This Wednesday, I will be appearing as an expert guest on Fox Business News to talk about some of the pressing tax problems taxpayers are facing due to the recent surge in IRS enforcements.
Please tune in to Fox Business News tomorrow morning, September 2nd, at 8am to learn how you can protect your financial future by staying informed of your tax obligations as well as how you can save money from legal tax breaks (such as the first-time homebuyer’s tax credit.)
The current IRS tax climate is troublesome for some taxpayers who may find themselves under scrutiny by the IRS even when they are innocent. It is extremely important to stay informed and understand your rights to a tax attorney’s representation when fighting against the IRS. In my morning show tomorrow, in addition to talking about tax breaks like the first-time homebuyer tax credit, I will be sharing my expertise on IRS penalties and the tax implications of the health care bill. For taxpayers who want to learn more about the current tax climate to protect their financial well-being, this show is for you!
If you are unsure about how to handle your current tax problems, it will benefit you to tune in to learn various ways that you can ameliorate your IRS penalties and back taxes. I am a tax resolution specialist. My team of tax attorneys and CPAs deal with tax problems on a daily basis.Contact us today for a free tax relief consultation to see how we can help you reduce your IRS penalties today.
It’s official–UBS, the Swiss Banking Giant has reached a deal with the US Government and the Swiss Government to release around 4,450 names of American account holders suspected of tax evasion.
The US Government estimates there to be $18 billion hidden in these offshore accounts–giving the IRS plenty reason to scrutinize and audit both the innocent and guilty in the upcoming months.
If you have a UBS account and have not paid your taxes, you can still decrease the severity of your charges by participating in voluntary disclosure. Currently, the IRS offers an Amnesty Program for tax evaders who come forward before their names are disclosed by UBS. (The deadline for this program is September 23rd, 2009).
If you come forward to the IRS before UBS does, the IRS will drop all criminal charges in exchange of you paying all back taxes plus penalties and interest. Considering this exchange could make the difference between jail time and an affordable payment plan, it is worthwhile for tax evaders who have significant unpaid taxes.
Taxpayers are required by law to disclose all income from domestic and foreign sources–all of which are taxable. Therefore, if you are going through an IRS audit or have found yourself in trouble with the IRS, it is best to get professional tax help from an experienced tax attorney, CPA, or certified tax resolution specialist.
Guilty or innocent, it’s crucial for taxpayers with offshore bank accounts to be prepared for severe IRS scrutiny. Get professional tax help now before it’s too late. In most cases, finding the most qualified tax lawyer or tax resolution specialist can significantly reduce your IRS penalties.
Read more on how you can pick the best tax attorney to help you fight the IRS.
Hope everyone had a great weekend! CNBC.com reporter Mark Koba quoted me in a recent article about last week’s agreement by Swiss bank UBS to name US account holders. This is being seen as a watershed, leaving many wealthy Americans with foreign accounts scrambling to figure out what to do
Anyone who has not checked the Report of Foreign Bank and Financial Accounts (FBAR) box on Schedule B of form 1040 and/or has deposited monies into these foreign accounts without paying federal income taxes (earned income) on them should be nervous about being targeted by the IRS in their crackdown on foreign accounts.
However, people in this situation can still strike a deal with the IRS in exchange for full voluntary disclosure. We do this all the time for our clients – we go straight to the IRS instead of the IRS seeking out our client. The voluntary disclosure program offers immediate relief because the IRS agrees not to criminally prosecute taxpayers who pay all back taxes plus interest and penalties. But in order to take advantage of this immediate relief, taxpayers must come forward before their names are turned over to the IRS.
And remember that a tax attorney or tax resolution specialist can help you resolve IRS tax problems if your offshore account comes under scrutiny by the IRS. Contact us today for a free tax relief consultation to see if you qualify for a voluntary disclosure settlement.
As Swiss bank UBS and the Swiss government consider reneging on a deal to turn over 52,000 names of U.S. clients, Justice Department warns criminal prosecution may be next step By Michael Rozbruch ———————————-
For those who follow tax compliance news, February was a big month.
That’s when the U.S. Department of Justice announced a deal with Swiss bank UBS.
The U.S. government agreed to waive criminal prosecution — federal prosecutors suspected the Swiss bank helped American clients evade as much as $300 million a year in taxes from 2002 to 2007 — if UBS would provide the U.S. government with the names of its 52,000 U.S. clients.
