Friday, September 28, 2018

Understanding the New IRS Tax Transcript

On August 23, 2018 we posted IRS to Introduce New Tax Transcript as of 9/23/18!  where we discussed that the IRS announced in IR-2018-171 that it is moving to better protect taxpayer data, in a new format for individual tax transcripts that will redact personally identifiable information from the Form 1040 series. 

This new transcript replaces the previous format and will be the default format available via Get Transcript Online, Get Transcript by Mail or the Transcript Delivery System for tax professionals as of September 23. Financial entries will remain visible, which will give taxpayers and third-parties the data they need for tax preparation or income verification.

The IRS is now published a fact sheet and FAQs to help you better understand the new IRS tax transcripts.

Here is a sample: New Tax Transcript (PDF)

Because the taxpayer’s SSN no longer can be used as a tracking number for third-party requesters, the IRS is creating a Customer File Number that third parties may use as an identifying number. The Customer File Number created by third party on Form 4506-T/T-EZ, Request for Transcript of Tax Return, will populate on the transcript, allowing a redacted transcript to be matched to a taxpayer.  

Have a Tax Problem?
 

 
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 for a FREE Tax Consultation Contact us at: 
or Toll Free at 888-8TaxAid (888 882-9243). 



Wednesday, September 26, 2018

The IRS Still Does Not Make Effective Use Of Currency Transaction Reports

The Treasury Inspector General For Tax Administration (TIGTA) issued on September 21, 2018 a Report Reference Number:  2018-30-076 to the Commissioner of Internal Revenue concluding that the Internal Revenue Service Still Does Not Make Effective Use of Currency Transaction Reports.

Highlights of Reference Number:  2018-30-076  to the Commissioner of Internal Revenue.
IMPACT ON TAXPAYERS
The Currency and Foreign Transactions Reporting Act of 1970, referred to as the Bank Secrecy Act, requires U.S. financial institutions to assist U.S. Government agencies by filing reports concerning currency transactions.  One such report is known as the Currency Transaction Report (CTR), which financial institutions are required to file with the Financial Crimes Enforcement Network for currency transactions that exceed $10,000 or multiple currency transactions that aggregate more than $10,000 in a single day.
 
WHY TIGTA DID THE AUDIT
Congress believed that the reports required by the Bank Secrecy Act, including the CTRs, would be useful for numerous purposes, including tax compliance purposes.  TIGTA previously recommended that the IRS make greater use of CTR data to pursue potential nonfilers and underreporters, and the IRS agreed to the recommendation.  This audit was initiated to determine how effectively the IRS uses CTR information to select and examine taxpayers.
 
WHAT TIGTA FOUND
The IRS still makes no systemic use of CTR data in examinations.  Although IRS management agreed with TIGTA’s recommendation in a September 2010 report and cited steps taken to develop examination referrals from the CTRs, the IRS is still not systemically using the CTRs to identify and pursue potentially noncompliant individuals. It is also not effectively tracking information referrals from Bank Secrecy Act examiners to the Examination function.  Finally, some examiners are not documenting that they are considering available CTR information in their audits.

 
During the fieldwork for this review, TIGTA also found that CTR data stored in the Integrated Data Retrieval System incorrectly aggregated CTR amounts for multiple individuals and showed the same CTRs total dollar amount for these individuals.  We have initiated a follow-up audit to determine the extent and potential causes of this issue.

 
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS:
 
  1. Establish formalized procedures for processing Bank Secrecy Act Program referrals and begin tracking the time required to send referrals to the Field Exam Support Team, and
  2. Clarify formal Internal Revenue Manual procedures to assist examiners in their consideration of CTR data in examinations.  
IRS management agreed with the recommendations and plans to take corrective actions.
 
Have an IRS Tax Problem? 
 
   
Contact the Tax Lawyers at 
Marini & Associates, P.A. 
 
