Jeffrey B. Kahn, Esq. Discusses Taxes and the IRS discovering your undisclosed foreign bank account On ESPN Radio – July 10, 2015 Show

Topics Covered:

1. Welcome to a new era of transparency where the IRS is getting information on U.S. taxpayers from foreign banks and the IRS is taking action by examining and investigating taxpayers who are not reporting their worldwide income nor disclosing their foreign accounts.
2. Breaks IRS is providing to waive penalties for U.S. taxpayers with undisclosed foreign bank accounts.
3. The top ten tax problems that taxpayers face with the IRS.
4. Questions from our listeners:
   • Why should I hire the Law Offices Of Jeffrey B. Kahn, P.C. for my IRS tax problem instead of using a local CPA or a general attorney?
   • I have unfiled tax returns so what should I do?
   • I can’t pay the IRS what I owe, what are my options?

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Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show

This is your host 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.

You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California.

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!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.

I have a lot to cover today in the world of taxes and helping me out will be my associate attorney Amy Spivey who will be calling in later.

Its been about one year since we entered into a new era of transparency where the IRS is getting information on U.S. taxpayers from foreign banks and the IRS is taking action by examining and investigating taxpayers who are not reporting their worldwide income nor disclosing their foreign accounts.

Many people thought that forever they can keep their foreign accounts a secret – not just from their creditors and spouses but also from the IRS.

Little do they know that we are in a new era.

Starting July 1, 2014, the U.S. government is imposing 30% taxes on many overseas payments to financial institutions that don’t share information with the IRS.

That means that any non-compliant bank which invests in the U.S. will be getting a 30% haircut on distributions and income from U.S. investments.

This new burden has frustrated overseas banks and U.S. expatriates. It’s also created a new standard of global bank-to-government information sharing designed to throw light on often difficult-to-trace accounts.

But under the 2010 Foreign Account Tax Compliance Act, or as it is widely known as FATCA, this law allows the U.S. to scoop up data from more than 77,000 financial institutions and 80 governments about U.S. taxpayers’ overseas financial activities.

What led to the enactment of FATCA in 2010 was the inability of federal tax authorities to obtain clear information about financial accounts that U.S. taxpayers have outside the country. That’s especially important for the U.S., because unlike many other countries, the U.S. taxes citizens on their worldwide income regardless of where they actually live.

In establishing FATCA, Congress and President Obama in effect threatened to cut off banks and other companies from easy access to the U.S. market if they didn’t pass along such information. The U.S. was able to leverage its status as a stable major financial center to demand action from governments and banks in other countries.

You would expect that with a Republican-led Congress and a Democrat President, any proposed legislation would be stuck in the quagmire of politics. But not so with FATCA. This proposed legislation was barely debated when Congress in 2010 passed it as a budgetary offset to a tax credit for hiring. Why did it pass so easily? Because FATCA is projected to raise $8.7 billion in revenue over the next 10 years!

Since passing FATCA in 2010, an even more robust Republican-led Congress has felt no need to address this legislation again, although the Republican National Committee voted in favor of repeal.

So since it should be clear that FATCA is here to stay, what is this law all about and how does it affect us taxpayers?

Withholding Tax

Under FATCA, U.S. banks and other companies making certain cross-border payments — such as interest and dividends — to foreign financial institutions must withhold a 30% tax if the recipient isn’t providing information about its U.S. account holders.

FATCA was enacted with phases of compliance to give foreign institutions time to refine their systems and certify to the IRS compliance in reporting U.S. accountholders to the IRS. These later phases of the law will apply to a broader set of cross-border payments, such as gross proceeds from stock sales. Many non-financial companies will be affected, too. The phases of the law were scheduled to be in full effect by 2015 and the IRS is pleased to announce that FATCA is fully implemented and in full force.

FATCA has prompted more than 77,000 foreign financial institutions to register for the program to avoid the withholding tax. As a result of that compliance, the IRS doesn’t expect to collect much direct revenue from the 30% levy. But the IRS expects to collect a lot more from U.S. taxpayers.

Direct Disclosure

So far, the U.S. has reached final or provisional agreements with more than 80 jurisdictions, allowing for government-to-government information exchange or streamlined business-to-government exchanges.

