Jeffrey B. Kahn, Esq. and Gary Sussman Discusses Financial Planning, Undisclosed Foreign Accounts and the IRS On ESPN Radio – July 29, 2016 Show

https://soundcloud.com/kahntaxlaw/undisclosed-foreign-accounts-and-the-irs

Topics Covered:

1. Special Guest Mark Schwartz, Owner at Mark Schwartz Realty
2. Financial Planning missteps that could ruin everything
3. FATCA Momentum Grows; If You Have Undisclosed Foreign Accounts You Have No Where To Hide
4. Questions from our listeners:
a. I am considering offering a 401k to my employees, is this a good idea?
b. What if a taxpayer has already filed amended returns reporting income from foreign assets without entering into the Offshore Voluntary Disclosure Program?

Jeff states: Good afternoon! Yes sometimes we just have to take the money and run!

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.
Gary states:
And this is Licensed Financial Planner, Gary Sussman, 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!

Gary 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: Financial Planning missteps that could ruin everything

Gary states:

Also coming up is:
Segment 3 material: FATCA Momentum Grows; If You Have Undisclosed Foreign Accounts You Have No Where To Hide
And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Gary.

Jeff states: So let’s introduce you to today’s guest:

Please welcome Mark Schwartz, Owner and Agent at Mark Schwartz Realty 858-414-4602.

Questions:
1. So Mark, tell us how you got into Real Estate?
2. Why Real Estate?
3. How do you get your business?
4. How is the market right now and where are there good opportunities?
5. There is a lot of competition out there, what separates you from the rest?
6. Tell us about your coaching and mentoring program?

Well it’s time for a break but stay tuned because we are going to tell you about Financial Planning missteps that could ruin everything.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

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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, Gary Sussman.

And be aware of the special offer that Gary has for you: Gary states 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, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com.
Financial Planning missteps that could ruin everything

1. Investing is a complex and challenging issue. There are lots of experts who claim to know the best guaranteed investment strategy and the best way to structure investments for secure and optimal growth. However even the most sound investment strategy is not a guarantee of success especially when the one certainty that we know will hold true is that life is always going to get in the way of our “ideal future”
2. The first mistake is that people build their house before laying a foundation.
a. Can your current plans still complete if you are sued, you are unable to work due to sickness or injury, and could your family fulfil your current plans for them if you died?”

3. The second mistake is not having a clear vision for the future and knowing what our preferred future will look like.
a. How will we ever achieve our financial goals if we don’t even know what the finish line looks like.
b. Adjust to things when taken off course

4. The third mistake is that people are sold on a story versus a concrete strategy
5. The fourth mistake is not having a budget.
a. Budget is not a dirty word.
b. Knows what we can and afford
6. Fifth mistake is not planning for Longevity or costs associated with advanced medical care.

Gary states 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, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com.

Stay tuned because after the break we are going to tell you about how the FATCA Momentum is Growing – If You Have Undisclosed Foreign Accounts You Have No Where To Hid.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman 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, Gary Sussman.

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

Chit chat with Amy

And be aware of the special Offer that I have for you: PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. 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 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.

