularly proposing to raise their taxes. Now, they say, the Obama administration is making it harder for the super-rich to pay those taxes. Apparently, people sending huge checks to the federal government is a growing problem.
Windus asks: OK Jeff so how big of a problem is this – I cannot imagine somebody having to write a check for $100 million to the IRS for taxes?
Jeff states: Actually this limitation in amount is a problem not only with IRS but other federal agencies as well. The Treasury Department says it has noticed an increase in federal agencies trying to deposit checks of $100 million or more. In 2015 the IRS so far has accepted 14 checks for at least $100 million each.
Jeff continues: You see the Federal Reserve says most commercial banks can’t process checks with amounts that stretch for more than 10 digits, including cents. The Fed says federal agencies have been prohibited from depositing checks of $100 million or more for years.
Windus states: Apparently, the IRS didn’t get the memo. Do we know who any of the 14 taxpayers are that wrote checks to the IRS for at least $100 million?
Jeff replies: Confidentiality laws prevent those kinds of disclosures so we would never know unless it is admitted by the paying taxpayer. Very few individuals pay that much in federal income taxes. However, each year, the IRS tracks the 400 taxpayers with the highest incomes. These high rollers had an average income of nearly $336 million in 2012, the latest year for data. Their average tax bill was $56 million. A corporation would have to make nearly $300 million in taxable profits to have a tax bill of $100 million. Investors who get the bulk of their income from capital gains would have to make about $500 million in taxable income to have a tax bill that big.
Windus states: I wonder whether anyone in Congress has commented on this?
Jeff states: I do not think you will find much sympathy for people who will no longer be able to write enormous checks to the government. Most politicians would probably not mind making enough money to pay $100 million in taxes.
Windus states: Now for those people who have to pay $100 million or more, you still have the option to pay electronically.
Jeff states: That’s right and nearly 90% of individuals already file their federal taxes electronically, according to the IRS.
Windus states: I still don’t get it. The government is running at a deficit! 14 checks at $100 million a piece is $1.4 billion dollars and you can’t hire a government clerk to process this!
Jeff states: Windus you are assuming that each of those 14 people are writing a check for only $100 million. I am sure that there are checks even larger than that that would make the total even higher than $1.4 billion dollars.
Jeff continues: So bringing this to the level of us ordinary folk, you have got to understand that we are dealing with the government – not a general creditor. They want their money paid in full and in the manner that most suits them. For example, say you owe the IRS $50,000.00 and do not have the money to pay and want to enter into an Offer In Compromise whereby you are willing to pay $5,000.00 as a lump sum settlement. If the IRS believes you have the ability to pay the amount owed over as long as 10 years with interest and penalties that continue to accrue, they will not accept your $5,000.00 payment and instead put you on a payment plan collecting your money over the next ten years! That is why people who attempt to make their own Offer In Compromise to the IRS without representation usually fail.
Well it’s time for a break but stay tuned because we are going to tell you about Investing In Charter-Schools.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
Jeff states: So Windus before we go into the next segment, please tell our listeners of your offer:
Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Investing In Charter-Schools
Jeff states: So Windus you saw an article in the October 13, 2015 Wall Street Journal that caught your attention. http://on.wsj.com/1VZI82z
Windus states: That’s right apparently a new niche is developing as more charter schools open doors and some states even help with financing. Almost all charter schools are operated by nonprofit organizations. But these groups often rent and buy their buildings from private real-estate developers, and that is creating a new niche asset for some investors. The schools usually open in office buildings that are otherwise vacant.
Not a bad thing but what is interesting is:
1. Why more charter schools?
2. Why office buildings?
3. Does State help hurt public schools?
Jeff to comment with Windus.
Windus states: Now another article on this topic came out in the Wall Street Journal on October 18, 2015 which is really summed up clearly. http://on.wsj.com/1Ps7SWp
Windus states: If we look at demographics of kids in charter schools versus public schools, ones that go to charter schools likely have parents taking a much more serious interest in their overall education.
Windus continues: So to know if a charter school is really better, “A true test would be for a charter school to take over a failing public school and, without changing any of the students and working with the same budget, show significant improvement.”
Jeff states: But you mentioned that some States help out in the financing and I would think that as an investor, those would be the better states to put your money in if you were looking to invest in charter schools.
Windus states: True and those States that have the highest percentage of students who perform poorly would probably fare well by having the State help out in financing of charter schools. Massachusetts could be one of those states. Massachusetts Governor Charlie Baker wants to expand charter schools. But again, why not reform public schools instead of creating a new school system. We are at a critical situation where reading and math scores are terrible. In Massachusetts the comment was that 50% of their students are below average. Kids in great home environments are not suffering, but the less fortunate you are in what Warren Buffet calls the “ovarian lottery” the more likely you are to just fall through the “crack” in public schools.
Jeff asks: Any such movement going on in Southern California?
Windus replies: In Orange County, there is a different kind of an activist that is really targeting fixing the school at the source. I read this article back in September in the Wall Street Journal and it deeply impacted me. http://on.wsj.com/1Yp90gq
Windus continues: In some cases the school and the unions are not helping the children and need to be challenged to change and get better. A “parent revolution” can help fix a school but often this in communities where parents are working multiple jobs and the home environment is part of the issue with a child’s success. And so whether you are looking to investment in charter schools or have other investment/financial concerns, remember that:
Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Jeff states: Windus I know that you have to get back to your meeting but I am glad you were able to be on with me for the first half of the show.
Windus signs off.
Jeff states: Stay tuned because after the break Amy Spivey will be joining me to tell you the Fall 2015 Report Card out by IRS On OVDP Milestones And FATCA Implementation.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.