The list includes jurisdictions that often are labeled as tax havens, such as the British Virgin Islands, the Cayman Islands and Guernsey. It also includes most of the world’s major economies, such as Germany, Japan, Canada and the U.K.

Some U.S. Taxpayers Are Renouncing Citizenship

But some expatriates would rather renounce their U.S. citizenship than tolerate the requirements under FACTA and the lack of access to local foreign banks that are refusing American customers or placing additional restrictions on them

In 2013, 2,999 Americans renounced citizenship, the highest number on record. This is a trend that has been on the rise since 2010 when FATCA became law. Because these Americans know that as the account information comes into the U.S., the focus shifts to the IRS which will use the data to guide its investigations into offshore tax evasion.

Bankers, Lawyers

The U.S. continues to go after foreign banks and their officials for their involvement in assisting U.S. taxpayers to evade taxes. The U.S. has used prosecutions against Credit Suisse, UBS and other major foreign banks to get information on Americans hiding overseas accounts.

Prosecutors have charged more than 70 U.S. taxpayers and three dozen bankers, lawyers and advisers in their crackdown on offshore tax evasion.

It should be clear that FATCA is here to stay. IRS Commissioner John Koskinen has put enforcement against taxpayers with undisclosed foreign bank accounts on the top of his agency’s list. And so it is time for you to come forward before it is too late.

Well it’s time for a break but stay tuned because we are going to tell you the breaks IRS is providing to waive penalties for U.S. taxpayers with undisclosed foreign bank accounts.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

Calling into the studio from our Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Jeff states: Despite the rhetoric by IRS threatening U.S. Taxpayers with harsh penalties, I hear that the IRS is looking to waive penalties for some Americans living abroad who haven’t been paying US taxes. Amy what is the deal here?

Amy says: The Internal Revenue Service is offering to waive steep penalties for Americans living abroad who haven’t been paying their U.S. taxes.

But there is a catch: You have to be able to show that you didn’t evade U.S. taxes on purpose.

American citizens living abroad are required to file U.S. tax returns, even if they keep all their money overseas. Similarly, U.S. citizens living in the United States are required to tell the IRS about any accounts they have in foreign banks.

The penalties for not reporting these accounts are stiff. If there is more than $10,000 in an unreported account, the IRS can impose penalties of $100,000 or even more if the accounts are really big.

Jeff asks: So what is the IRS doing to encourage taxpayers to come forward?

Amy says: The IRS announced a program on June 18, 2014 that would largely waive these penalties if taxpayers come forward and show that they didn’t hide the money on purpose.

Americans living abroad can have all penalties waived, if they file three years’ worth of tax returns and pay any back taxes.

Americans living in the U.S. can come clean by disclosing overseas accounts and paying a penalty equal to 5% of the account’s assets.

For people who are willfully evading U.S. taxes, the IRS is tweaking an existing program that imposes stiff penalties for people who come forward, but allows them to escape criminal prosecution.

Jeff asks: So what is considered to be non-wilful conduct?

Amy: “Non-willful conduct is conduct that is due to negligence, inadvertence or mistake, or conduct that’s the result of a good-faith misunderstanding of the requirements of the law.” The application of this standard will vary based on each person’s facts and circumstances so I suggest that one consult with experienced tax counsel.

Jeff says: And that is where we come in. 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 KahnTaxLaw Radio Show when you call to make an appointment. Call our 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 asks: Is there any tax advantages that Americans living abroad gain by making voluntary disclosure?

Amy replies: The disclosure program is a particularly good deal for Americans living in countries with higher tax rates than the U.S.

Typically, U.S. citizens living abroad must file a U.S. tax return and pay U.S. taxes on all income, regardless of where it is earned. However, they can deduct taxes paid to a foreign government from their U.S. tax bill.

Jeff asks: When did the U.S. start stepping up its efforts to crack down on people who are willfully hiding assets overseas?

Amy replies: I would say that it started in 2009 when the IRS started its first voluntary disclosure program in a series of programs to encourage people to come clean. In general, people who come forward can escape criminal prosecution in exchange for paying reduced penalties and back taxes.

The IRS has stated that more than 50,000 people have come forward so far, paying more than $6.5 billion in taxes, interest and penalties.

