Monday, March 20, 2017

IRS Issues John Doe Summons To Director of "Sovereign" a Panamanian Law Firm

The US Internal Revenue Service (IRS) has obtained a 'John Doe summons' against the director of a Panamanian company claimed by the IRS to have helped American taxpayers to set up anonymous offshore accounts.

The summons demands all records of Sovereign Management & Legal's clients (SML). The phrase 'John Doe' indicates that the US authorities do not know the clients' identities, but the summons applies to them irrespectively of that fact.

According to the US Department of Justice (DoJ), the company issued clients with prepaid debit cards called 'Sovereign Gold Cards' that enabled them to access the funds in the offshore accounts 'in such a manner as to evade their obligations under internal revenue laws'.

The accounts were opened by SML in the names of corporations that were owned by other entities such as fake charitable foundations, and held in the name of nominee officers provided by SML.

US District Court Judge Brian Morris found that there is a reasonable basis for believing that US taxpayers may be using Sovereign Gold Cards to violate federal tax laws.
“The Department of Justice and the IRS Are Committed to Stopping the Use of Foreign Bank Accounts to Evade
US Tax Laws,”

said Acting Assistant Attorney General David A. Hubbert, head of the Justice Department’s Tax Division.
“The Time to Come Forward and Come into Compliance Is Running Short, and Those Who Continue to Violate US Tax and Reporting Laws Will Pay a Heavy Price!”

Thus far, the U.S. District Court has granted the IRS the authority to serve eight different “John Doe” summons on several foreign financial institutions. These institutions are tied to a Panamanian entity that had been issuing debit cards to individuals who the IRS believes may have been using the accounts to evade their U.S. tax obligations. As a result of the summons, the IRS used data-mining methods to obtain additional information on such accounts. 
These John Doe Summons may constitutes a public disclosure event that may prevent a taxpayer from entering an amnesty program such as the Offshore Voluntary Disclosure Program (OVDP) and the taxpayer will be subject to a 50% miscellaneous offshore penalty (instead of 27.5%).

Taxpayers that have issues related to these transactions should immediately seek the guidance of a tax advisor with significant experience in US international tax issues and voluntary disclosure practices. 
The utilization of the OVDP or the Streamlined Filing Compliance Procedures is the first line of defense against substantial civil penalties and criminal prosecution.
 Do You Have An Un-Reported Foreign Account? 

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini& Associates, P.A.  
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888) 882-9243



IRS Adopts New Offer in Compromise Policy

On February 28, 2017, we posted How To Get The IRS To Accept Your Offer In Compromise? where we discussed:
  1. Do you owe a substantial amount of taxes to the IRS?
    If so, you've likely looked into establishing a payment plan.
  2. What if you are simply unable to pay your tax balance? 
    In this case, you might consider requesting an offer in compromise, which is a last-resort option that allows you to settle your account for literally pennies on the dollar.
  3. A Definition of Reasonable Collection Potential
    A reasonable collection potential refers to the maximum amount that the IRS believes it can collect from you over time. Generally, the agency uses a simple formula to calculate this amount, which you can easily figure on your own.
  4. How to Calculate Your Reasonable Collection Potential
    Reasonable collection potential includes two factors: the liquidation value of your assets and your extra monthly income over the next four or five years. 
  5. Downside to Submitting an OIC
Completing the forms is just the beginning. The IRS will ask you for rafts of financial documentation: pay stubs, bank records, vehicle registrations, and myriad other items. This is an exhaustive, time-consuming process. Some taxpayers wind up submitting boxloads of documents to the IRS to support their OIC request.
Now the IRS has just updated its policy covering Offer in Compromise‎ applications: Applications will now be returned without consideration in instances where the taxpayer has not filed all required tax returns.
In such cases, the application fee will be returned and any required initial payment submitted with the Offer will be applied to outstanding tax debt. This update is reflected on the Offer in Compromise page on and the newly updated Offer in Compromise Booklet (Form 656-B) available March 27.
Have Tax Problems?

 Want to Know if you Qualify for an Offer?
Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at 
or Toll Free at 888-8TaxAid (888 882-9243).

Friday, March 17, 2017

Trump's Budget Is Trouble For the IRS

On December 14, 2016 we posted Trump's Anti-Union Drumbeat Could Be Trouble for the IRS  where we discussed that IRS employees could be in for a rocky ride if President-elect Donald Trump and Congress move forward with sweeping pledges to rein in federal employee benefits and cripple unions.

Now President Trump's America First, A Budget Blueprint to Make America Great Again cuts $239 million in IRS funding.
President Trump has released his 53-page “America First, A Budget Blueprint to Make America Great Again” a wish list of spending requests for Congress and some basic economic projections in which he lays out his plans for boosting military spending, and cutting foreign aid and an array of domestic programs. Among those cuts is a funding reduction of $239 million for IRS.

The President's 2018 Budget requests $12.1 billion in discretionary resources for the Department of the Treasury's domestic programs, a $519 million (or 4.1%) decrease from the 2017 annualized Continuing Resolution (CR) level. This program level excludes mandatory spending changes involving the Treasury Forfeiture Fund.

