Friday, May 25, 2018

Time to File OVDP Refund Requests Based Upon Colliot?

On May 22, 2018 we posted A Taxpayer Victory on a FBAR Penalty Case - FBAR Limited to $100M!  where we discussed the Colliot case, where a U.S. District Court found that a prior un-amended valid regulation, that caps penalties for willful violations of foreign bank account reporting at $100,000 controls even though under 31 U.S.C. § 5321, which Congress in 2004 had amended increased the maximum civil penalties for willful failure to file a FBAR to greater of $100,000, or 50 percent of the amount in the account.

For those taxpayers who made a voluntary disclosure and payment within the last two years the issue becomes, can they file for refund under this precedent, since OVDP provided that in no case will the penalties in the OVDP program be higher than the penalties provided under law?

Have Undeclared Income from an Offshore Account?
Want to Know Make Sure You Are Not Over Penalized 
If You Do Not Enter The OVDP Program?
Contact the Tax Lawyers at 
Marini& Associates, P.A. 
for a FREE Tax Consultation Contact Us at:
Toll Free at 888-8TaxAid (888) 882-9243

Thursday, May 24, 2018

IRS Has 6 New Compliance Campaigns Audit Strategies for LB&I

On February 7, 2017 we posted IRS Has 13 New Compliance Campaigns for LB&I Taxpayers where we discussed our previous posted on October 9, 2015 LB&I Agents Lose Autonomy To Centralized Office That Will Be Using Data to Identify Compliance Risks For Audit! that discussed the fact that Tax practitioners will face new questions from examination teams as the IRS selects compliance risks based on data.   

This is in conformity with the Large Business and International Division's (LB&I) move from individual audits of multinationals to broader considerations involving risk assessment, which was included in January 2017 announcement regarding the new audit strategy for its LB&I division known as "campaigns," essentially, shifting its strategy toward issue-based examinations based on compliance issues that LB&I determines present greater levels of compliance risk and thereby improving return selection. IRS initially selected 13 compliance issues when it rolled out this strategy.

On May 21, 2018 the IRS Announced the Identification of 6 Large Business and International Compliance Campaigns
These six additional campaigns were identified through LB&I data analysis and suggestions from IRS employees. LB&I's goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.
The six campaigns selected for this rollout are:
  • 1. Interest Capitalization for Self-Constructed Assets
When a taxpayer engages in certain production activities they are required to capitalize interest expense under Internal Revenue Code (IRC) Section 263A. Interest capitalization applies to interest a taxpayer pays or incurs during the production period when producing property that meets the definition of designated property. Designated property under IRC Section 263A(f) is defined as (a) any real property, or (b) tangible personal property that has: (i) a long useful life (depreciable class life of 20 years or more), or (ii) an estimated production period exceeding two years, or (iii) an estimated production period exceeding one year and an estimated cost exceeding $1,000,000. 
The goal of this campaign is to ensure taxpayer compliance by verifying that interest is properly capitalized for designated property and the computation to capitalize that interest is accurate. The treatment stream for this campaign is issue-based examinations, education soft letters, and educating taxpayers and practitioners to encourage voluntary compliance
  • 2. F3520/3520-A Non-Compliance/Assessed Penalties  
This campaign will take a multifaceted approach to improving compliance with respect to the timely and accurate filing of information returns reporting ownership of and transactions with foreign trusts. The Service will address noncompliance through a variety of treatment streams including, but not limited to, examinations and penalties assessed by the campus when the forms are received late or are incomplete. 
  • 3. Forms 1042/1042-S Compliance
    Taxpayers who make payments of certain U.S.-source income to foreign persons must comply with the related withholding, deposit, and reporting requirements. This campaign addresses Withholding Agents who make such payments but do not meet all their compliance duties. The Internal Revenue Service will address noncompliance and errors through a variety of treatment streams, including examination.
  • 4. Nonresident Alien Tax Treaty Exemptions
This campaign is intended to increase compliance in nonresident alien (NRA) individual tax treaty exemption claims related to both effectively connected income and Fixed, Determinable, Annual Periodical income. Some NRA taxpayers may either misunderstand or misinterpret applicable treaty articles, provide incorrect or incomplete forms to the withholding agents or rely on incorrect information returns provided by U.S. payors to improperly claim treaty benefits and exempt U.S. source income from taxation. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
  • 5. Nonresident Alien Schedule A and Other Deductions
This campaign is intended to increase compliance in the proper deduction of eligible expenses by nonresident alien (NRA) individuals on Form 1040NR Schedule A. NRA taxpayers may either misunderstand or misinterpret the rules for allowable deductions under the previous and new Internal Revenue Code provisions, do not meet all the qualifications for claiming the deduction and/or do not maintain proper records to substantiate the expenses claimed. The campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
  • 6. NRA Tax Credits

    This campaign is intended to increase compliance in nonresident alien individual (NRA) tax credits. NRAs who either have no qualifying earned income, do not provide substantiation/proper documentation, or do not have qualifying dependents may erroneously claim certain dependent related tax credits. In addition, some NRA taxpayers may also claim education credits (which are only available to U.S. persons) by improperly filing Form 1040 tax returns. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.