Jeff asks: For taxpayers who have undisclosed foreign bank accounts, how quickly must they act to come forward to get the benefits under one of the voluntary disclosure programs including the new streamlined procedures?

Amy replies: If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.   Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Jeff asks: How far back do taxpayers have to go to correct the past problems of not disclosing foreign accounts and foreign income?

Amy replies: Well it depends on which voluntary disclosure program they are entering into, when did they first acquire or start the foreign accounts, and when they first became U.S. persons for tax purposes.

Usually the disclosure period would not be longer than the last 8 years but in some instances it could be as short as the last three 3 years.

Jeff asks: Is it possible to avoid going through a voluntary disclosure program and just file the amended income tax returns and delinquent FBAR’s?

Amy replies: The IRS calls that as a “Quiet Disclosure” and claims that any taxpayer who follows this route will be picked by the IRS and their case will be investigated. That being the case, you do not get any benefits of voluntary disclosure, you cannot get into any of the voluntary disclosure programs, and the filings you made will be used against you by IRS to assess the maximum penalties provided by law and perhaps even be referred for criminal prosecution.

Jeff asks: So is it looking for 2015?

Amy replies: Well is it getting harder for Americans to hide assets overseas. As part of FATCA, more than 77,000 foreign banks from about 70 different countries have started sharing detailed information about U.S. account holders with the IRS. This effort is part of a global crackdown on overseas tax evasion.

Jeff says: 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 KahnTaxLaw Radio Show when you call to make an appointment. Call our 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 because after the break we are going to tell you the top ten tax problems that taxpayers face with the IRS.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And on the phone from our Walnut Creek office I have my associate attorney, Amy Spivey.

Jeff says: OK Amy so you have given me the list of the Top 10 IRS Tax Problems facing taxpayers. Lets go through this list. I will let you read of each item.

1. Liens – Jeff says: Once the IRS assesses tax against you, they are required to give you a notice and demand of payment within 60 days. If you fail to pay, the IRS will send you a Notice of Federal Tax Lien. This public notice attaches to all your assets. The lien establishes the IRS as a secured creditor. This gives them the ability to seize your assets. However, there are different things and programs available that experienced tax counsel may qualify you for to get the IRS to withdraw, discharge or subordinate the federal tax lien.

2. Wage levies – Jeff says: The IRS will mail you a Notice of Intent to Levy. You have 30 days from the date on the letter before they can levy your wages. The IRS can levy your entire paycheck and it will attach to each and every pay check until a release is issued. If a levy has been placed on your wages, you cannot let this sit – you need to contact experienced tax counsel immediately for tax relief.

3. Bank levy – Jeff says: Again, the IRS will mail you a Notice of Intent to Levy. You have 30 days from the date on the letter before they can levy your bank account. The IRS will seize all of the funds from your account upon notice of levy. However, the law provides for a twenty one day waiting period before the funds are surrendered to the IRS. If you do not get your IRS problem resolved within this 21 day period, the IRS will take all of the money in the bank account. Only in rare cases will the IRS return these funds. If a levy has been placed on your bank account, you need to contact experienced tax counsel immediately for tax relief.

4. Levy on Accounts Receivable – Jeff says: For self-employed taxpayers and businesses, the IRS can levy your account receivables. Without these funds for day-to-day operations, you could be forced to shut down. Just like a bank levy, the IRS will take the entire amount so you need to contact experienced tax counsel immediately.

5. Property Seizures – Jeff says: The IRS can seize and auction your home, automobile, real estate, inventory, business equipment, or any other tangible asset. Proceeds from the auction are applied to the tax liability. If the sale proceeds are less than your tax liability, you will still be liable for the remaining unpaid tax. If you have received a Notice of Seizure, you need to contact experienced tax counsel immediately.

Jeff says: It is important that you don’t ignore these IRS notices. 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 KahnTaxLaw Radio Show when you call to make an appointment. Call our 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.

6. Payroll Taxes – Jeff says: Employers are required to withhold and deposit federal income and social security taxes from each employee’s paycheck. The IRS is extremely aggressive when it comes to the collection of payroll taxes. The IRS may even assess some of these taxes personally against the corporate officers or employers so you need to contact experienced tax counsel immediately to represent you in these types of problems.