 
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Tuesday, September 25, 2018

Ad Exec Appealed His $10M Tax Refund Denial and Won

According to Law360 a former ad agency executive won his appeal for more than $10 million in tax refunds when the Ninth Circuit ruled on September 24, 2018 that he had fulfilled a legal requirement to report inconsistencies between his personal tax return and that of his now-defunct advertising placement company.

Thomas Rubin had sued the Internal Revenue Service, claiming the agency had denied him a tax refund even after being advised that the bankruptcy trustee for Focus Media Inc. had incorrectly accounted for nearly $67 million of cancellation of indebtedness income and more than $23 million of bad debt expenses that Focus was entitled to write off.
The IRS had argued that Rubin had failed to meet a statutory requirement to report inconsistencies between the corporate and shareholder returns. Even though Rubin filed a statement explaining how his income flowed from Focus and provided information on where he disagreed with the bankruptcy trustee, the IRS said he did not identify the right inconsistencies.

 The Ninth Circuit disagreed with the IRS, saying there is nothing on the form for reporting inconsistencies that “directs or requires the taxpayer to report figures taken directly from the corporation’s return.”

The three-judge panel also rejected the IRS’ contention that the 20-plus pages of information that Rubin filed to explain the inconsistencies were unduly burdensome.

“That fact does not … impose such a burden that the IRS could not reasonably accomplish its duty, particularly in light of the size of the claimed refund,” the panel said.

The ruling reverses an October 2016 decision from a lower district court in favor of the government. That decision, from U.S. District Judge R. Gary Klausner, concluded that the pro forma tax return Rubin had attached for Focus to his individual amended tax returns did “not constitute an an attempt to amend Focus’ tax returns.”

The case now returns to Judge Klausner’s court for further proceedings.

Rubin had claimed in his lawsuit that the net income for Focus had been substantially overstated for the 2000 tax year, and since the company’s income flowed through to him, he ended up owing substantially more in income tax payments.

According to court documents, Focus’ largest customers had become concerned about the possible misuse of funds and sued the company to prevent further payments. Eventually, Focus’ creditors put it into involuntary bankruptcy, and a bankruptcy trustee was appointed. The trustee deemed the company’s receivables worthless.

Rubin initially filed his personal tax return based on the income reported in Focus’ return for 2000. He later filed an amended return for that year as well as the two preceding years. He also filed a pro forma amended tax return for Focus reflecting the different treatment of bad debt expenses and cancellation of indebtedness income, according to the Ninth Circuit’s opinion.

The opinion also noted that Rubin had submitted a chart and explanations describing amounts as they were originally reported, the net change and the amended amounts. The case is Thomas Rubin v. USA, case number 16-56633, in the U.S. Court of Appeals for the Ninth Circuit.

Have a Tax Problem?
 
 
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Tax Shelter RICO Suit Dismissed for Seyfarth

According to Law360 an Illinois federal judge has dismissed a Racketeer Influenced and Corrupt Organizations Act suit accusing Seyfarth Shaw LLP of selling a client an illegal tax shelter, saying that the man had failed to establish that the alleged fraud was part of the firm’s usual way of doing business or that it was an ongoing practice.
U.S. District Judge John Robert Blakey ruled that even after updating the complaint to include details on three other alleged victims, Steven Menzies still hadn’t established facts that suggested the other victims were deceived into buying tax shelters, which would be necessary to establish a pattern for a RICO claim.

“The [second amended complaint] is devoid of any allegations that defendants’ conduct actually deceived other investors,” the decision said. “Plaintiff’s failure to plead such facts is particularly problematic in a case, like this one, where the purported victims knowingly entered into tax shelters, which by their nature are designed to avoid taxes.”

The judge also dismissed the remaining claims, which were brought under state law, as untimely.

Menzies sued Seyfarth, Northern Trust Corp. and Christiana Bank & Trust Co. in 2015, want to get a bottle water something before go through this to sell him the tax scheme when he sought help on taxes coming out of a 2006 sale of $64 million in Applied Underwriters stock to Berkshire Hathaway Inc.

