by Fresh Start Tax | Apr 9, 2014 | Tax Help
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- Former IRS Agents, Managers and Instructors with over 60 years experience in the local, district and regional IRS offices.
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by Fresh Start Tax | Apr 9, 2014 | Tax Help
COURT AUTHORIZES IRS TO ISSUE SUMMONSES FOR RECORDS RELATING TO U.S. TAXPAYERS WITH OFFSHORE BANK ACCOUNTS
Some of the latest news regarding production of records.
Five Banks Directed to Produce Records for Accounts at Zurcher Kantonalbank, The Bank of N.T. Butterfield & Son Limited and Affiliates
U.S. District Judge Kimba M. Wood of the Southern District of New York entered an order on Nov. 7, 2013, authorizing the IRS to issue summonses requiring Bank of New York Mellon (Mellon) and Citibank NA (Citibank) to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, ZKB) in Switzerland; and U.S. District Judge Richard M. Berman of the Southern District of New York entered an order today authorizing the IRS to issue summonses requiring Mellon, Citibank, JPMorgan Chase Bank NA (JPMorgan), HSBC Bank USA NA (HSBC), and Bank of America NA (Bank of America) to produce similar information in connection with undisclosed accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, Butterfield) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom. U.S. Attorney for the Southern District of New York Preet Bharara, Assistant Attorney General for the Justice Department’s Tax Division Kathryn Keneally, and Acting Commissioner of the Internal Revenue Service (IRS) Danny Werfel made the announcement today.
In these actions, the Court granted the IRS permission to serve what are known as “John Doe” summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America.
The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown.
The John Doe summonses approved today direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield and their affiliates, including other foreign banks that used ZKB and Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.
“These cases once again demonstrate the department’s resolve to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes,” said Assistant Attorney General Keneally. “These John Doe summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations.
U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it’s too late.”
“Today’s action show that the use of foreign banks for tax evasion remains a high investigative priority of this office and U.S. citizens should understand that loud and clear,” said U.S. Attorney Bharara. “By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes.”
“International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law,” said IRS Acting Commissioner Werfel. “These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts, even if the person hiding money overseas chooses a bank that has no offices on U.S. soil.”
IRS Offshore Voluntary Disclosure programs and initiatives enable U.S. taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution by voluntarily disclosing previously undisclosed foreign accounts and income. To date, U.S. taxpayers have identified 371 previously undisclosed accounts at ZKB and 81 such accounts at Butterfield.
In addition, a number of U.S. taxpayers with beneficial ownership and control over funds held in accounts at ZKB and Butterfield have admitted failing to report income earned from their offshore accounts on their federal tax returns.
The IRS has reason to believe that other U.S. taxpayers who held or presently hold similar accounts at ZKB, Butterfield, and their affiliates have done the same in violation of federal tax law. In December 2012, three employees of ZKB were indicted for conspiring with U.S. taxpayers and others to hide at least $423 million from the IRS in secret Swiss bank accounts.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.
Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.
These cases are being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Tomoko Onozawa is in charge of the Butterfield case and Assistant U.S. Attorney Christopher B. Harwood is in charge of the ZKB case.
Beware: Court Can Authorize IRS to Issue Summons – FBAR/FATCA Representation Attorneys, Lawyers
by Fresh Start Tax | Apr 9, 2014 | Tax Help
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Tax Tips Information
IRS audits less than 1% of all United States taxpayers. Last year the IRS audited 1.4 million taxpayers by mail.
If you are one of the unlucky taxpayers who have received an IRS notice of audit please read the following.
There are several types of IRS tax audits.
1. The most common type of IRS tax audit is the mail correspondence audit. IRS audits about 1.5 million taxpayers through mail correspondence.
2. The high DIF score is the second most common way. the DIF score or the discriminatory index function tax audit means your tax return fell out of the National Standards for various credits or expenses or something did not make sense on your tax return.
3. Random sample audit. you won the IRS lottery and IRS will use your tax audit results to set up future DIF scores.
4. National Program Audit. IRS runs market specialization program in different areas in the country for different industries. IRS tries to audit all industries to set National Standards.
6. The Office Audit. You will get a letter to appear in a local IRS office where a local office auditor will audit selected features of your tax return.
7. The Field Audit. A more high skilled IRS Revenue Agent will spend days combing through your records. These are more advanced and complicated tax audits conduct at your home, place of business of at your representatives office.
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by Fresh Start Tax | Apr 9, 2014 | Tax Help
New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers
On June 26, 2012, the IRS announced new streamlined filing compliance procedures for non-resident U.S. taxpayers to go into effect on Sept. 1, 2012.
These procedures are being implemented in recognition that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1, but have recently become aware of their filing obligations and now seek to come into compliance with the law.
