Friday, June 20, 2014

IRS Will Now Accept an ‘I Was Clueless’ Defense for Offshore Tax Evaders


Newsweek.com - As the Justice Department winds down its eight-year crusade against Swiss banks selling offshore tax-dodging services to wealthy Americans, the Internal Revenue Service is offering its own parting gift: softer penalties for taxpayers who come out of the woodwork to disclose their secret accounts.

Call it the advent of the “I was clueless” defense.

The IRS announced Wednesday it would ease the financial and legal pain for the estimated 6 million expatriate Americans who live and work abroad, many of whom don’t know that they must pay U.S. taxes on their foreign income. People who come forward under an amnesty program to disclose their foreign accounts and settle their U.S. tax bills won’t be charged any penalties and will simply owe back taxes and interest. Previously, they would have owed a penalty of 27.5 percent, computed as a percentage of each undisclosed foreign account.

The IRS also said it is eliminating a requirement that expats wanting to qualify for the amnesty program had to owe a maximum of $1,500 in unpaid taxes per year, a small amount that had blocked many would-be filers.

The agency extended an olive branch to Americans living in the U.S. as well, effectively saying that the “I didn’t know” argument would now be available to some Americans with undisclosed offshore accounts who live in the United States. People who come forward now will owe back taxes, interest and a reduced “miscellaneous offshore penalty” equal to 5 percent of their undisclosed foreign financial assets. Previously, they would have faced a 27.5 percent penalty.

Want to Know How The New OVDP Program
 Can Benefit You?

 

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)


Is Their Benefit To Responding To Your Swiss Bank's Request For Confirmation Of Tax Compliance?

On Tuesday, June 17, 2014 we originally posted "Did You Receive a Swiss Bank Letter Asking You to Confirm That You Are Compliant with US Tax Law?" where we discussed that numerous clients of our firm have requested advice on how to respond to letters from their Swiss Bankers asking them to confirm that they are US tax compliance.

We advise taxpayers not to be fooled into thinking that answering these letters or providing this information will somehow benefit you the client! Your account will be turned over to the U.S. Treasury Department, as an account associated with a US beneficiary, whether you respond to this banks request or not!  

This is solely for the bank's benefit, so that they can  categorize your account as a "Tax  Compliant Account" which will then not be subject to the 20% penalty imposed by the U.S. Treasury Department against your Swiss Banker.

However having reflected on  this blog post; there is one instance where a US individual is otherwise compliant, it might not be a bad idea to comply with the Swiss banks request, so they can classify this particular account as US tax compliant.

This may have the additional benefit of possibly not resulting in this particular Swiss bank account being turned over to the US; since it will be classified by the Swiss Bank as "US tax compliant". But there's no guarantee of this result.

The only other deadline the US taxpayers with previously undeclared income from their foreign bank should consider, is the deadline to make a voluntary disclosure in the current Offshore Voluntary Disclosure Program (OVDP), which sets a limit to the penalties imposed on them by the Internal Revenue Service (IRS) for failing to declare foreign assets and earnings.
Once the Swiss banks disclosed an account holder's name to the IRS, which they must do by no later than June 30, 2014the OVDP option is no longer available to that US Taxpayer Account Holder. 


Taxpayers who wish to take advantage of the OVDP 
must act quickly! 


 
The US Can Use Swiss Data for Law Enforcement Actions!    

The new agreement makes clear that “personal data provided by the Swiss banks… will be used and disclosed only for purposes of law enforcement (which may include regulatory action) in the United States or as otherwise permitted by US law.”
 
Have Un-Reported Income From a Swiss Bank?

Value Your Freedom?
Contact the Tax Lawyers at
Marini & Associates, P.A.
Before July 30th 
  
for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882 9243 ) 









Components Of The Revised OVDP Program!