Northern Trust pitched Menzies on the tax shelter scheme and then guided him to co-conspirators Christiana and Seyfarth, which facilitated the scheme and convinced him it was aboveboard, according to the suit.
 Menzies was specifically sent to former Seyfarth partner Graham Taylor, who issued opinion letters that Menzies believed would convince the IRS of the tax shelter’s legality if he was audited, the suit says.

A few years later, Taylor pled guilty in a $20 million tax fraud conspiracy case. He had a long history of issuing opinion letters on tax shelters that contained false information when he was hired at Seyfarth, according to Menzies.

The IRS audited Menzies in 2009, determining that the shelter he relied on was not legal, according to his complaint. Part of the agency's determination was based on the fact that Taylor, who by then had pled guilty to tax fraud, acted as Menzies’ adviser, the suit alleges.

The IRS claimed Menzies underpaid his taxes by $45 million, and threatened him with large fines, penalties and potential criminal liability, according to his suit. In December 2012, Menzies settled with the IRS for approximately $10.4 million.

Judge Blakey initially killed off Menzies’ RICO claims in a July 2016 opinion, saying that describing a scheme involving only one victim was not enough. He allowed Menzies to refile his complaint.

On September 21, 2018, however, the judge ruled that Menzies still had not established a pattern. Although he had included details for additional alleged victims, he did not specify how they had been deceived by Seyfarth, or even whether Seyfarth had misled them into using tax shelters. Indeed, for one alleged victim, the new complaint stated it was “reasonable to assume” the firm lied about the shelters’ legality.

The new complaint also did not establish that this was the firm’s usual way of doing business or that there was any evidence that the firm continued to behave this way even after Taylor’s arrest and conviction, the decision said.
The case is Menzies v. Seyfarth Shaw LLP et al., case number 1:15-cv-03403, in the U.S. District Court for the Northern District of Illinois.
 
 Do You Have a Criminal Tax Problem?
 
 
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Saturday, September 22, 2018

Attorney Allegedly Conspired to Repatriate More Than $18 Million in Untaxed Money Held in Foreign Accounts

According to the DoJ a federal grand jury sitting in Houston, Texas returned an indictment on September 20, 2018 charging a Houston attorney with one count of conspiracy to defraud the United States and three counts of tax evasion.

According to the indictment, Jack Stephen Pursley, also known as Steve Pursley, conspired with another individual to repatriate more than $18 million in untaxed earnings from the co-conspirator’s business bank account located in the Isle of Man.  Knowing that his co-conspirator had never paid taxes on these funds, Pursley allegedly designed and implemented a scheme whereby the untaxed funds were made to appear to be stock purchases in United States corporations owned and controlled by Pursley and his co-conspirator.
If convicted, Pursley faces a statutory maximum sentence of five years in prison for the conspiracy count, and five years in prison for each count of tax evasion.  He also faces a period of supervised release, monetary penalties, and restitution.

An indictment merely alleges that a crime has been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.
  • The indictment alleges that Pursley received more than $4.8 million and an ownership interest in the co-conspirator’s ongoing business for his role in the fraudulent scheme. 
  • The indictment further alleges that for tax years 2009 and 2010 Pursley evaded the assessment of and failed to pay the incomes taxes due on this money by, amongst other means, withdrawing the funds as purported non-taxable loans or returns of capital.  
  • Pursley allegedly used the money he received to purchase personal assets, including a vacation home in Vail, Colorado and property in Houston.  
 
Do You Have a Criminal Tax Problem?
 
 
Contact the Tax Lawyers of
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for a FREE Tax Consultation contact us at:
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Toll Free at 888-8TaxAid (888) 882-9243
 

Friday, September 21, 2018

Treasury Considering Eliminating Obama-Era Debt-Equity Documentation Rules

October 6, 2017 we posted Treasury to Currently Eliminate 8 Tax Regulations Including Discounting Restrictions on Family Business Transfers where we discussed that the U.S. Department of the Treasury  posted on October 4, 2017 that it would amend or completely do away with 8 tax regulations issued under the Obama administration, including rules regarding corporate debt and transfers of estates, as part of an effort to simplify the tax code.