7. Unfiled Returns – Jeff says: When dealing with the IRS, filing delinquent tax returns is step one. The IRS will not release levies, consider an Offer in Compromise or Installment Agreement until you have filed all delinquent tax returns. To become a tax compliant filer, you will need to file at least the previous six years tax returns.  You should contact experienced tax counsel to help prepare these delinquent tax returns and to deal with the IRS.

8. Substitute Tax Returns – Jeff says: If the IRS has filed a substitute tax return on your behalf, it may be in your best interest to file an original return yourself. The IRS prepares the substitute tax returns using the harshest tax rates and zero deductions which often times leave you with an inflated tax bill. The IRS closely inspects these types of original returns and may audit it before acceptance.  To ensure you are getting all the tax benefits you are legally entitled to it is a good idea to contact experienced tax counsel for this work.

9. Penalties & Interest – Jeff says: The IRS will assess penalties and interest for many reasons. The most common are failure to file tax returns and failure to pay the tax owed. Interest compounds daily and penalties are as much as 50% or more of the taxes owed. The IRS will abate penalties under certain circumstance so it is a good idea to contact experienced tax counsel for this work.

10. Audits – Jeff says: Because the IRS can audit specific line items on the return or the entire tax return, communication during an audit is vital. It will help make the process run smooth and could help save you money. Audits can take as little as a couple of weeks or as much as a couple of years. Typically the shorter the audit is, the better the outcome will be. Planning before the audit begins is the most important part of the process so contact experienced tax counsel immediately if you received an audit examination notice.

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 KahnTaxLaw Radio Show when you call to make an appointment. Call our 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 Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.

If you would like to post a question for us to answer, you can go to our 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 from the kahntaxlaw inbox for me to answer?

Question for Jeff:

Dianne from Riverside asks: Why should I hire the Law Offices Of Jeffrey B. Kahn, P.C. for my IRS tax problem instead of using a local CPA or a general attorney?

Jeff says: Considering our IRS insider knowledge, experience and customized procedures, the attorneys and professional staff at that Law Offices Of Jeffrey B. Kahn have effectively resolved a wide range of tax issues more than CPAs or general attorneys will handle in their career. Can you trust you will get the outcome you need from your tax problem with someone who occasionally handles a tax resolution case? My team routinely handles tax resolutions including you being audited, or the subject of an investigation or facing collection action. This is what we do.

Richard from San Diego asks: I have unfiled tax returns so what should I do?

Jeff says: The best thing you can do is file your tax return as soon as possible. The IRS will eventually find out that you haven’t paid taxes through employers, contractors, mortgage holders or the assets that you purchase. The longer you go without paying taxes, the more fines you will have to pay. If you can’t pay all of your taxes, you may be able to qualify for an Offer in Compromise, Installment Agreement or Currently Not Collectible Status. With the information we can get from IRS and your tax documentation, we can prepare previous years of unfiled tax returns and propose a resolution to the IRS. Also, if you can’t find some of the documentation, we can help.

Dan from Los Angeles asks: I can’t pay the IRS what I owe, what are my options?

Jeff says: If you are not financially capable of paying back the IRS, you may be able to negotiate an Offer in Compromise, where you can settle your back taxes for less than you owe. If the IRS accepts your offer, you can pay the amount agreed upon, and all federal tax liens or levies are removed.

Negotiating an Offer in Compromise can take up to 18 months and be very complicated. The IRS makes it hard for lay people to get an Offer in Compromise on their own. About a quarter of all offers are accepted so it is highly recommended that you hire us to help.

The next best option is entering into payment plan with IRS. There are different types of payment plans and so the only way you know which is the best plan for you is to consult with us. The worst thing to do is to get into a plan with the IRS that you cannot afford to keep and go into default.

Another option is to get the IRS to put a taxpayer in uncollectible status. This option does not make the liability go away but does allow a period of time where the IRS will not require payments to be made and you need not worry about collection action.

These options are also available if you have outstanding balances with any State tax agency.

Remember, 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 KahnTaxLaw Radio Show when you call to make an appointment. Call our 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.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone!