Jeffrey B. Kahn, Esq. Discusses taxes and the IRS targeting you for your undisclosed foreign accounts or criminal investigation On ESPN Radio – February 6, 2015 Show
Topics Covered:
1. Man Convicted Of Threatening To Assault & Kill IRS Agent And Torture The Agent’s Family Over Audit Proceedings
2. America’s Manifest Destiny Still Lives On Today As FATCA Imposes Our Will On Banking Worldwide
3. Tools And Tactics That IRS Criminal Investigation Division Uses To Gather Information About You
4. Questions from our listeners:
- Do many people cheat on their taxes?
- If I can’t pay my taxes, should I file my return anyway?
- Can I get an extension to pay a tax without penalties and interest?
- My state had an amnesty period for nonfilers. Can I ever hope the IRS will have one?
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 today will be my associate attorney Amy Spivey who will be calling in later in today’s show.
Man Convicted Of Threatening To Assault & Kill IRS Agent And Torture The Agent’s Family Over Audit Proceedings
While death and taxes are always certain, take lesson from Andrew A. Calcione that you should never mix them together.
In May 2014, a federal judge found 49-year-old Andrew A. Calcione of Cranston, Rhode Island, guilty of threatening to assault an IRS Revenue Agent, rape and kill the agent’s wife and injure the agent’s daughter while the agent watched before murdering the agent. The reason? Mr. Calcione didn’t want to pay his tax bill of $330,000.
According to government testimony as reported in United States of America v. Andrew A. Calcione, U.S. District Court for the District of Rhode Island (Providence County), Case No. 1:13-mj-00291-LDA, Mr. Calcione was selected for audit for the years 2008, 2009 and 2010. Mr. Calcione’s behavior is also so bizarre because for many years worked as a professional tax return preparer and was a partner in a tax preparation business in Rhode Island. As a result of the audit which was being conducted by an agent out of the IRS office in Warwick, Rhode Island, it appeared that Mr. Calcione would be responsible for an additional $330,000 in tax liability.
In April 2013 while the audit was still in progress, Mr. Calcione and his ex-wife Patricia were asked to sign a form allowing extra time to assess their case. As part of the audit process, an IRS revenue agent requested that Mr. Calcione and his ex-wife sign a Consent to Extend Time to Assess Tax. A consent is almost always requested during audit because, by statute, the Service does not have an unlimited time to examine a tax return. As a general rule, the IRS can’t assess tax more than three years after the later of the date the return was due or the date the return was actually filed (this is sometimes referred to as the statute of limitations) though exceptions may apply. If an audit is bumping up against that statute of limitations, it is sometimes (but not always) advantageous to sign a consent to allow more time to argue your case before the IRS issues a notice of deficiency. In short, it’s a question of timing.
Mr. Calcione signed the document, but his wife did not, spurring the agent to leave a voicemail on Mr. Calcione’s cell phone asking about the consent on July 12, 2013.
Mr. Calcione called the agent back three days later which was July 15, 2013. He did not, however, call to leave a friendly status update. Rather, according to court documents, Mr. Calcione advised the agent that if he called again, Mr. Calcione would show up at the agent’s home and torture the agent’s family before killing all of them. And he said it all on voicemail.
It wasn’t a run of the mill threat either. The initial call lasted over 3 minutes and contained numerous threats. He was pretty specific, saying things like: “Matter of fact, I’d shoot you in the f****** knee caps, tie you to a f****** chair, gag ya…” The message continued, with Calcione invoking some pretty horrific threats against the agent’s wife and daughter. You can check out my blog if you’re interested in the gory details.
You’d think that he’d stop there. But he didn’t. Mr. Calcione actually called the agent back on the same day, telling him to “disregard my previous voicemail.” Mr. Calcione went on, according to the agent, to say that the message was intended to mess (though he used a more colorful word) with his daughter.
After receiving the threatening calls, the agent reported Mr. Calcione to the police.
Prosecutors were able to establish that both calls came from a cell phone belonging to Mr. Calcione’s wife. The agent also recognized Mr. Calcione’s voice.
What’s really bizarre is Mr. Calcione’s explanation for the call. He told IRS special agents that the call was intended for his ex-wife who was apparently seeking increased child support (and you wonder why she’s an ex). At some point, it must have dawned on him that this story made no sense so he tried another version claiming that he was merely talking out loud in his car and must have accidentally activated his phone’s hands free calling feature.
Court records reveal that prior to this offense, Mr. Calcione ran a successful financial services business and had no criminal record.
U.S. District Court Chief Judge William E. Smith didn’t buy any of Mr. Calcione’s stories. He found Mr. Calcione guilty of threatening to assault and murder the agent and his family after Mr. Calcione waived a jury trial.
Following the conviction, the U.S. government made several statements:
Assistant U.S. Attorney Gerard B. Sullivan had prosecuted the case and his boss, United States Attorney Peter F. Neronha referred to Mr. Calcione’s behavior as “outrageous, threatening, and frankly bizarre noting that “[t]he vast majority of Americans understand the payment of their federal taxes is part of their civic responsibilities.” Mr. Neronha went on to say that his office would be “seeking the toughest, appropriate sense in this case.”
For the record, while bad behavior and threats can always be considered criminal, there are special rules which apply with dealing with the feds. Federal law provides that “knowingly and intentionally threaten to assault and murder a Revenue Agent of the IRS with intend to interfere with the official in the performance of official duties and knowingly and intentionally threaten to assault and murder a member of the immediate family of a Revenue Agent of the IRS are each punishable by statutory penalties of up to 10 years in federal prison and a fine of up to $250,000.”
That meant that Mr. Calcione could face up to 20 years for his crimes.
But on September 27, 2014 in U.S. Federal District Court he was sentenced to a year and a day in federal prison. Although part of the record is sealed, what is public suggests that Mr. Calcione may have tried to claim an anxiety disorder as a reason for his bizarre behavior. If true, he will have plenty of time to meditate while in prison. By the way, his tax bill of $330,000.00 will still be waiting for him when he completes his sentence.
Well it’s time for a break but stay tuned because we are going to tell you how America’s philosophy of the 19th century is being applied today in targeting 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 San Francisco Office is my associate attorney, Amy Spivey.
Chit chat with Amy
Jeff then to discuss:
America’s Manifest Destiny Still Lives On Today As FATCA Imposes Our Will On Banking Worldwide
In the 19th century, Manifest Destiny was a widely held belief in the United States that American settlers were destined to expand throughout the continent. Historians have for the most part agreed that American felt they had an irresistible destiny to accomplish this essential duty. This spirit has endured into the 21st century with the application of FATCA over worldwide banking activity.
Never heard of FATCA? You will.
FATCA—the Foreign Account Tax Compliance Act—is America’s global tax law. It was quietly enacted in 2010. And after a four-year ramp up, it is finally in full effect. What is most amazing is not its impact on Americans—although that is considerable—but its impact on the world. Yes, the whole world.
Never before has an American tax law attempted such an astounding reach. And it is clear FATCA has succeeded, after shrewd diplomacy by President Obama and his Treasury Department. FATCA requires foreign banks to reveal Americans to the Department Of Treasury and the IRS with accounts over $50,000. Non-compliant institutions could be frozen out of U.S. markets, so everyone is complying.
Essential Facts About FATCA:
Jeff to read off each one with Amy to explain.
- FATCA Blew In On a Perfect Storm. FATCA grew out of a controversial rule. America taxes its citizens—and even permanent residents—on their worldwide income regardless of where they live. In 2009, the IRS struck a groundbreaking deal with the Swiss banking giant UBS for $780 million in penalties and American names. Recently, Credit Suisse took a guilty plea and paid a record $2.6 billion fine. Since then, all 106 Swiss banks accepted a U.S. Department Of Justice (DOJ) deal and with many other subsequent developments, banking is now more transparent than could ever have been imagined. FATCA was enacted in 2010, when only some of those developments were unfolding. The idea was to cut off companies from access to critical U.S. financial markets if they didn’t pass along American data. And boy did that idea work.
- Everyone Around the World is Complying. More than 80 nations—including virtually every one that matters—have agreed to the law. As for those few rouge nations that remain that have not signed on, I would question how safe is your money anyways in those countries. So far, over 77,000 financial institutions have signed on too. Countries must throw their agreement behind the law or face dire repercussions. Even tax havens have joined up. The IRS is so proud of this accomplishment that it maintains a searchable list of financial institutions on its website. Click here to check out this list.