These new procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns.
The address provided for in the instructions for the Streamlined Filing Compliance Procedures may only be used for returns filed under these procedures.
If you have already submitted tax returns through the Streamlined Filing Compliance Procedures, you must file subsequent year returns according to regular procedures.
Description of the New Streamlined Procedure
This streamlined procedure is designed for taxpayers that present a low compliance risk.
All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission.
For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions.
Bad New Here;
Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.
Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years.
Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns. For a summary of information about federal income tax return and FBAR filing requirements and potential penalties, see IRS Fact Sheet FS-2011-13. (December 2011).
In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by relevant treaty is available through this process. The proper deferral elections with respect to such arrangements must be made with the submission.
Eligibility
This procedure is available for non-resident U.S. taxpayers who have resided outside of the U.S. since January 1, 2009, and who have not filed a U.S. tax return during the same period. These taxpayers must present a low level of compliance risk as described below
Amended returns submitted through this program will be treated as high risk returns and subject to examination, except for those filed for the sole purpose of submitting late-filed Forms 8891 to seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty.
It should be noted that this relief is also available under the Offshore Voluntary Disclosure Program. See below for the information required to be submitted with such requests. (If you need to file an amended return to correct previously reported or unreported income, deductions, credits, tax etc, you should not use this streamlined procedure.
Depending on your circumstances, you may want to consider participating in the Offshore Voluntary Disclosure Program.)
- All tax returns submitted under this procedure must have a valid Taxpayer Identification Number (TIN). For U.S. citizens, a TIN is a Social Security Number (SSN).
For individuals that are not eligible for an SSN, an Individual Taxpayer Identification Number (ITIN) is a valid TIN.
Tax returns filed without a valid SSN or ITIN will not be processed.
For those who are ineligible for an SSN, but who do not have an ITIN, a submission may be made through this program if accompanied by a complete ITIN application.
For information on obtaining an SSN, see www.ssa.gov. For information on obtaining an ITIN, see the ITIN page.
Compliance Risk Determination
The IRS will determine the level of compliance risk presented by the submission based on information provided on the returns filed and based on additional information provided in response to a Questionnaire required as part of the submission.
Low risk will be predicated on simple returns with little or no U.S. tax due. Absent any high risk factors, if the submitted returns and application show less than $1,500 in tax due in each of the years, they will be treated as low risk and processed in a streamlined manner.
The risk level may rise if any of the following are present:
- If any of the returns submitted through this program claim a refund;
- If there is material economic activity in the United States;
- If the taxpayer has not declared all of his/her income in his/her country of residence;
- If the taxpayer is under audit or investigation by the IRS;
- If FBAR penalties have been previously assessed against the taxpayer or if the taxpayer has previously received an FBAR warning letter;
- If the taxpayer has a financial interest or authority over a financial account(s) located outside his/her country of residence;
- If the taxpayer has a financial interest in an entity or entities located outside his/her country of residence;
- If there is U.S. source income; or
- If there are indications of sophisticated tax planning or avoidance.
Instructions for Using This Procedure
Taxpayers wishing to use these streamlined procedures must:
1. Submit complete and accurate delinquent tax returns, with appropriate related information returns, for the last three years for which a U.S. tax return is due.
Please note that all delinquent information returns being filed under this procedure should be sent to the address below with the rest of the submission.
2. Include at the top of the first page of each tax return “Streamlined” to indicate that the returns are being submitted under this procedure. This is very important to ensure that your returns get processed through these procedures.
3. Submit payment of all tax due and owing as reflected on the returns and statutory interest due and owing.
For returns determined to be high risk, failure to file and failure to pay penalties may be imposed in accordance with U.S. federal tax laws and FBAR penalties may be imposed in accordance with U.S. law. Reasonable cause statements may be requested during review or examination of the returns determined to be high risk. For a summary of information about federal income tax return and FBAR filing requirements and potential penalties, see IRS Fact Sheet FS-2011-13 (December 2011).
4. Submit copies of filed FBARs for the last six years for which an FBAR is due. (You should file delinquent FBARs according to the FBAR instructions and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers.
Through June 30, 2013, you may file electronically (http://bsaefiling.fincen.treas.gov) or by sending paper forms to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621.
After June 30, 2013, you must file electronically (http://bsaefiling.fincen.treas.gov.)) If you are unable to file electronically, you may contact FinCEN’s Regulatory Helpline at 1-800-949-2732 or (if calling from outside the United States) 1-703-905-3975 to determine possible alternatives for timely reporting.