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

Tax Havens Still Very Much Alive & Well!

According to National Bureau of Economic Research (NBER) there is over ARS220 billion in offshore accounts, the equivalent of almost 40 percent of Argentina’s GDP. The country ranks 5th globally for offshore account deposits, behind Russia, Saudi Arabia, Venezuela and the UAE.

Drawing on newly published macroeconomic statistics, the National Bureau of Economic Research  estimates the amount of household wealth owned by each country in offshore tax havens.

The equivalent of 10% of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity, from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies.

NBER used these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP.

Because offshore wealth is very concentrated at the top, accounting for it increases the top
0.01% wealth share substantially, even in countries, such as Norway or Denmark, that do not
use tax havens extensively. Offshore wealth has a larger effect on inequality in the U.K., Spain,
and France, where, by our estimates, 30%–40% of all the wealth of the 0.01% richest households
is held abroad.

It has dramatic implications in Russia, where the majority of wealth at the top is held outside of the country. In the United States, offshore wealth also increases inequality, but the effect is more muted than in Europe, because U.S. top wealth shares are already very high even disregarding tax havens. In all cases, taking offshore wealth into account increases the rise in inequality seen in tax data markedly. This result highlights the importance of looking beyond tax data to study wealth accumulation among the very rich in a globalized world.

These results highlight the importance of looking beyond tax and survey data to study wealth accumulation among the very rich in a globalized world.

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


Tuesday, May 22, 2018

IRS Tell Estates No Closing Letters - Pull Transcripts!

We previously posted IRS Tell Estates No Closing Letters - Pull Transcripts Yourself! where we discussed that for estate tax returns filed after June 1, 2015, if the estate wished to receive a closing letter and form 5173, the personal representative or power of attorney had to send a letter to the IRS more than four months after the filing of the tax return requesting the issuance of both the closing letter and form 5173.   

The IRS issued Notice 2017-12, 2017-4 IRB where it announced that an IRS-issued account transcript can substitute for an estate tax closing letter.  
An estate tax closing letter (IRS Letter 627) is a written communication from IRS that specifies the amount of the net estate tax, the state death tax credit or deduction, and any generation-skipping transfer tax for which the estate is liable.
The estate tax closing letter also confirms that the estate tax return has either been accepted by IRS as filed, or has been accepted after an adjustment by IRS to which the estate has agreed. Thus, the receipt of an estate tax closing letter generally indicates that, for purposes of determining the estate tax liability of the decedent's estate, the IRS examination of the estate tax return is closed.
Prior to June 1, 2015, IRS issued an estate tax closing letter for every estate tax return filed (except in certain limited instances). However, for estate tax returns filed on or after June 1, 2015, IRS changed its policy and issues an estate tax closing letter only at the request of an estate, which request is to be made at least four months after the filing of the estate tax return.  
Notice 2017-12, 2017-4 IRB that announces that an IRS-issued account transcript can substitute for an estate tax closing letter. In so doing, IRS has updated some of the information on the Transcripts in Lieu of Estate Tax Closing Letters webpage 
IRS says that it understand that executors, local probate courts, state tax departments, and others have come to rely on estate tax closing letters for confirmation that the IRS examination of the estate tax return has been completed and the IRS file has been closed. Estate tax closing letters continue to be available upon request. However, an account transcript may substitute for an estate tax closing letter and is available at no charge.

Estates and their authorized representatives may request an account transcript by filing Form 4506-T, Request for Transcript of Tax Return. Currently, Form 4506-T can be filed with IRS via mail or facsimile (per the instructions on the form). Although account transcripts for estate tax returns are not currently available through IRS's online Transcript Delivery System (TDS), the IRS website,, will have current information should an automated method become operational. 
To allow time for processing the estate tax return, requests should be made no earlier than four months after filing the estate tax return.
IRS says that estates and their authorized representatives who wish to continue to receive estate tax closing letters may call IRS at (866) 699-4083 to request an estate tax closing letter no earlier than four months after the filing of the estate tax return. 
This certainly presents an opportunity to demonstrate how the IRS can create unnecessary complexities (and accompanying misery) for people wishing to receive Federal Closing Letters. Lots of luck!

Have a US 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.

IRS Warns of Variation of Form W-8BEN Scam!