- Even Russia and China Agreed to FATCA. If you think money anywhere can escape the IRS, think again. Even notoriously difficult China and Russia are on board. Which is more amazing? Probably Russia. The U.S. and Russia were negotiating a FATCA deal until March, 2014, but Russia’s annexation of Crimea caused the U.S. to suspend talks. That meant Russian financial institutions faced being frozen out of U.S. markets. Russia took last minute action to allow Russian banks to send American taxpayer data to the U.S. when President Vladimir Putin Signed a Law in the 11th Hour to Satisfy U.S. Treasury. By the way, now that the embargo on Cuba has been lifted, the U.S. Treasury will be looking for Cuba to promptly sign on to FATCA as a condition for opening banking relationships.
- FATCA is America’s Big Stick. Cleverly, FATCA’s 30% tax and exclusion from U.S. markets would be so catastrophic that everyone has opted to comply. Foreign financial institutions must withhold a 30% tax if the recipient is not providing information about U.S. account holders. The choice is simple, and that’s why everyone is complying.
- Everyone is on the Lookout for American Indicia. Foreign Financial Institutions (FFI’s) must report account numbers, balances, names, addresses, and U.S. identification numbers. For U.S.-owned foreign entities, they must report the name, address, and U.S. TIN of each substantial U.S. owner. And in what is a kind of global witch hunt, American indicia will likely mean a letter. Don’t ignore it.
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.
- FBAR’s Are Still Required. FBAR’s predate FATCA, but get ready for duplicate reporting. FATCA just adds to the burden, including Form 8938, but it doesn’t replace FBAR’s. The latter have been in the law since 1970 but have taken on huge importance since 2009. U.S. persons with foreign bank accounts exceeding $10,000 must file an FBAR by each June 30. These forms are serious, and so are the criminal and civil penalties. FBAR failures can mean fines up to $500,000 and prison up to ten years. Even a non-willful civil FBAR penalty can mean a $10,000 fine. Willful FBAR violations can draw the greater of $100,000 or 50% of the account for each violation–and each year is separate. The numbers add up fast. Court Upholds Record FBAR Penalties, Exceeding Offshore Account Balance.
- FATCA is Compelling Compliance.S. account holders who are not compliant have limited time to get to the IRS. The IRS recently changed its programs, making its Offshore Voluntary Disclosure Program a little harsher. Yet for those not willing to pay the 27.5% penalty—which rose to 50% August 4, 2014 for some banks—the new IRS’s Streamlined Program may be a good option for those who qualify. The latter applies now to both foreign and U.S.-based Americans. Some still want to amend their taxes and file FBAR’s in a “quiet disclosure” which could bring civil FBAR penalties or even prosecution. Thus, caution is clearly in order.
Jeff states:
Why You Should Do Something About It Before It’s Too Late
Until the government receives your name and account information and chooses to act on that information, you have the opportunity to avoid the possibility of time in a federal prison and reduce the potential civil penalties for failing to report your foreign account. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). 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. Protect yourself from excessive fines and possible jail time.
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 because after the break we are going to tell you the Tools And Tactics That IRS Criminal Investigation Division Uses To Gather Information About You.
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 San Francisco office I have my associate attorney, Amy Spivey.
Jeff goes on to discuss:
Tools And Tactics That IRS Criminal Investigation Division Uses To Gather Information About You
A simple mistake, oversight, or your accountant’s malpractice may trigger an IRS criminal investigation. Specifically, unreported income, a false statement, the use of an impermissible accounting or banking service, or declaring too many deductions are things that could initiate an audit, which could then rise to the level of an IRS criminal investigation.
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.
As you can imagine, the IRS Criminal Investigation Division (“CID”) uses a vast array of tools to investigate a suspected tax evasion case or while conducting a criminal investigation. If you think about it, every employee of the IRS has a single task of ensuring that the IRS tax collections are maximized. IRS Special Agents, who work on the criminal tax cases, are no different. If you file your taxes, their goal is to prove that you may have understated or omitted income or sources of income or you may have falsified sources of income or taken deductions or credits for which you do not qualify.
The tools that the IRS Special Agents have at their disposal include interviewing the suspect, summons, search warrants, and use of grand juries.
Jeff asks Amy:
Should I talk to the IRS Special Agent during an IRS Criminal Investigation and what are my rights?
Amy replies:
Since the IRS Special Agents conduct a criminal investigation, you have a right to remain silent and not incriminate yourself and the right to an attorney. At your first encounter, the IRS Special Agent will advise you of your rights. You should exercise them and ask for an attorney. The Special Agent is then required to terminate the encounter.