The government, of course, suspects these 52,000 U.S. clients are using their Swiss bank account to hide money and avoid income taxes. For wealthy Americans, that’s been a well-laid plan, since Swiss banks are known to offer absolute privacy.
Until now. Well, maybe.
Following the unprecedented agreement, the Swiss have hemmed and hawed, saying an order to release client names would violate Swiss banking law.
A Miami judge asked federal prosecutors what they would do if UBS reneged on the deal. Their response: UBS bank officials would face criminal prosecution.
This is quickly becoming something of an international banking incident. But what does it means for you, an American taxpayer?
A lot, in fact.
Take what John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, said earlier this year about obtaining UBS’s records: “It is time for those who are trying to hide from the IRS to rethink their actions. The Department of Justice is committed to do all that it can to aid the IRS in locating those who would seek to hide behind secret accounts and in holding them accountable under the federal tax laws.”
What DiCicco means, it’s safe to say, is this: The IRS has now mustered its entire strength to dismantle the mechanisms that in the past have facilitated tax evasion.
The highest profile of these mechanisms are Swiss banks, which have made fortunes over the last century operating with a success model that promised to protect money without asking questions or telling secrets. From Americans trying to hide money to dictators trying to steal it, Swiss banks offered the best option.
So to combat tax evasion, the IRS has targeted everything from credit cards to banks located overseas, and in the past year, the federal government has been remarkably successful at obtaining records, creating a sort of tip sheet of those who may be cheating Uncle Sam.
For American taxpayers such as you, the writing is on the wall: Time is short. That’s because, if you’ve used a traditional method of evading taxes such as overseas banks, the IRS will soon find out, if it hasn’t already.
Uncle Sam won’t back down from tax cheats. Ask the secretive Swiss.
———————————- If your offshore account comes under scrutiny from the IRS and you need tax help, Tax Resolution Services can advise you on how to avoid IRS problems. They can also help you with the voluntary disclosure process and filing any back taxes (delinquent taxes) that need to be taken care of.
Michael Rozbruch is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers and a Maryland CPA. You can contact him at 866-IRS-PROBLEMS (866-477-7762) to obtain a free subscription to his newsletter titled The IRS Times & Inquirer or read stories from the newsletter on our blog.
While the final form of agreement is not yet in place, there are many implications for U.S. taxpayers, including innocent offshore account holders who did not use their Swiss accounts to evade taxes. They may be heavily investigated, so it will be important for them to know their rights and seek a tax attorney’s representation when necessary.
Details of the UBS agreement may also affect the pace of activity under an IRS amnesty program that lets Americans reveal secret Swiss bank accounts in exchange for lower penalties. Through the program, taxpayers with unreported income in foreign bank accounts van avoid criminal prosecution and lower IRS penalties in exchange for voluntary disclosure of their foreign account and payment of all back taxes plus interest.
Taxpayers are required to report all income from domestic and foreign sources. I recently blogged about requirements for offshore account holders to file a Report of Foreign Bank and Financial Accounts (FBAR), which cannot be filed with federal tax returns. The deadline to file with the Department of the Treasury in Detroit, Michigan has been extended from June 30, 2009 to September 23, 2009. While there may be some confusion about who is required to file an FBAR, the IRS is providing extra time for taxpayers to seek tax help.
Remember that a tax attorney or tax resolution specialist can help you avoid IRS problems if your offshore account comes under scrutiny by the IRS. You can contact us for a free consultation to see if you qualify for a voluntary disclosure settlement.
According to Reuters, the days of secret bank accounts are numbered for Americans.
The deal is also expected to put European tax dodgers on notice as other governments are encouraged to seek out hidden accounts.
U.S. authorities believe the 52,000 U.S.-based clients of UBS may be hiding nearly $15 billion of assets.
For more IRS news and tax help tips, follow me on Twitter @taxresolution
UBS has just struck a deal with the US Government to give up 52,000 names of Americans who have Swiss bank accounts. In the upcoming weeks, we can expect to see many guilty tax evaders being charged with heavy IRS penalties as well as innocent account holders who will need to defend themselves. (Read more about the latest UBS settlement.)