NOTE:
Taxpayers filing FBARs electronically do not currently have the technological ability to include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers. Until such time that they have the ability, it is not necessary to include the statement. (July 18, 2013)
5. Submit a complete, accurate and signed Questionnaire.
6. If the taxpayer must apply for an ITIN in order to file delinquent returns under this procedure, the application and other documents required for applying for an ITIN must be attached to the the required forms, information and documentation required under this streamlined procedure. See the ITIN page for more.
7. Any taxpayer seeking relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty will be required to submit:
- a statement requesting an extension of time to make an election to defer income tax and identifying the pertinent treaty provision;
- for relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission; and
- a dated statement signed by the taxpayer under penalties of perjury describing:
- the events that led to the failure to make the election,
- the events that led to the discovery of the failure, and
- if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities.
8. This program has been established for non-resident non-filers. Generally, amended returns will not be accepted in this program. The only amended returns accepted through this program are those being filed for the sole purpose of submitting late-filed Forms 8891 to seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty.
Non-resident taxpayers who have previously filed returns but wish to request deferral provisions will be required to submit:
an amended return reflecting no adjustments to income deductions, or credits; and
all documents required in item 7 above.
9. The documents listed above must be sent to (please see the Read This First section of this page):
Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined
Austin, TX 78741
Other Considerations
Taxpayers who are concerned about the risk of criminal prosecution should be advised that this new procedure does not provide protection from criminal prosecution if the IRS and Department of Justice determine that the taxpayer’s particular circumstances warrant such prosecution.
Taxpayers concerned about criminal prosecution because of their particular circumstances should be aware of and consult their legal advisers about the Offshore Voluntary Disclosure Program (OVDP), announced on Jan. 9, 2012, which offers another means by which taxpayers with undisclosed offshore accounts may become compliant. For additional information go to the OVDP page.
It should be noted, however, that once a taxpayer makes a submission under the new procedure described in this document, OVDP is no longer available.
It should also be noted that taxpayers who are ineligible to use OVDP are also ineligible to participate in this procedure.
Revenue Procedure 2014-13 – Final FFI Agreement is Now Available for FFI Agreement for Participating FFI and Reporting Model 2 FFI.
For the period from the opening of the FATCA registration website through December 31, 2013, a financial institution (FI) will be able to access its online account to modify or add registration information.
Prior to January 1, 2014, any information entered into the system, even if submitted as final by the website user, will not be regarded as a final submission, but will merely be stored until the information is submitted as final on or after January 1, 2014.
FIs can use the remainder of 2013 to become familiar with the FATCA registration website, to input preliminary information, and to refine that information. On or after January 1, 2014, each FI will be expected to finalize its registration information by logging into its online account on the FATCA registration website, making any necessary additional changes, and submitting the information as final.
As registrations are finalized and approved in 2014, registering FIs will receive a notice of registration acceptance and will be issued a global intermediary identification number (GIIN).
The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List by June 2, 2014, and will update the list on a monthly basis thereafter.
by Fresh Start Tax | Apr 9, 2014 | Tax Help
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- IRS Tax Audits IRS Hardships Cases or Unable to Pay
- Payment Plans, Installment Agreements, Structured agreements
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by Fresh Start Tax | Apr 9, 2014 | Tax Help
Contact us today for free initial consultation. Covered under attorney-client privilege.Word of advice, do not mess with this, find them before they find you.
BEWARE – Since 2009, the department has charged more than 30 banking professionals and 68 U.S. account holders with violations arising from their offshore banking activities. Fifty-four U.S. taxpayers and four bankers and financial advisors have pled guilty, and five taxpayers have been convicted at trial.
Since 2009, the department has charged more than 30 banking professionals and 68 U.S. account holders with violations arising from their offshore banking activities. Fifty-four U.S. taxpayers and four bankers and financial advisors have pled guilty, and five taxpayers have been convicted at trial.
UNITED STATES AND SWITZERLAND ISSUE JOINT STATEMENT REGARDING TAX EVASION INVESTIGATIONS
Switzerland Encourages Its Banks to Cooperate With New Program Which Will Require Significant Financial Penalties and Information Sharing From Banks That Aided Secret Account Holders
The Department of Justice announced a program that will encourage Swiss banks to cooperate in the department’s ongoing investigations of the use of foreign bank accounts to commit tax evasion.
The DOJ also released a joint statement with the Swiss Federal Department of Finance, stating that Switzerland will encourage its banks to participate in the program.
Attorney General Eric Holder
“This program will significantly enhance the Justice Department’s ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States,” said Attorney General Eric Holder. “In addition to strengthening our partnership with the Swiss government, the program’s requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the U.S. treasury from across the globe.”
“This program will provide us with additional information to prosecute those who used secret offshore bank accounts and those here and abroad who established and facilitated the use of such accounts,” said Deputy Attorney General James M. Cole. “Now is the time for all U.S. taxpayers who hid behind Swiss bank secrecy laws or have undeclared offshore accounts in other foreign countries to come forward and resolve their outstanding tax issues with the United States.”