FATCA Momentum Grows; If You Have Undisclosed Foreign Accounts You Have No Where To Hide
Jeff states: Nine months have passed since the Internal Revenue Service announced on October 2, 2015 the exchange of financial account information with certain foreign tax administrations, meeting a key September 30th milestone related to FATCA, the Foreign Account Tax Compliance Act.
Amy states: This information exchange is part of the IRS’s overall efforts to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities. FATCA generally requires withholding agents to withhold on certain payments made to foreign financial institutions (FFIs) unless such FFIs agree to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
Amy continues: To achieve this, the IRS successfully and timely developed the information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA.
Gary asks: Amy, what is the reason behind the Federal government enacting FATCA into law?
Amy replies: Well for a long time the IRS felt that U.S. taxpayers were keeping money abroad to evade paying U.S. taxes. There are also many U.S. taxpayers who are still not aware that when they file their U.S. income tax returns, they must report their worldwide income. So by enacting FATCA, foreign banks would eventually be reporting the same level of financial information as domestic banks already do to the IRS which the IRS can then use to verify compliance of U.S. taxpayers in reporting their worldwide income on their U.S. income tax returns. IRS Commissioner John Koskinen has even said that “meeting the September 30th deadline is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements and that FATCA is an important tool against offshore tax evasion.”
Jeff states: You know a lot of foreign countries are also looking to benefit from the enactment of FATCA by facilitating and participating in the exchange of financial account information so they can enforce their own tax laws on their citizens who may be evading that country’s tax laws.
Amy replies: That’s right. The U.S. government has entered into a number of bilateral IGAs that set the groundwork for cooperation between the jurisdictions in this area. Certain IGAs not only enable the IRS to receive this information from FFIs, but enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS. And some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions’ tax authorities. Under these reciprocal IGAs, the first exchange of information had to take place by September 30, 2015.
Jeff asks: So Amy what should one do if they have undisclosed foreign bank accounts and unreported foreign income?
Amy replies: You should see tax counsel as soon as possible. The tax law imposes penalties as high as $100,000 or 50% of the principal value of your foreign accounts per violation and you can be incarcerated for as long as 5 years if convicted by a Federal court. Since 2009, over 60,000 U.S. taxpayers have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP), which is open until otherwise announced.
Gary asks: That is some serious punishment. Amy, what different programs are available to U.S. taxpayers?
Amy replies: The two main options are:
1. Offshore Voluntary Disclosure Program; and
2. Streamlined Filing Compliance Procedures.
Amy continues: The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. OVDP is designed to provide to taxpayers with such exposure (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations.
Amy continues: OVDP requires that taxpayers go back as far as eight years in amending income tax returns to report foreign source income and disclose foreign bank accounts. The taxpayers would include with their submission of these tax filings the payment of the back taxes, interest each year on the unpaid tax and a 20% accuracy-related penalty which is applied against the unpaid tax. In addition, the taxpayers would include payment of what we call the “OVDP penalty” which is 27.5% of the highest balance of the foreign bank account in the past eight years. The IRS in return will not pursue charges of criminal tax evasion which would have resulted in jail time or a felony on your record and the IRS will not pursue impose the other multitude of penalties the tax law otherwise provides.
Jeff asks: What about the other option you mentioned of Streamlined Filing Compliance Procedures?
Amy replies: The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The key factor to be eligible for the streamlined procedures is that a taxpayer must show that he is non-willful in failing to report worldwide income and disclose foreign accounts.
Gary asks: If the streamlined procedures require a taxpayer to prove he was non-willful in failing to report the foreign account and foreign income and the regular OVDP does not, why would it still be beneficial to pursue the streamlined procedures?
Amy replies: Well for one thing that penalty is a lot lower. Recall that under regular OVDP the penalty is 27.5% penalty based upon the highest balance of the account in the past eight years. Beginning August 4, 2014, this rate increases to 50% for U.S. accountholders of certain foreign banks. Under the streamlined procedures the penalty is 5% of the highest balance of the account in the past six years and if you are a foreign person, that penalty can be waived under the streamlined procedures.
Jeff states: So it appears that for the streamlined procedures, the effort that you must place the most emphasis on to have a successful result is not so much in the preparation of the amended tax returns but showing that a taxpayer is non-willful.
Amy replies: That is correct. Many people think just by stating to the IRS that they did not know the law requires that you must report foreign income on your U.S. income tax return and disclose foreign accounts on an FBAR will satisfy this non-willful standard. There is a lot more than that to meet this standard. In fact we have identified over 50 factors that we cover with our clients which we then address in the non-willful statements that get included with the packages submitted to IRS. A comprehensive non-willful statement is the key to a successful submission.
PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. 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 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.

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, Gary Sussman on Inside Advantage on ESPN.

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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, Gary Sussman.

And Gary and I always pleased to make our offers to our listeners where… PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. 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 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.

Gary states 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, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com.

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.

And again I want to introduce our quest, Mark Schwartz, Owner and Agent at Mark Schwartz Realty. So Mark as our guest, what questions have you pulled for us to answer?

Charles from San Diego asks: I am considering offering a 401k to my employees, is this a good idea?

Gary answers.

Stanley from Newport Beach asks: What if a taxpayer has already filed amended returns reporting income from foreign assets without entering into the Offshore Voluntary Disclosure Program?

Jeff replies: When a taxpayer bypasses the Offshore Voluntary Disclosure Program and instead files the delinquent FBAR’s and amends income tax returns to include foreign income, that we call is a “quiet disclosure”.

Jeff continues: The IRS is aware that some taxpayers have made “quiet disclosures” by filing amended returns, by filing delinquent FBARs, and paying any related tax and interest for previously unreported income from foreign assets without otherwise notifying the IRS. Because of this the IRS has put procedures in place whereby its computers can detect these filings and now open up examinations or investigations against these taxpayers. Our firm has already seen this happen.

Jeff continues: That is why taxpayers who have already made “quiet disclosures” are encouraged to participate in OVDP by submitting an application, along with copies of their previously filed returns (original and amended), and all other required documents and information to the IRS’s Voluntary Disclosure Unit. By doing this taxpayers are protected from criminal prosecution and obtain the favorable penalty structure offered under OVDP. Unlike a voluntary disclosure through OVDP, quiet disclosures provide no protection from criminal prosecution and may lead to civil examination and the imposition of all applicable penalties. And remember, once the IRS starts an examination or investigation, it is too late to enter into OVDP.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Gary states: Have a great day everyone!