It is not uncommon for American businesspeople to hold foreign bank accounts, especially if their business is international. Due to the recent heavier IRS enforcement, it is extremely crucial for you to understand everything you are required (by law) to do if you have a foreign bank account or if you have signatory authority over an offshore account. Failure to comply with IRS regulations regarding FBAR will result in severe tax penalties that could debilitate your financial well-being for life.
Currently, taxpayers are required to report all income from domestic and foreign sources. In addition, taxpayers who have a financial interest in or signature authority over foreign accounts are required to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if the aggregate value of all such financial accounts exceeds $10,000 at any time during the calendar year. The FBAR cannot be filed with your federal tax return. Instead, it is filed with the Department of the Treasury in Detroit, Michigan no later than June 30 of the year following the calendar year reported. There is no extension of time available for filing this report.
Failure to report income in foreign bank accounts, or to file Form TD F 90-22.1, has serious consequences; there are civil and criminal penalties, and both can be imposed in appropriate cases. However, until September 23, 2009, taxpayers with unreported income in foreign bank accounts have an opportunity to take advantage of an IRS settlement offer. In exchange for full disclosure, the IRS agrees not to criminally prosecute those taxpayers not already under investigation who pay all back taxes plus interest and penalties. In addition, the IRS waives the 75 percent fraud penalty for taxpayers who voluntarily disclose their foreign accounts.
If you find yourself in trouble with the IRS but have a reasonable cause for your neglect or ignorance of the IRS rules, you have a chance at winning yourself a penalty abatement.
Oftentimes, people find themselves in trouble with the IRS because they do not realize their inaction (in certain situations) was illegal. Do not be one of the innocent people who has to pay heavy tax penalties for ignorance. Educate yourself and stay informed.
99% of the time, Tax Resolution Services will keep an IRS tax case in the civil arena and out of the criminal arena, if you find yourself in IRS tax trouble, you can contact our team of experts for afree consultation. Call us at 866-IRS-PROBLEMS (1-866-477-7762) or visit our website at www.TaxResolution.com
As a part of recent IRS efforts to find wealthy Americans who have been deliberately evading taxes by using offshore bank accounts, a deal has been reached today with UBS. The US Government and Switzerland have come to an agreement today that will force the Swiss bank, UBS, to turn over 52,000 names of suspected tax evaders.
According to the New York Times (www.nytimes.com), “UBS and the Swiss government have been battling efforts by the Justice Department to force the bank to disclose the names of 52,000 American clients of UBS suspected of offshore tax evasion. The efforts threatened to peel back layers of Swiss banking secrecy, the backbone of the world’s private banking industry, and have rattled UBS, the world’s largest private bank and a pillar of the Swiss economy.”
A hearing scheduled for Monday in Miami was postponed until Aug. 10, at which point more details are expected to be released. The judge scheduled another conference call with parties in the case for next Friday.
Secretary of State Hillary Rodham Clinton is scheduled to meet with the Swiss foreign minister, Micheline Calmy-Rey, in Washington on Friday to discuss the matter. The issue has unsettled the Swiss banking industry and escalated into a diplomatic incident between the two sides.
Going after offshore bank account holders is one of the major ways that the IRS is trying to close its $345 billion annual tax gap. There are many implications in the latest UBS development. Many innocent offshore account holders who did not use the Swiss account to evade taxes may be heavily investigated. It is important for innocent offshore account holders to know their rights and seek a tax lawyer’s representation when necessary.
The tax evaders who are guilty will be facing severe IRS penalties and interests. Learn how you can save your financial future through penalty abatement.
Avoid getting in IRS trouble in the first place. If you have an offshore account, you must know the IRS rules that require you to disclose all of your income (domestic and international). Read the IRS rules for foreign bank and financial accounts reporting (FBAR).
Don’t fight the IRS alone. If you find yourself in trouble with the IRS, you can contact our team of experts for a free consultation. Call us at 866-IRS-PROBLEMS (1-866-477-7762) or visit our website at www.TaxResolution.com
Recently I spoke with Russ and Sully on the Big Biz Show to discuss how the more aggressive IRS tax collection effort is affecting tax cheaters as well as innocent law-abiding taxpayers.