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for the following clarifications to the OVDP program:

  • Continuation of 2012 OVDP. The "revamped" OVDP is not a new program but rather a continuation of the 2012 OVDP with modified terms. Thus, it still has no set deadline for taxpayers to apply. IRS also reminds taxpayers that the terms of the program (i.e., penalty amounts and/or eligibility) are subject to change, and that the agency could decide to end the program entirely at any time. (FAQ #1)
  • Increased penalty in certain situations. A 50% penalty applies if either a foreign financial institution (FFI) at which the taxpayer has or had an account, or a facilitator who helped the taxpayer establish or maintain an offshore arrangement, has been publicly identified as being under investigation or as cooperating with a government investigation as we discussed in "OVDP Penalty Increased To 50%! "
  • Reduced penalty structure eliminated. The reduced penalty structure has been eliminated due to the expansion of the streamlined filing compliance procedures. (FAQ #1.1)
  • Potential penalties for non-disclosers. IRS provided a list of penalties that could potentially apply to a taxpayer that doesn't participate in the OVDP and is examined by IRS. These include penalties (many of which can run from $10,000 to $100,000) for failing to file a host of forms, including FBARs; fraud penalties under Code Sec. 6651(f) or Code Sec. 6663; a penalty for failing to file a tax return under Code Sec. 6651(a)(1); a penalty for failing to pay the amount of tax shown on the return under Code Sec. 6651(a)(2) ; and an accuracy-related penalty under Code Sec. 6662; which cumulatively total 325% of the Highest Amount - See FAQ #8.
  • Potential criminal charges for non-disclosers. Possible criminal charges related to tax matters include tax evasion under Code Sec. 7201, filing a false return under Code Sec. 7206(1) and failure to file an income tax return under Code Sec. 7203; willfully failing to file an FBAR and willfully filing a false FBAR (31 USC 5322); conspiracy to defraud the government with respect to claims (18 USC 286); and conspiracy to commit offense or to defraud the U.S. (18 USC 371)
  • Effect of prior "quiet disclosures." IRS encouraged taxpayers who have already filed amended returns reporting income from OVDP assets without actually making voluntary disclosures to participate in the OVDP by submitting an application with copies of the previously filed returns and all other required information. IRS emphasized that quiet disclosures provide no protection from criminal prosecution and may lead to civil examination and the imposition of all applicable penalties. (FAQ #15)
  • Effective date. The revised FAQs are effective for all new submissions made on or after July 1, 2014. (FAQ #1.2)

Taxpayers Who Wish To Take Advantage
Of These New Compliance Procedures
 Must Act Quickly! 
 

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(
 
 
Source:




Thursday, June 19, 2014

OVDP Penalty Increased To 50%!


The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:
  1. UBS AG
  2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
  3. Wegelin & Co.
  4. Liechtensteinische Landesbank AG
  5. Zurcher Kantonalbank
  6. Swisspartners
  7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
  8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
  9. HSBC India
  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 


Those individuals have until August 3, 2014 to enter the OVDP.

If they do not enter the OVDP by that date then they will still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.



Taxpayers Who Wish To Take Advantage
Of These New Compliance Procedures
 Must Act Quickly! 
 

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)









Wednesday, June 18, 2014

IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance

On Wednesday, June 4, 2014 we posted, "IRS to Unveil Compliance Program for U.S. Expats Not Willfully Evading Taxes?" where we discussed that U.S. citizens abroad who are non-compliant with their tax obligations but aren't willfully evading taxes may be able to come into compliance under a new program to be announced by the Internal Revenue Service.

Today June 18, 2014, the IRS  released IR-2014-73 which provides that The Internal Revenue Service announced major changes in its offshore voluntary compliance programs, providing new options to help both taxpayers residing overseas and those residing in the United States. The changes are anticipated to provide thousands of people a new avenue to come into compliance with their U.S. tax obligations.

The changes include an expansion of the streamlined filing compliance procedures announced in 2012 and important modifications to the 2012 Offshore Voluntary Disclosure Program (OVDP). The expanded streamlined procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was non-willful.