Under the program, which is available only to banks that are not currently under criminal investigation by the department for their offshore activities, participating Swiss banks will be required to:
- Agree to pay substantial penalties
- Make a complete disclosure of their cross-border activities
- Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest
- Cooperate in treaty requests for account information
- Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed
- Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations
Banks meeting all of the above requirements will be eligible for non-prosecution agreements.
Banks currently under criminal investigation related to their Swiss banking activities, and all individuals, are expressly excluded from the program.
The program holds banks to a higher degree of responsibility for opening secret accounts after it became publicly known that the department was actively investigating offshore tax evasion in Switzerland.
Penalty provisions of the program
Under the penalty provisions of the program, banks seeking a non-prosecution agreement must agree to a penalty in an amount equal to 20 percent of the maximum aggregate dollar value of all non-disclosed U.S. accounts that were held by the bank on Aug.1, 2008.
The penalty amount will increase to 30 percent for secret accounts that were opened after that date but before the end of February 2009 and to 50 percent for secret accounts opened later than that.
The program will significantly assist the department’s efforts to investigate and prosecute U.S. taxpayers who, when faced with the risk of detection, chose to move funds away from banks under investigation to banks that they believed might be better havens for tax secrecy.
A key component of the program requires cooperating banks to provide information that will enable the United States to follow the money to other Swiss banks and to banks located in other countries.
The program also provides a path to resolution for Swiss banks that were not engaged in wrongful acts with U.S. taxpayers but nonetheless want a resolution of their status.
Most banks in this category will be asked to provide an internal investigation report prepared by an independent examiner, as well as any additional information requested by the department.
A smaller group of banks will be allowed to show that they met certain criteria for deemed-compliance under the Foreign Account Tax Compliance Act (FATCA).
Banks in these two groups will be eligible to receive non-target letters.
The program is intended to enable every Swiss bank that is not already under criminal investigation to find a path to resolution.
It also creates significant risks for individuals and banks that continue to fail to cooperate, including for those Swiss banks that facilitated U.S. tax evasion but fail to cooperate now, for all U.S. taxpayers who think that they can continue to hide income and assets in offshore banks, and for those advisors and others who facilitated these crimes.
Since 2009, the department has charged more than 30 banking professionals and 68 U.S. account holders with violations arising from their offshore banking activities. Fifty-four U.S. taxpayers and four bankers and financial advisors have pled guilty, and five taxpayers have been convicted at trial.
One Swiss bank entered into a deferred prosecution agreement, and a second Swiss bank was indicted and pleaded guilty.
Currently, the department is actively investigating the Swiss-based activities of 14 financial institutions.
The department’s enforcement activities are global and have also included public actions concerning activities in India, Luxembourg, Israel and the Caribbean.
The program does not address current or future investigations and pending cases concerning bank employees, financial advisors and other individuals. The department will address each of these cases only with the individual’s counsel, in a manner that gives consideration to the particular facts and circumstances of each case.
In those cases in which indictments are pending, any resolution will also require addressing outstanding issues with the court.
Counsel for banks currently under investigation, individuals who have been indicted, or bank employees who are concerned about whether they have potential criminal liability should contact the department’s Tax Division or the prosecutors handling their case if they wish to seek resolution.
The department notes that the joint statement with the Swiss Federal Department of Finance provides that if personal data are provided, they should only be used for purposes of law enforcement, which may include regulatory action, in the United States or as otherwise permitted by U.S. law.
Additionally, the department has assured its Swiss counterparts that it understands that simply because the names of individuals are included in the information that it receives from a bank does not necessarily mean that any particular individual is or is not culpable of wrongdoing.
The support that Switzerland has shown for this program may also help those banks already under investigation take some of the steps necessary to reach a resolution.
“Banks that come forward under the program that we have announced today have the opportunity to reach a resolution with the United States,” said Assistant Attorney General for the Tax Division Kathryn Keneally. “The program will give us yet more information to pursue U.S. taxpayers who are continuing to hide their assets in offshore accounts, and creates significant risks for those Swiss banks that fail to come forward. We recognize and express our appreciation for Switzerland’s support of the program.”
“The program the Department of Justice announced today is another positive step forward in the U.S. government’s continuing efforts to combat offshore tax evasion,” said Danny Werfel, Acting Commissioner of the Internal Revenue Service. “On behalf of the IRS, I extend my appreciation to both the Justice Department and the Swiss government for developing a way forward that provides the United States with information that will be critical to the enforcement of our tax laws and will bring closure for Swiss banks that meet the requirements of the program.”