Unfortunately, during this tense climate of increasing IRS enforcements, even some innocent people are going to get weaved into the mix and may find themselves in IRS trouble. Many of these innocent taxpayers will be able to explain and prove their innocence. It is always a good idea to understand the procedures of filing a case against the IRS to maximize chances of success. You are entitled to the help of a professional tax attorney–make sure you choose the right one for you.
Read on for some of the pertinent questions during today’s tax environment:
Q: For those people with bank accounts in Switzerland or have used the Bahamas as a tax haven, what can we expect now with the Obama Administration going after offshore accounts so aggressively?
A: We’re going to see the end to the secretive banking laws. The US Government has already sued the Swiss Government for the 52,000 names on the Swiss bank accounts. It is very probable that the Swiss is going to give those names up because the press has been announcing that the Swiss wants to cooperate. And if that happens, there’s going to be a lot of unhappy people in this country with regard to that. These tax evaders will have to answer to their crimes here and face the appropriate IRS penalties.
Q: What will happen to someone who inherits money from someone that recently passed away and is unaware of the tax responsibility they have on the inheritance?
A: Many people do not know that the money they inherit from someone–be it a 401k or an IRA–is taxable to the beneficiary. There could be hundreds of thousands of dollars in the retirement fund that was tax-free during the life of the person but when they pass, that money is all of the sudden taxable. If you inherit money and do not pay taxes on it, you are committing tax evasion and will be punished as that.
Q: If someone finds themselves in trouble with the IRS for failing to file for taxes in the past couple of years, what will you do to help them?
A: The first thing Tax Resolution Services does is we make a Voluntary Disclosure to the IRS—in other words, we’re going to the IRS instead of the IRS seeking out our client. One phone call from Tax Resolution Services can help you keep the case civil. 99% of the time, we keep the cases civil even when the IRS has already been contacting you to file those back taxes.
Voluntary Disclosure offers immediate relief for a couple of reasons: Number One, the client doesn’t have to talk or deal with the IRS from that point forward. We take over all correspondence and communications; Number 2, it keeps the case in the civil arena because it is a misdemeanor punishable by one year in prison to not file a return when it’s due. So we keep the case out of the judicial arena and keep it civil.
Avoid harsh IRS tax penalties. If you find yourself at odds with the IRS but are innocent of the charges, you are entitled to seek a professional tax attorney’s representation.
Don’t fight the IRS alone–you can contact our team of experts for a free consultation. Call us at 866-IRS-PROBLEMS (1-866-477-7762) or visit our website at www.TaxResolution.com
In an effort to more aggressively pursue tax evaders who hide assets in overseas accounts, the US Department of Justice, UBS AG (Swiss Bank), and the Swiss government are working together to reveal the identities of US depositors who use secret offshore accounts.
In order to aid Obama’s latest efforts to bring out tax cheats who take advantage of offshore tax havens, the government of Switzerland filed a brief in the case asserting that it may confiscate from UBS any information identifying U.S. taxpayers hiding assets from the IRS in secret Swiss accounts.
CCH (http://tax.cchgroup.com) reports:
District Court Stays IRS Summons Enforcement Against Swiss Bank as Potential Settlement Looms
The U.S. Department of Justice (DOJ), UBS AG and the government of Switzerland, on July 12, filed a joint motion to stay proceedings concerning the identity of U.S. depositors that may be hiding assets offshore in secret accounts. Although no ruling was on the docket at press time, the DOJ announced through a subsequent July 13 media press release that the U.S. District Court for the Southern District of Florida granted the motion, allowing the parties until August 3 to work on a settlement. This announcement comes after the government of Switzerland filed an amicus brief in the case asserting that it may confiscate from UBS any information identifying U.S. taxpayers hiding assets from the IRS in secret Swiss accounts.
In the July 12 press release that coincided with the July 12 motion to stay, the DOJ stated that all filing parties agreed to require UBS to disclose the identities of a significant number of allegedly liable U.S. taxpayers if a resolution for the case could be reached out of court. Otherwise, with no alternative resolution, the DOJ said it will “continue to vigorously pursue enforcement of the summons through the court.”