It promises to shrink the Federal workforce and increase its efficiency by redirecting resources away from duplicative policy offices to staff that manage the country's finances. Further, the Budget states that it will empower the Treasury Secretary, as Chairperson of the Financial Stability Oversight Council, to end taxpayer bailouts and foster economic growth by advancing financial regulatory reforms that promote market discipline and ensure the accountability of financial regulators.

IRS funding. The President's 2018 Treasury budget includes a $239 million funding reduction from the 2017 annualized CR level for IRS. It asserts that diverting resources from antiquated operations that are still reliant on paper-based review in the era of electronic tax filing would achieve significant savings.

The 2018 Budget “preserves key operations of the Internal Revenue Service (IRS) to ensure that the IRS could continue to combat identity theft, prevent fraud, and reduce the deficit through the effective enforcement and administration of tax laws.”

 Have a Tax Problem? 
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).

Thursday, March 16, 2017

California Businessman Sentenced to 24 Months For Hiding > $23.5 MM Offshore!

A Los Angeles, California businessman was sentenced to 24 months in prison today for hiding more than $23.5 million in offshore bank accounts and evading more than $8.3 Million in Federal Taxes over seven years.
According to court documents, Masud Sarshar, a U.S. citizen, maintained several undeclared bank accounts at Bank Leumi and two other Israeli banks, both in his name and in the names of entities that he created.
Sarshar owned and operated Apparel Limited Inc., a business that designed, manufactured and sold clothing and other apparel.
For decades, with the assistance of at least two relationship managers from Bank Leumi and a second Israeli bank (Israeli Bank A), Sarshar hid tens of millions of dollars in assets in these accounts in an effort to conceal income and obstruct the Internal Revenue Service (IRS).
Between 2006 and 2009, Sarshar diverted more than $21 million in untaxed gross business income to those undeclared accounts and earned more than $2.5 million in interest income from the funds.
Sarshar reported none of this income on his 2006 through 2012 individual and corporate tax returns. He also filed false Reports of Foreign Bank and Financial Accounts, commonly known as FBARs, with the U.S. Department of Treasury on which he omitted his ownership and control of these offshore accounts.
Sarshar’s relationship managers at Israeli Bank A (RM1) and Bank Leumi (RM2) visited him frequently in Los Angeles. At Sarshar’s request, neither bank sent him his account statements by mail. Instead, RM1 and RM2 provided Sarshar with his account information in person. RM2 concealed Sarshar’s account statements on a USB drive hidden in a necklace that she wore when she visited Sarshar in the United States.
Sarshar’s meetings with RM1 sometimes occurred in Sarshar’s car. RM1 and RM2 used their visits to offer Sarshar other bank products, including “back-to-back” loans. Through back-to-back loans, which Bank Leumi made to Sarshar through its branch in the United States and which Sarshar collateralized with funds from his account at Israeli Bank A, Sarshar was able to bring back to the United States approximately $19 million of his assets without creating a paper trail or otherwise disclosing the existence of the offshore accounts to U.S. authorities.
At the direction of RM1 and RM2, Sarshar also obtained Israeli and Iranian passports in an effort to avoid being flagged as a U.S. citizen by the banks’ compliance departments. The banks still flagged Sarshar as a U.S. citizen after Sarshar received these two passports, so RM1 and RM2 advised him to transfer his remaining funds from Israeli Bank A to Israeli Bank B, which Sarshar did in late 2011.
In addition, with the help of someone identified as Individual 1, Sarshar transferred approximately $5.8 million from his Bank Leumi accounts to an account at Hong Kong Bank A, which Individual 1 then helped transfer to Sarshar in the United States, disguising it as a loan to Apparel Limited.
In addition to the term of prison imposed, Sarshar was ordered to:
  • Serve three years of supervised release and
  • To pay more than $8.3 million in restitution to the IRS, plus interest and penalties. 
  •  Sarshar also agreed to pay an FBAR penalty of more than $18.2 million for failing to report his Israeli bank accounts.

 Do You Have An Un-Reported Foreign Account? 

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini& Associates, P.A.  
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888) 882-9243

Tuesday, March 14, 2017

FinCen Announces That Fbar's Are Automatically Extended until October 15!

On February 22, 2017 we posted Your FBAR Is Due in April This Year! where we discussed that the new law, for returns for tax years beginning after Dec. 31, 2015, the due date of FinCEN Report 114 will be Apr. 15, with a maximum extension of 6 months ending on Oct. 15.

Now FinCEN has issued a new report providing that while new annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR) for foreign financial accounts is April 15; to implement the statute with minimal burden to the public and FinCEN, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year. 

Accordingly, specific requests for this extension are not required. You will not have to file any paperwork with the Department to file Form 114 by October 15. 

If you have foreign bank or investment accounts, make sure to discuss this with your tax advisor. 

If you have not reported these accounts, you may need to go back six or eight years and voluntarily report it to the Department of Treasury and the IRS.  Their is a 325% tax, penalties & interest for not doing this,which can easily exceed the remaining dollars in those accounts.