Treasury also announced that it continues to work to identify additional regulations for modification or repeal by evaluating significant regulations issued recently and initiating a comprehensive review of all regulations.
 
Now according to Law360, the U.S. Department of the Treasury on September 21, 2018 proposed scrapping documentation requirements established under Obama-era regulations to discourage corporate inversions by re-characterizing debt as equity.

The regulations, under Section 385 of the Internal Revenue Code, were intended to prevent an accounting maneuver called “earnings stripping” that shifts profits to low-tax jurisdictions, and they established documentation requirements for purported debt obligations among related parties to be treated as debt for federal tax purposes.


Following a review initiated by President Donald Trump, the Section 385 documentation rules were among eight Treasury regulations identified in July 2017 as either imposing an undue financial burden on U.S. taxpayers or adding undue complexity to federal tax laws. After reviewing comments from the public, Treasury has now concluded that the documentation requirements should be repealed but added it may propose streamlined documentation rules in the future.

“The Treasury Department and the IRS will continue to study the issues addressed by the documentation regulations," the regulations said. "When that study is complete, the Treasury Department and the IRS may propose a modified version of the documentation regulations.”

Experience Tax Advice...
 
 
Now Even More Valuable! 

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

 

Thursday, September 20, 2018

Preview of New Tax Transcript Starting on 9/23!

August 23, 2018 we posted  IRS to Introduce New Tax Transcript as of 9/23/18! where we discussed that in August 22, 2018, the IRS announced in IR-2018-171 that it is moving to better protect taxpayer data, in a new format for individual tax transcripts that will redact personally identifiable information from the Form 1040 series. On September 19, 2018 the IRS  released IRS Fact Sheet 2018-16 (FS-2018-16) describing the changes in the transcript starting onSept. 23, 2018 and that the new transcript format will become the default transcript and describes the data that it will display. 
 
On Sept. 23, 2018, a new transcript will become the default transcript issued by IRS through all available platforms, including online, toll-free and the Transcript Delivery System (TDS) used by tax professionals. The new transcript format is for individual transcripts only, not business transcripts.
The new transcript format will display the following data:
  • . . . Last 4 digits of any Social Security Number (SSN) listed on the transcript: XXX-XX-1234
  • . . . Last 4 digits of any Employer Identification Number (EIN) listed on the transcript: XX-XXX-1234
  • . . . Last 4 digits of any account or telephone number
  • . . . First 4 characters of the last name for any individual
  • . . . First 4 characters of a business name
  • . . . First 6 characters of the street address, including spaces
  • . . . All money amounts, including balance due, interest and penalties
IRS noted that tax transcripts are used for many non-tax purposes, such as income verification for loans or college financial aid, and the new format will still have enough financial information available to meet these needs.

The fact sheet noted that financial entries on all redacted transcripts continue to be fully visible. Tax practitioners preparing prior-year tax returns for clients have several additional options to obtain the wages, income and taxes paid for non-filing individuals, including:
  • . . . obtaining Form W-2 and income documents from the client;
  • . . . asking the client to access Get Transcript Online to immediately download and print a redacted wage and income transcript;
  • . . . asking the client to request a mailed transcript via Get Transcript by Mail or call toll-free assistance to have a transcript mailed to the address of record (mailed transcripts are delivered within five to 10 business days);
  • . . . accessing e-Services Transcript Delivery Service for tax professionals for immediate access to a redacted transcript if there is proper authorization; and
  • . . . asking toll-free assistance to mail a redacted transcript to the client’s address of record.
If necessary for return preparation, a client may also order a complete (not redacted) wage and income transcript through IRS.