DOJ Prosecution Continues
Despite this chance for settlement, the DOJ also filed a response on July 12 in opposition to the Swiss government’s threats to transfer the disputed information from UBS’s legal control. It argued that an act of state by the government of Switzerland would not interfere with the court’s enforcement of the summons. The DOJ also asserted that, should the court order UBS to comply with the summons and if UBS refuses to do so, it would ask the court to hold UBS in contempt and impose monetary sanctions. However, it emphasized that consideration of any punishment of UBS, as well as the Swiss government for its role in the dispute, before ruling on enforcement of the summons is premature.
“To the best of our knowledge the Swiss government has not yet taken such action, nor has it made clear what it means when it suggests that it will issue an order “taking effective control” of the UBS records,” the DOJ observed.
You may get help from our specialized staff of tax attorneys, CPAs, EAs and tax professionals at TRS. VisitTax Resolution Services for a free income tax relief consultation or call us at 866-IRS-PROBLEMS (1-866-477-7762).
Swiss banks are shutting the accounts of Americans as the Internal Revenue Service accelerates the hunt for tax dodgers. The country’s biggest banks, UBS AG and Credit Suisse Group AG, have told Americans to move their money into specially created units registered in the U.S., or lose their accounts. Smaller private banks such as Geneva-based Mirabaud & Cie. are closing all accounts held by U.S. taxpayers.
After the American government’s legal battle to get UBS to disclose the owners’ names for 52,000 accounts in which Americans evaded taxes – the IRS announced a new Voluntary Disclosure process that offers leniency to taxpayers with unreported income relating to offshore transactions. Along with lower tax penalties, those who come forward, pay their taxes, and comply with the IRS are expected to avoid criminal prosecution.
Until now, the IRS could impose penalties of at least 50% for all years in which an account wasn’t disclosed. In some cases, that could exceed the value of the offshore holdings. But voluntary disclosure isn’t about how much you end up paying, it’s about being able to avoid jail time.
While the IRS has since increased pressure on Americans to disclose offshore accounts, Swiss banks must comply with U.S. tax rules and register with the Securities and Exchange Commission to accept a investment from a U.S. person.
While the banks declined to say how many people are affected, more than 5 million Americans live abroad, including about 30,000 in Switzerland, according to estimates from American Citizens Abroad in Geneva. Swiss banks must register with the Securities and Exchange Commission to provide services for those customers.
SEC registration means clients don’t enjoy the protection of Swiss banking secrecy laws, which make it a crime for money managers to disclose the names of clients without their consent. Switzerland said in March it would cooperate with international tax evasion probes after Zurich-based UBS admitted helping U.S. clients avoid taxes.
The IRS has since increased pressure on Americans to disclose offshore accounts as it seeks to recoup an estimated $50 billion in unpaid taxes. The agency set a deadline of Sept. 23 for taxpayers to declare all foreign accounts or face possible criminal prosecution that could result in as much as 10 years in prison and $500,000 in penalties.
Presumption of Guilt
U.S. citizens must file tax returns, report offshore accounts that contain more than $10,000 and pay tax on any income earned, no matter where they live. To take advantage of the amnesty program, taxpayers must file six years of returns, plus pay back taxes and a penalty, according to the IRS.
If you owe the IRS more than you can afford to pay, get help from the specialized staff of tax attorneys, CPAs, EAs and tax professionals at TRS. Visit Tax Resolution Services for a free income tax relief consultation or call us at 866-IRS-PROBLEMS (1-866-477-7762).
In an effort to bring more tax evaders to the surface, the IRS has issued a new voluntary offshore compliance initiative in March of 2009, which provides more lenient penalties for tax evaders who have placed their assets overseas. In this initiative, taxpayers who voluntarily disclose their wrongdoings will only be punished with paying back taxes, certain penalties, and interest. Those who come forward will not face criminal charges unless strong evidence suggests criminal behavior. Since this compliance initiative overlooks the criminal prosecution aspect of tax evasion, it is useful for anyone who has wrongfully concealed their full income in past tax returns.
Also, the FBAR (Report of Foreign Bank and Financial Accounts) filing deadline has been extended from June 30, 2009 to September 23, 2009. Due to the newly changed definition of “United States person”, there has been confusion over who is required to file the FBAR; those who are filing for the June 30th deadline should use the July 2000 definition of “United States person” instead of the newly changed definition.