Chit chat with Amy
Jeff states:
IRS Issues Fall 2015 Report Card On OVDP Milestones And FATCA Implementation
Offshore Compliance Programs For Taxpayers With Undisclosed Foreign Bank Accounts Generate $8 Billion; IRS Urges People to Take Advantage of Voluntary Disclosure Programs
Jeff states: On October 16, 2015 the IRS announced in a news release that more than 54,000 taxpayers have entered into offshore voluntary disclosure programs since 2009. Both the Offshore Voluntary Disclosure Program (OVDP) and the streamlined procedures enable taxpayers to correct prior omissions and meet their federal tax obligations while mitigating the potential penalties of continued non-compliance. There are also separate procedures for those who have paid their income taxes but omitted certain other information returns.
Amy states: IRS Commissioner John Koskinen stated “The groundbreaking effort around automatic reporting of foreign accounts has given us a much stronger hand in fighting tax evasion. People with undisclosed foreign accounts should carefully consider their options and use available avenues, including the offshore program and streamlined procedures, to come back into full compliance with their tax obligations.”
Jeff asks: Amy what sort of dragnet has the IRS created to catch non-compliant taxpayers?
Amy replies: Under the Foreign Account Tax Compliance Act (FATCA) and the network of intergovernmental agreements (IGAs) between the U.S. and foreign jurisdictions, automatic third-party account reporting began in 2015, making it less likely that offshore financial accounts will go unnoticed by the IRS.
Amy continues: In addition to FATCA and reporting through IGAs, the Department of Justice’s Swiss Bank Program continues to reach non-prosecution agreements with Swiss financial institutions that facilitated past non-compliance. As part of these agreements, banks provide information on potential non-compliance by U.S. taxpayers. Potential civil penalties increase substantially if U.S. taxpayers associated with participating banks wait to apply to OVDP to resolve their tax obligations.
Jeff states: OVDP offers taxpayers with undisclosed income from offshore accounts an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.
Jeff asks: Amy, When did the IRS first start OVDP?
Amy replies: OVDP was first started by the IRS in 2009. Since then there have been more than 54,000 voluntary disclosures by taxpayers with undisclosed foreign bank accounts. The IRS has collected more than $8 billion from this initiative.
Jeff states: And the IRS is confident that it will catch those taxpayers who are not coming forward in OVDP. So we encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts or the foreign banks are reporting you to the IRS. By then, it could be too late to avoid the higher penalties and you may be subject criminal prosecution.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
OVDP Myths
Jeff states: During the course of U.S. taxpayers with previously undisclosed interests in foreign financial accounts and assets consulting with us on their options, we have heard a lot of myths out there causing confusion and misinformation so we are going to try and clear some misconceptions.
[Jeff to reading off each Myth and Amy to respond.]
Myth #1: An individual will be better off “explaining” the undisclosed foreign bank accounts through amended tax returns, rather than opting into OVDP.
Even outside of OVDP, 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 OVDP 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 OVDP, you cannot dispute the amount of penalties imposed by the program.
Just because the penalty rate structure is set in OVDP does not mean the amount of penalty can never be disputed. Agents assigned to OVDP 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 OVDP.
Myth #3: An individual who enters into OVDP 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 OVDP 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 OVDP 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 OVDP, the MINIMUM penalty is 50% of the value of your foreign assets. But for taxpayers participating in OVDP, the MAXIMUM penalty is 27.5%. That means for taxpayers who are in OVDP, they will still get to keep at least 72.5% of their foreign assets. And under the new Streamlined Procedures with a penalty of 5%, you still get to keep 95% pf your foreign assets.
Jeff states: Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”) or the new Streamlined Procedures. 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.
PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
Jeff states, Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment with Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Jeff continues: You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.
Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.
OK Amy, what questions have you pulled for us to answer?
Question from Eric of Newport Beach: I just got in the mail a Notice from IRS. It is identified as Notice Number CP504 and says – “Urgent!! They intend to levy Certain Assets.” I don’t agree that I owe this amount. How can I appeal? Will that stop the levy action?
Answer. That notice is meant by the IRS to be threatening and intimidating but the IRS cannot levy with just this notice. The IRS must first issue a formal Notice of Intent to Levy. So while the IRS cannot carry out this threat now, you should not ignore the problem as the IRS will next issue a “Final Notice” that if the problem continues as unresolved will result in levy action. Eric I suggest that you call our firm and let us take control of your tax problem.
Now it was helpful that Eric told us the notice number that appeared on his letter from the IRS. The IRS knows that there are certain procedures they must follow before they can start levy action on your bank accounts, wages and other sources of income. The IRS also knows that taxpayers must be given the opportunity to appeal before levy action may begin. Perhaps that is the reason why the IRS will make these notices confusing and look the same so that when a notice gets issued offering appeals rights, it is overlooked by the taxpayer.
Be on the lookout for a Letter L-1058 or LT11 FINAL NOTICE OF INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING. Also be on the lookout for a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, Letter 3172. These letters will be sent to you by certified mail. These are the letters that if any appeal is not filed within the next 30 days from the date of the notice regardless of when you claim it or read it, the IRS will be able to commence levy action or keep the tax lien in place. It is imperative that you contact us when you get one of these notices so that you do not waive your appeals rights and your case can be resolved outside of IRS Collections.
Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Jeff states: Well we are reaching the end of our show.
Thanks Amy for calling into the show. Amy says Thanks for having me.
Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.
Jeff states: Have a great day and a great weekend!
Follow
Follow