Also starting on Sept. 23, 2018, IRS will introduce a revised Form 4506-T and Form 4506T-EZ, Request for Transcript, to include a new field—line 5b—for a Customer File Number. The Customer File Number is created by the requester, not IRS. This is an optional field for the requester (e.g., a lender or college) to use as an identifier because the SSN will no longer be fully visible. Requesters have the option of creating and entering an identifying number that is displayed on the transcript. The field is unique to the requester and will not be searchable by IRS.

The requester will assign a 10-digit number, for example, a loan account number, enter it on line 5b of the Form 4506T or Form 4506T/EZ. The Customer File Number assigned by the requester will populate on the transcript, enabling the requester to match the transcript to the taxpayer. Requesters may use any 10-digit number except the taxpayer’s SSN.

Tax professionals requesting transcripts through TDS may also assign a Customer File Number to the transcript beginning on Sept. 23, 2018. This is an optional field for the requester to use as an identifier because the SSN will no longer be fully visible. TDS users will have the option of creating and entering an identifying number that is displayed on the transcript. The field is unique to the requester and will not be searchable by IRS.

The requester will enter a 10-digit number (any 10-digit number except the taxpayer's SSN) in the Customer File Number field on TDS. The Customer File Number assigned by the requester will populate on the transcript, enabling the requester to match the transcript to the taxpayer.

Starting in mid January 2019, taxpayers also may assign a 10-digit number to their transcript that they obtain through Get Transcript Online or Get Transcript by Mail. In these instances, the Customer File Number field will assist those taxpayers who require a transcript for income verification purposes, such as a loan application or college financial aid.

Distribution of transcripts to fax numbers or third-party addresses poses a threat to taxpayer data and poses a risk that sensitive information will result in fraudulent tax refunds. The timeframes below have not yet been finalized.

Sometime around January 2019, IRS plans to stop faxing transcripts to both taxpayers and to third parties. This change applies to both individual and business taxpayers. At that time, when taxpayers or third parties call IRS with an individual or business transcript request, the transcript will be mailed to the taxpayer’s address of record.

Starting around May 2019, IRS will stop mailing transcripts to third parties listed on Line 5a of the Form 4506-T and T-EZ. This field will be eliminated from the form. Transcript requests made on the Form 4506-T and T-EZ will be mailed to the taxpayer’s address of record, not to third parties. 
Alternatives for obtaining tax transcript by tax professionals and third parties. Tax professionals have alternatives to obtain a tax transcript. Attorneys, Certified Public Accountants (CPAs) or enrolled agents (EAs) may register for IRS e-Services tools to obtain access to TDS without being an Electronic Return Originator (ERO).

E-Services users must create an account, protected by a two-factor authentication process, to verify their identities. Tax preparers who are neither an attorney, CPA nor EA must either be part of an ERO’s file or become an Authorized IRS e-File Provider and file tax returns to access the TDS.
IRS advised that third parties who routinely use the Form 4506-T or T-EZ to obtain tax transcripts for income verification purposes consider contracting with a participant in the Income Verification Express Service (IVES) or become an IVES participant.

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). 




 

Tuesday, September 18, 2018

First FATCA Violation Conviction With Bank Executive's Plea Deal

The former head business officer and CEO of offshore Loyal Bank Ltd. admitted to setting up multiple opaque bank accounts for a purported stock fraudster in order to evade detection by U.S. authorities in violation of the Foreign Account Tax Compliance Act, the first conviction of its kind. 
 
Adrian Baron 63, who was extradited from Hungary to face charges in New York, pled to one count of conspiring to defraud the U.S. Dressed in jail fatigues, Baron admitted to directing others at Loyal Bank to set up bank accounts for an individual identified in court papers as an undercover law enforcement agent, who posed as a U.S. fraudster involved in multiple stock manipulation schemes on the hunt for corporate bank accounts he could control but that couldn’t be traced back to him.
 