CCH (http://tax.cchgroup.com/) reports:
The IRS is combing amended returns for taxpayers who have made “quiet disclosures” to circumvent the Service’s temporary offshore compliance initiative. The Service reiterated in new frequently asked questions (FAQs) about the initiative on its website (www.irs.gov) that taxpayers who make quiet disclosures will not escape penalties and possible criminal prosecution. The Service also is giving some taxpayers additional time to file Form 90-22.1, Report of Foreign Bank and Financial Accounts (known as the “FBAR”).
Quiet Disclosures
The IRS launched its voluntary offshore compliance initiative in March (TAXDAY, 2009/03/27, I.3). In exchange for full disclosure of offshore accounts and the payment of back taxes, interest and certain penalties, the IRS will not seek criminal prosecution of wrongdoers. In April, IRS Commissioner Douglas H. Shulman said he was pleased with the response but the Service has been tight-lipped about how many taxpayers have come forward.
Rather than formally applying to participate in the initiative, some taxpayers have filed amended returns reporting previously undisclosed assets. The IRS is reviewing amended returns. The Service cautioned that, if it discovers evidence of criminal behavior, it will recommend criminal prosecution.
Taxpayers whose quiet disclosure returns have not been selected for examination may request to participate in the initiative. These taxpayers must meet all of the criteria for participation, the IRS explained.
FBARs
June 30, 2009, is the deadline for filing 2008 FBARs. The IRS previously clarified the filing requirement for FBARs (IR-2009-58, Announcement 2009-51; TAXDAY, 2009/06/08, I.5). A recent change in the definition of “United States person” created confusion for filers. For FBARs due on June 30, 2009, taxpayers should use the prior (July 2000) definition to determine who must file an FBAR, the IRS explained.
Now, the Service has provided additional FBAR relief. Taxpayers who recently learned that they have an FBAR filing obligation but do not have sufficient time to gather the necessary information to file by June 30 may file before September 23, 2009, without penalty. The taxpayer must have reported and paid tax on his or her 2008 taxable income, the IRS cautioned. This treatment mirrors similar relief previously provided to tax years before 2008.
“The September 23 deadline is good news,” Walter Goldberg, IRS Practice & Procedures, executive director, Grant Thornton, LLP, Washington, D.C., told CCH. “Taxpayers and practitioners are hopeful that the IRS will continue to answer questions about the initiative.”
President Obama has been working hard to ensure that American taxpayers are held more financially accountable. I recently blogged about how new tax enforcement regulations have been put in place in order to make it more difficult for business owners and wealthy people who put their assets overseas to escape taxes. In my recent interview with Mike Jaxson on KSVP, I discussed with him some important new changes to tax enforcement and how these changes can negatively impact innocent taxpayers who have not done anything illegal.
There has been a regulation for some time where banks are required to fill out a Currency Transaction Report for whenever someone deposits more than $10,000 all in one visit. Now, there’s even a more stringent form called the Suspicious Activity Report –this report is filled out any time someone deposits less than $10,000 but does it regularly over a period of time. The IRS investigates the Suspicious Activity Report more thoroughly than the Currency Transaction Report. Thus the people who have to file The Suspicious Activity Report are waving a larger red flag to the IRS than those who are only filing the Currency Transaction Report.
I know a couple who recently got married and received $37,000 in cash gifts. The groom knew that if he deposited all of the $37,000 into the bank at once, he would have to file a Currency Transaction Report. However, he did not realize that by going into the bank every week for six weeks and depositing $6,000 or $7,000 each time actually caused the bank to fill out a Suspicious Activity Report which got him into IRS trouble.
The IRS investigated the couple and accused them of not disclosing their full income. Of course, the IRS did not know that the $37,000 was a gift (which you do not have to disclose as income), so the burden of proof was on the couple. They had to get a tax attorney to represent them in order to prove to the IRS that what they did was completely legal and that the $37,000 was not income and thus not taxable. After four months, the couple was finally off the hook.
The Obama Administration enacted these new tax regulations in order to get to the guilty tax cheats and to penalize them accordingly. However, the process of instilling new enforcement may also wrongfully incriminate many innocent people. Some people get in trouble with the IRS because they are unaware of the new rules. Don’t be one of these people. If you find yourself in trouble with the IRS, get a tax expert on your side to represent your story in order to safeguard your financial future.
** For more information on resolving tax debt, visit the Tax Resolution Services web site for a free tax relief consultation or call 866-IRS-PROBLEMS.