“This opens a new pathway for people with offshore assets to come into tax compliance,” said IRS Commissioner John Koskinen. “The new versions of our offshore programs reflect a carefully balanced approach to ensure everyone pays their fair share of taxes owed. Through the changes we are announcing today, we provide additional flexibility in key respects while maintaining the central components of our voluntary programs.”

Balanced against the modified programs is the government’s ongoing effort to combat the misuse of offshore assets. The IRS, working closely with the U.S. Department of Justice, continues to investigate foreign financial institutions that may have assisted U.S. taxpayers in avoiding their tax filing and payment obligations. In addition, on July 1, the new information reporting regime resulting from the Foreign Account Tax Compliance Act (FATCA) will go into effect. Thousands of foreign financial institutions will begin to report to the IRS the foreign accounts held by U.S. persons.

The current Offshore Voluntary Disclosure Program was launched in 2012 and is the successor to prior voluntary programs offered in 2011 and 2009. Since the launch of the first program, more than 45,000 taxpayers have come into compliance voluntarily, paying about $6.5 billion in taxes, interest and penalties.

The expansion of the streamlined procedures and modifications to OVDP reflect the thoughtful input of the tax community given the growing awareness among U.S. taxpayers of their offshore tax obligations.

“Through our enforcement efforts and implementation of FATCA, taxpayers are more aware of their obligations, and we believe want to come into compliance,” Koskinen said. “In this rapidly changing environment, we listened to feedback from the tax community as well as the National Taxpayer Advocate about our voluntary programs. We have made important adjustments to provide opportunities for all U.S. taxpayers to come in, including those who are not willfully hiding assets.”

Streamlined Procedures Expanded

The changes announced today make key expansions in the streamlined procedures to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts.
The original streamlined procedures announced in 2012 were available only to non-resident, non-filers. Taxpayer submissions were subject to different degrees of review based on the amount of the tax due and the taxpayer’s response to a “risk” questionnaire.

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. The changes include:
  • Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year; 
  • Eliminating the required risk questionnaire; 
  • Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.
For eligible U.S. taxpayers residing outside the United States, all penalties will be waived. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue.

Offshore Voluntary Disclosure Program (OVDP) Modified

The changes announced today also make important modifications to the OVDP. The changes include:
  • Requiring additional information from taxpayers applying to the program; 
  • Eliminating the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures;
  • Requiring taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application; 
  • Enabling taxpayers to submit voluminous records electronically rather than on paper;
  • Increasing the offshore penalty percentage (from 27.5% to 50%) if, before the taxpayer’s OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice.
Taxpayers Who Wish To Take Advantage
Of These New Compliance Procedures
 Must Act Quickly! 
 


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)

 

IRS

Tuesday, June 17, 2014

Swiss FATCA Agreement NOW in Force!

On Friday, April 11, 2014, we posted "Swiss Bank Information Can NOW be Disclosed to Foreign Tax Authorities WITHOUT Notice!"where we discussed That the Swiss Parliament has approved a legal amendment that tax evaders will not always have to be told if Switzerland sends information about them to other countries. The move further loosens Swiss banking secrecy laws in order to avoid a global backlash.

Now the Swiss agreement with the US to implement the Foreign Account Tax Compliance Act came into force last week.  The Swiss Federal Department of Finance announced that its Model 2 intergovernmental agreement with the U.S. for the Foreign Account Tax Compliance Act has entered into force and the implementing act will enter into force June 30.        


The two countries signed an agreement to implement FATCA in February 2013. The agreement was approved by the Swiss parliament in September 2013 and came into force June 2 following an exchange of  documents between the two countries, the finance department announced June 6.        


Under the Model 2 agreement, Swiss financial institutions will be required to disclose account details on their U.S. clients directly to U.S. tax authority, subject to the consent of the U.S. clients concerned. The U.S. government will have to request data on U.S. citizens who have refused consent through the normal administrative assistance channels, the Swiss finance ministry said.        