The Internal Revenue Service warned in IR-2018-119 of a new twist tied to an old scam aimed at international taxpayers and non-resident aliens. In this scam, criminals use a fake IRS Form W-8BEN to solicit detailed personal identification and bank account information from victims. Here’s how the scam works:

  1. Criminals mail or fax a letter indicating that although individuals are exempt from withholding and reporting income tax, they need to authenticate their information by filling out a phony version of Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting. Recipients are requested to fax the information back.
  2. The Form W-8BEN is a legitimate U.S. tax exemption document, however, it can only be submitted through a withholding agent.
  3. In the past, fraudsters have targeted non-residents of the U.S. using the form as a lure to get personal details such as passport numbers and PIN codes.
  4. The legitimate IRS Form W-8BEN does not ask for any of that information.
  5. The phony letter or fax also refers to a Form W9095, which does not exist.
  6. Furthermore, the IRS doesn’t require a recertification of foreign status.
Scam variations

Be alert to bogus letters, emails and letters that appear to come from the IRS or your tax professional requesting information. Scam letters, forms and e-mails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. These phishing schemes may seek personal information, including mother’s maiden name, passport and account information in order steal the victim’s identity and their assets.

Note that the IRS does not:
  • Demand that people use a specific payment method, such as a prepaid debit card, gift card or wire transfer. The IRS will not ask for debit or credit card numbers over the phone. For people who owe taxes, make payments to the United States Treasury or review for IRS online options.  
  • Demand immediate tax payment. Normal correspondence is a letter in the mail and taxpayers can appeal or question what they owe. All taxpayers are advised to know their rights as a taxpayer.
  • Threaten to bring in local police, immigration officers or other law enforcement to arrest people for not paying. The IRS also cannot revoke a license or immigration status. Threats like these are common tactics scam artists use to trick victims into believing their schemes.
Taxpayers who receive the IRS phone scam or any IRS impersonation scam should report it to the Treasury Inspector General for Tax Administration at its IRS Impersonation Scam Reporting site and to the IRS by emailing with the subject line “IRS Impersonation Scam.”

 Have a Problem With IRS Paperwork? 

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).

ABA Request Voluntary Disclosure for Bitcoin

According to JDSUPRA, The American Bar Association has written to the US Internal Revenue Service, asking it clarify whether assets held as cryptocurrencies such as Bitcoin are subject to the Foreign Bank Account Reports (FBAR) and Form 8938 reporting rules.  

IRS Notice 2014-21 asserted that cryptocurrencies were 'property' rather than currencies for federal income tax purposes but did not address their FBAR and Forms 8938 status. 
US Cryptocurrency Investors Made $92 Billion of Taxable Gains during 2017 Alone, Resulting in about $25 Billion of Cryptocurrency related Tax Liabilities, and the ABA Is Asking the IRS to Offer an Offshore Voluntary Compliance Initiative Focused on Virtual Currency and Equivalent Assets.
“It is unclear whether a taxpayer holding cryptocurrencies on a foreign cryptocurrency exchange (e.g., or or in a wallet maintained by a foreign wallet service provider (e.g., is required to report the account(s) on an FBAR as it is unclear whether cryptocurrencies may qualify as a reportable account for FBAR purposes.

There is tension between the Service’s classification of cryptocurrency as “property,” the Securities Exchange Commission’s (“SEC”) classification of cryptocurrency, in certain circumstances, as a “security,” and the Commodity Futures Trading Commission’s (“CFTC”) classification of  cryptocurrency as a “commodity.”

This tension is perhaps most pronounced in the context of the FBAR reporting requirements, which blend concepts of tax, securities, commodities, and money and finance laws. 
  • On the one hand, if cryptocurrency is property, then it is arguably not subject to FBAR reporting requirements because it is not, under the current regulatory definitions, a “bank, securities, or other financial account.” 
  • On the other hand, if cryptocurrency is a “security,” then FBAR reporting requirements may apply under the general rule: “each United States person having a financial interest in, or signature authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner…”
  • Moreover, by treating cryptocurrency as “property,” the answer to whether cryptocurrency held in foreign wallets must be reported likely depends on what functions the wallet provider actually provides, which may be difficult for taxpayers to determine in many cases. 
  • Furthermore, it is unclear how these requirements may apply to taxpayers who hold cryptocurrencies directly on a distributed blockchain.
Additional guidance is needed with respect to whether, and the extent to which, the FBAR reporting requirements apply to cryptocurrency. Assuming an FBAR may be required in particular cases, it would also be helpful if guidance addresses the differences in filing requirements for cryptocurrency held on an exchange, cryptocurrency held  through a wallet service company (custodial or noncustodial), or cryptocurrency held directly through a wallet address maintained by the taxpayer.  
The ABA believes that cryptocurrency that is held directly by a taxpayer or held through a noncustodial wallet should not be reportable on the FBAR as there is no “financial account” maintained by a third party as there is with other reportable accounts. 
We previously discussed, that an abundance of caution, a taxpayer may want to report their investments in cryptocurrencies on their FBAR and Form the 8938, since Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest. 
In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions.  
Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.
 Have an IRS 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