 Have a Tax Problem? 
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).

Tuesday, March 7, 2017

Disregarded Entities Are Not Always Disregarded

Under the check the box rules, entities owned by one person can often be disregarded for federal tax purposes. Such entities are referred to as "disregarded entities." 

As time has progressed since the passage of the check the box rules, the IRS has created more and more exceptions to the disregarded treatment. The following is a summary of the principal exceptions, but is not intended to be exhaustive. If any readers think we have missed anything major, please feel free to comment to this posting.
  1. Status is modified if the single owner of the entity is a bank. Treas. Regs. Section 301.7701-2(c)(2) (iii). 
  2. Status is modified for certain tax liabilities. Treas. Regs. Section 301.7701-2(c)(2)(iii). These include: (1) federal tax liabilities of the entity with respect to any taxable period for which the entity was not disregarded; (2) federal tax liabilities of any other entity for which the entity is liable; and (3) refunds or credits of federal tax. 
  3. Disregarded status ignored or modified for taxes imposed under Subtitle - Employment Taxes and Collection of Income Tax (Chapters 21, 22, 23, 23A 24, and 25 of the Code) and taxes imposed under Subtitle A including Chapter 2 - Tax on SelffEmployment Income. Treas. Regs. Section 301.7701-2(c) (2) (iv) (A). 
  4. Status is modified for certain excise taxes, as described in Treas.Regs. Section 301.7701-2(c)(2J(v). Although liability for excise taxes isn't dependent on an entity's classification, an entity's classification is relevant for certain tax administration purposes, such as determining the proper location for filing a notice of federal tax lien and the place for hand-carrying a return under Code Section 6091
  5. Conduit financing proposed regulations will treat a disregarded entity as separate from its single member. Code Section 7701 (I).
  6. Special rules will apply in hybrid situations. Hybrid situations are circumstances where an entity is not disregarded in one jurisdiction but is disregarded in another.
  7. Recently enacted final regulations (TD 9796) that treat domestic disregarded entities wholly owned, directly or indirectly, by foreign persons  as domestic corporations solely for purposes of making them subject to the reporting requirements under Internal Revenue Code, Section 6038A that apply to 25% foreign-owned domestic corporations.
Have a Tax Problem?  

Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).


Monday, March 6, 2017

The Estate Tax Challenge

We previously posted on November 14, 2016 Trump Presidency Could Be Death Knell For Estate Taxes! where we discussed President-Elect Trump's tax plans, which includes the repeal of the US Estate & Gift taxes.

This may be a realistic possibility considering that this is in line with some of the proposals in the Republican House Ways & Means Committee Report of June 24, 2016 and especially when you consider that now the Republican's Control both the Senate and the Congress.

There are some differences that will need to be ironed out, including that Trump’s proposal would still allow the step-up in basis for estates under USD10 million but the Republican Party's proposal would simply abolish the tax without allowing step-up.

However, our Estate Tax Counsel, Robert S Blumenfeld, Esq., would like to point out that
dating back to the 1960s, an ongoing battle has been waged between Republicans and Democrats over the concept of the Federal Estate Tax.  During this fifty-year plus battle, Republicans have sought to eliminate or at least emasculate the FET while the Democrats fought to increase the impact of the FET on larger estates. The upshot of this is been best while there is a much larger credit shelter, $5.5 million dollars ($11 million for a husband and wife) today than  the $60,000 credit shelter extent in the 1960s, the number of devices or gimmicks available to lessen the impact of the FET has been legislatively reduced or eliminated. 

One of Donald Trump's chief campaign promises is the elimination of the FET. That he is supported by a majority in both houses of Congress would seem to give some impetus to his idea. Unfortunately, the concept proposed by POTUS does not seem fully thought through.  The Federal Estate Tax is not a one-dimensional tax; it is an interlinking conglomerate of The Estate Tax, The Gift Tax, The Capital Gains Tax, and the Generation Skipping Tax. None of these taxes stands on its own; each is interdependent on the implementation of at least two of the other three taxes. This void does not seem to have been addressed by the POTUS in much detail. 

President Trump will be opposed by three very powerful opponents; the Democratic Party, the insurance lobby, and the lobbies composed  of various charities. In addition, since his inauguration, Pres. Trump has done little to assuage the concerns of many Republicans Congressman and may not be able to count on complete backing by every Republican Sen. or member of the House of Representatives. 
This whole scenario gives us great angst when we try to create estate plans for families of wealth. No one really knows where this is going to lead. Everyone has a theory but most of these theories are diverse; there does not seem to be a common thread of agreement. The next five months will be very interesting in terms of the overall tax structuring; unfortunately, we tax planners can only sit on the sidelines and wait for some finality or resolution which should appear by August, 2017.

Have an Estate Tax Problem?
Estate Tax Problems Require
an Experienced Estate Tax Attorney

Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).
Robert S. Blumenfeld  - 
 Estate Tax Counsel
Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.
While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.