As you can imagine, nothing you say to a Special Agent is off-the-record! If you choose to disregard this advice, the IRS Special Agent will be more than happy to continue with the encounter. You’ll be surprised how people continue to dig themselves into a deeper hole even after all these warnings.
Jeff asks Amy:
Interview with an IRS Special Agent
Amy replies:
The “interview” is the most obvious and also the most common tool is the old fashioned approach of directly asking you if you are engaged in tax evasion. This interview can take place at your home or your place of business or both. When an IRS field officer comes to interview a subject suspected of tax evasion, that officer doesn’t just ask questions. They are also required to assess your standard of living as compared to the income shown on your tax return. In addition, the Special Agents have the legal authority to examine books and records and take your testimony under oath.
Jeff then states:
During the interview, the Special Agents (they travel in pairs so one can interview and the other takes notes) will find out about other persons who may have knowledge about your sources of income and if there is cash that you may not have disclosed to the IRS. One of the primary goals of the interview is to establish cash on hand because one of the common defenses is uncertainty about cash on hand. If they seem to always appear at the most inconvenient time, it is because they are required to timely obtain confessions or admissions from the subjects and witnesses who may have information about the case. These witnesses may include your spouse, friends, neighbors, your tax return preparer and others including others with whom you may have a business relationship like banks and brokerages.
I must mention here that the tax return preparer must also not talk to the IRS Special Agent without consulting an attorney. This attorney should be different than the attorney who is representing the person who is under IRS criminal investigation.
Amy then asks Jeff:
Methods of Proof that the IRS Special Agents Use to Prove Their Case
Jeff replies:
To prove tax evasion, the IRS Special Agents may use many different methods like:
- Specific Item Method: One or more specific transactions that the taxpayer engaged in were not full or accurately reported.
- Net Worth Method: Attributes taxable income to the difference between assets and liabilities.
- Bank Deposits Method: In case of a business, IRS assumes that proof of deposits is a substantial evidence of taxable revenue receipts.
Amy then states:
Needless to say, each of these methods has its own pros and cons and some defenses. The method that the IRS Special Agent applies depends on the circumstances of the case and in case of businesses, the type of business and the method of accounting employed by that business.
Typically in IRS criminal investigation cases, the Agents are tight lipped about the details of the case. For this reason, at the conclusion of the IRS criminal investigation, your attorney should request a conference with the Special Agents in charge of the investigation. Much can be gleaned from the line of questioning of the Agents.
IRS does give consideration to the fact that you voluntarily disclosed the information that the IRS asked and also your age, health and mental condition. Essentially, the IRS is weighing their chances of winning a case.
Jeff then states:
What Should You Do?
Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, we can determine how to respond to these inquiries and formulate an effective strategy.
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?
- Steve from Newport Beach. Do many people cheat on their taxes?
One out of five Americans admitted to cheating the IRS. The IRS says that 15.5% of us don’t fully comply with the tax laws. Undoubtedly the cheating would be greater if wage earners did not have taxes withheld by their employers. Small business owners and self-employed people have the most opportunities to play fast and loose.
Arguably, cheating by self-employed people approaches 100%. It may just be a question of degree—did you ever mail a personal letter with a business-bought stamp?
- Nancy from San Diego. If I can’t pay my taxes, should I file my return anyway?
Yes. Filing saves you from the possibility of being criminally charged or, more likely, from being hit with a fine for failing to file or for filing late. Interest continues to build up until you pay. Of course, filing without paying will bring the IRS collector into your life, but she’ll be friendlier if she doesn’t have to hunt you down. The sooner you start filing, the better.
- Jose from Chula Vista. Can I get an extension to pay a tax without penalties and interest?
Probably not. Although you can get an extension to file your tax return until October 15, you still must pay by April 15 or the IRS can impose a penalty and charge interest. Try pleading hardship on IRS Form 1127 to get up to six months extra to pay. Few payment extensions are granted. Even then, only penalties, not interest, stop accruing. Form 1127 works best in requesting an extension to pay estate taxes.
- Karen from Oceanside. My state had an amnesty period for nonfilers. Can I ever hope the IRS will have one?
Maybe—it is frequently kicked around in Congress. The IRS has always opposed tax amnesty legislation—which lets nonfilers come forward without being criminally prosecuted or civilly fined. The IRS’s reasoning is that after the amnesty period expires, significant numbers of people won’t file, expecting another amnesty. Based on the success of various states trying amnesty programs, I think the IRS is wrong.
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.
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!
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