During a June 6 meeting, the Federal Council voted to bring the parliamentary-approved FATCA Act, together with the ordinance on disclosure obligations, into force June 30, enabling Swiss financial institutions to implement the regulations.
  

So the reality call for all you US Citizens and residents with a unreported income from Swiss Banks is as follows:
  1. If your account is with one of 106 Swiss Banks, then your information is probably already on its way to the IRS on or before June 30, 2014!
  2. If your account is with another Swiss Bank, you are probably already received notification that as of July 1, 2014, your account information will be turned over to the IRS, pursuant to FATCA and
  3. If you're not with the Swiss bank your information, as of July 1, 2014, your account information will be turned over to the IRS, pursuant to FATCA.
US taxpayers who have unreported income from Swiss bank accounts may now want to consider applying for the US Offshore Voluntary Disclosure Program (OVDP), which sets a limit to the penalties imposed on them by the Internal Revenue Service (IRS) for failing to declare foreign assets and earnings.
 
However, once the Swiss banks disclosed an account holder's name to the IRS, which 106 of them y must do by no later than June 30, 2014; the OVDP option is no longer available to that US Taxpayer Account Holder. 

Taxpayers who wish to take advantage of the OVDP 
must act quickly! 


 
The US Can Use Swiss Data for Law Enforcement Actions!    

The new agreement makes clear that “personal data provided by the Swiss banks… will be used and disclosed only for purposes of law enforcement (which may include regulatory action) in the United States or as otherwise permitted by US law.”
 
Have Un-Reported Income From a Swiss Bank?

Value Your Freedom?


Contact the Tax Lawyers at
Marini & Associates, P.A.

Before June 30th 
 
  
for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243 ) 
      

  
 Sources:
 
Swiss Federal Council

          
Bloomberg

No FBAR Reporting Requirement in 2013 for Bitcoin!


Taxpayers don't have to report Bitcoin on the FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), for the current filing season, an Internal Revenue Service official said.

Rod Lundquist, a senior program analyst for the Small Business/Self-Employed Division, cautioned June 4 that could change in the future as the IRS continues to monitor developments on virtual currency closely.

Lundquist's comments came during an IRS webinar as a June 30 deadline approaches for mandatory electronic FBAR filing.

Bitcoin is a convertible virtual currency that can be digitally traded between users and purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies. Although Bitcoin and other virtual currency are widely known for use in making illegal black market purchases, over the past year, an increasing amount of mainstream businesses have begun to accept Bitcoin as payment, such as online retailer overstock.com. 
Back in March, IRS issued long awaited guidance on the tax treatment of virtual currency. In general, the guidance provided that virtual currency is treated as property for U.S. federal tax purposes, and the general tax principles that apply to property transactions apply to transactions using virtual currency. More particularly
the guidance included the following points:
  • Virtual Currency not treated as currency that can generate foreign currency gains/losses
  • Taxpayers are liable for determining the fair market value of their virtual currency
  • Taxpayers must report gains/losses upon exchange from virtual currency to fiat currency, for example
  • Miners must report mined coins at fair market value upon receipt
  • A miner’s income is subject to self-employment tax
  • Virtual currency paid as wages is subject to federal income tax withholding
  • Payments made using virtual currency are subject to information reporting
  • Payments made using virtual currency are subject to backup withholding
  • Taxpayers not in compliance with the notice are subject to penalties

U.S. citizens who have an interest in, or signature authority over, a foreign financial account are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, U.S. citizens must file a Report of Foreign Bank and Financial Accounts (FBAR) with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signatory or other authority.

Those who willfully fail to file their FBARs on a timely basis (i.e., on or before June 30 of the following year) can be assessed a penalty of up to the greater of $100,000 or 50% of the balance in the unreported bank account for each year they fail to file a required

Bitcoin and virtual currency are proving to have greater lasting power than many initially predicted when they first attracted broad-scale public attention. Many speculate that FinCEN and IRS will have to formally address the issue sooner or later; for now, you do not have to reported it on your 2013 FBAR report.