According to the DoJ, a grand jury in Brooklyn has returned a five-count superseding indictment charging
The Defendants:
PANAYIOTIS KYRIACOU, also known as “Peter Kyriacou” Age: 26, Residence: London, England
ARVINSIGH CANAYE, also known as “Vinesh Canaye” Age: 30, Residence: Mauritius
ADRIAN BARON Age: 63, Residence: Budapest, Hungary
LINDA BULLOCK Age: 57, Residence: St. Vincent/Grenadines
 
with conspiracies to defraud the United States by obstructing the functions of the Internal Revenue Service in its administration of the Foreign Account Tax Compliance Act (“FATCA”).   
 
FATCA is a federal law that requires foreign financial institutions to identify their U.S. customers and report information (“FATCA Information”) about financial accounts held by U.S. taxpayers either directly or through a foreign entity.  FATCA’s primary aim is to prevent U.S. taxpayers from using foreign accounts to facilitate the commission of federal tax offenses.
 
Last month, a grand jury in Brooklyn charged Kyriacou, Canaye, Baron, Bullock, and others with conspiracy to commit securities fraud and money laundering conspiracy.

 "As Alleged in the Superseding Indictment, Kyriacou, Canaye, Baron, and Bullock Agreed to Defraud the United States by Opening Foreign Bank and Brokerage Accounts without Collecting FATCA Information to Report to the IRS,"
 
Stated United States Atty. Donoghue.
 
"The Charges Announced Today Reflect the Commitment of This Office and Our Law Enforcement Partners to Combat Tax Evasion by Identifying Fraudulent Offshore Safe Havens That Facilitate Hiding Financial Assets from the IRS and to Prosecute Those Individuals Who Violate US Tax Laws."
 


The Beaufort Scheme         
As alleged in the superseding indictment, between August 2016 and February 2018, Kyriacou, an investment manager at Beaufort Securities, and Canaye, a general manager at Beaufort Management, together with others, conspired to defraud the United States by failing to comply with FATCA. 

Specifically, in the fall of 2016, an Undercover Agent contacted Kyriacou and stated that he was a U.S. citizen interested in opening brokerage accounts at Beaufort Securities from which he could execute trades in several multi-million dollar stock manipulation deals.  In furtherance of the stock manipulation scheme, Kyriacou and Beaufort Securities opened six brokerage accounts for the Undercover Agent.  Notwithstanding that a U.S. citizen would be the beneficial owner of each of the accounts, at no time did Kyriacou or Beaufort Securities request FATCA Information from the Undercover Agent.

In July 2017, Kyriacou introduced the Undercover Agent to Canaye and advised that Canaye could assist with the Undercover Agent’s schemes.  After meeting with the Undercover Agent and discussing the stock manipulation scheme, in January 2018, Canaye and Beaufort Management opened six global business corporations for the Undercover Agent.  The Undercover Agent’s name did not appear on any of the account opening documents. 

The Loyal Scheme                          
In June 2017, the Undercover Agent met with Baron, Loyal Bank’s Chief Business Officer.  During the meeting, the Undercover Agent explained that he was a U.S. citizen and was involved in stock manipulation schemes.  The Undercover Agent further explained that he was interested in opening multiple corporate bank accounts at Loyal Bank.  In July 2017, the Undercover Agent met with Baron and Bullock, Loyal Bank’s Chief Executive Officer.  During the meeting, the Undercover Agent described how his stock manipulation deals operated, including the need to circumvent the IRS’s reporting requirements under FATCA.  In July and August 2017, Loyal Bank opened multiple bank accounts for the Undercover Agent.  At no time did Loyal Bank request or collect FATCA Information from the Undercover Agent.

The charges in the superseding indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. However for  Adrian Baron who Pled Guilty, he is due to be sentenced on December 10, 2018.

Do You Have a Criminal Tax Problem?
 
 
Contact the Tax Lawyers of
Marini & Associates, P.A.    
 
for a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDPLaw.com or
Toll Free at 888-8TaxAid (888) 882-9243