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)





                
Bloomberg

Newsbtc




Did You Receive a Swiss Bank Letter Asking You to Confirm That You Are Compliant with US Tax Law?

We have numerous clients requested advice on how to respond to letters from their Swiss Bankers asking them to confirm either:
  1. That the account has been declared to the IRS, with evidence of either copies of actual FBAR reports  and/or 
  2. A certification  from a US tax advisor or lawyer  stating that they can has been declared to the IRS and/or
  3. Certification that the account has been disclosed  to the IRS through the  Offshore Voluntary Disclosure Program.
Then they usually further request a release from the client of any  secrecy, confidentiality and/or data protection  under Swiss law.

 
Don't be fooled into thinking that answering these letters or providing this information will somehow benefit you the client!

Your account will be turned over to the U.S. Treasury Department, as an account associated with a US beneficiary, whether you respond to this banks request or not! 




This is solely for the bank's benefit, so that they can  categorize your account as a "Tax  Compliant Account" which will then not be subject to the 20% penalty imposed by the U.S. Treasury Department against your Swiss Banker.

We originally posted Tuesday, January 28, 2014 "Offshore Swiss Bank Account? This May Be Your Last Chance To File A Voluntary Disclosure!," where we discussed that The United States Justice Department has received 106 requests from Swiss entities to participate in a settlement program aimed at ending a long-running probe of tax-dodging by Americans using Swiss bank accounts according to a senior US official.  The program is open only to banks, who will have to pay between 20 and 50 per cent of the value of undeclared US-owned accounts as at 1 August 2008.


Now on June 2014 Update on the Tax Division’s Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks  was issued by the Doj which provides, among other things:

  • Maximum aggregate dollar value and penalty mitigation (Program II.H.) Part II.H.1 of the program provides that the Swiss bank will pay as a penalty "for U.S. Related Accounts that existed on Aug. 1, 2008, an amount equal to 20% of the maximum aggregate dollar value of all such accounts during the Applicable Period." (Emphasis added.) Similar language is found in II.H.2 and II.H.3. 
  • For each of these three categories of accounts, the "maximum aggregate dollar value" is calculated at a single date (typically using end-of-month information) when the bank’s book of those U.S. Related Accounts is at its highest point. 
  • Additionally, that same date is used for all penalty mitigation calculations, and a reduction in maximum aggregate dollar value will only be permitted for accounts in existence on that date and in the amount that was included in the maximum aggregate dollar value. 
So basically, your Swiss Bank is not interested in advising you that the only reason they need this information is to mitigate their  penalty and  there is no benefit  whatsoever to you for providing information, which they request showing that the account is compliant.

Your account is still  categorized as having a US beneficiary and as such will be turned over to the US Treasury Department pursuant to the Swiss banks agreement.

The only real deadline US taxpayers are currently facing  is the June 30 deadline for filing the 2013 FBAR report on Form 114.



The only other deadline the US taxpayers should consider is the deadline to make a voluntary disclosure in the current Offshore Voluntary Disclosure Program (OVDP), which sets a limit to the penalties imposed on them by the Internal Revenue Service (IRS) for failing to declare foreign assets and earnings.
 
Once the Swiss banks disclosed an account holder's name to the IRS, which they must do by no later than June 30, 2014the OVDP option is no longer available to that US Taxpayer Account Holder. 


Taxpayers who wish to take advantage of the OVDP 
must act quickly! 


 
The US Can Use Swiss Data for Law Enforcement Actions!    

The new agreement makes clear that “personal data provided by the Swiss banks… will be used and disclosed only for purposes of law enforcement (which may include regulatory action) in the United States or as otherwise permitted by US law.”
 
Have Un-Reported Income From a Swiss Bank?

Value Your Freedom?
Contact the Tax Lawyers at
Marini & Associates, P.A.
Before June 30th 
 
  
for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882 9243)