In an effort to curtail corporate financial irresponsibility, the Obama administration has been working fervently to control white-collar tax cheats. The media has successfully portrayed the businesses that have overseas bank accounts as “suspicious” and potentially guilty of tax evasion. In 2001, there was a $345 billion tax gap–most of which can be accounted for by the underground economy of tax evaders who have strategically utilized foreign tax havens and other methods to avoid giving away 1/3, 1/4, or 1/5 of their income to the U.S.† government. I spoke with Chuck Morse early this month on The Chuck Morse Show about the new tax enforcement regulations and how they can affect your financial well-being.
Click here to listen to the entire interview online.
President Obama has gathered momentous support for his expansion of the IRS; this year, 1,000 new IRS agents will be hired, followed by another 1,000 new tax agents in 2010. In 24 months, the IRS is scheduled to grow by 25% in size. This means the IRS will have even more resources at their disposal to come after your hard-earned money. This is the most crucial time to be aware of the new tax regulations in order to protect your assets domestically or internationally.
The New Tax Enforcement Climate
The main focus of these new tax regulations is to target the offshore bank accounts of American businesses; these accounts are relatively protected from the IRS if they are in a country that does not have a tax treaty with the US–such as Switzerland. Lately, IRS has been pressuring convicted tax cheats to give up names of other tax cheaters in exchange for leniency in penalty. This creates a ripple effect that not only incriminates other tax cheaters, but also potentially jeopardizes the innocence of the tax advisers to the tax cheaters–such as lawyers and accountants. All of the sudden, lawyers and accountants who gave legal advice to their clients may now find themselves under investigation by the IRS for suggesting overseas-tax shelters to their clients.
Once the IRS accuses you of a tax violation, you are considered “guilty till proven innocent.” Some taxpayers go to tax court, but only about 6% of cases that go through tax court are actually ruled in favor of the taxpayer. Most of the time, the government wins. Therefore, it is imperative for you to seek a tax attorney’s expertise to handle the tax problem before you contact the IRS yourself. One of the most common and most incriminating mistakes people make is to speak to the IRS themselves without consulting professional tax guidance first.
What the New Tax Regulation Climate Means to You
Large sums of money deposits into your bank account will require you to formally alert the IRS
“Suspicious Activity Report“–this is the sister form to the “Currency Transaction Report” (which has been around for some time). The Currency Transaction Report is a form that the bank fills out any time you deposit $10,000 or more into your account. The Suspicious Activity Report is the form the bank fills out when you deposit less than $10,000 at regular intervals (i.e. if you go into your bank once a week for six weeks to put in $7,000 each time). The Suspicious Activity Report is investigated by the IRS more thoroughly than the Currency Transaction Report. All tax investigations are conducted by the IRS privately without public notice.
Casual cash gifts can get you in trouble–and you have the burden to prove your innocence If you receive large amounts of cash gifts (be it at a wedding or birthday, amounting to more than $10,000) and you go to deposit this amount into your bank, the IRS may accuse you of inaccurately disclosing your income. The IRS does not investigate the details of each cash source; therefore if you are in trouble with the IRS due to a personal circumstance unrelated to undisclosed income, you have to prove to them why you are innocent.
If your business accepts credit card payments, you have to fill out a 1099 form
By the end of 2010, all credit cards and merchant processors are going to be required to issue the business establishment a 1099 for all the gross credit card receipts that they processed on the business’s behalf. This means restaurants or anyone who takes credit cards as a business are now going to get a 1099 and the IRS is going to compare that to the businesses’ tax returns. This is one area that’s going to go through the roof in terms of enforcement.
If your business accepts PayPal, you may also need to fill out an IRS Office of Management and Budget Form
If you’re a business and you take more than one thousand dollars in one day of money orders, or you get a certified check of a thousand dollars or more in one day, you are considered a “currency operation”-in other words, they consider you just like a check-cashing establishment and you have to fill out an IRS Office of Management and Budget Form to alert the IRS that you’re one of these money service operations, even though you’re in a totally different business than cashing checks.
The Amnesty Period and Why You Need to Act Now
With the strict new tax enforcement laws, the U.S. government has offered an “Amnesty Period” which will expire on September 22, 2009. This amnesty period is a “break” for business owners with offshore accounts to voluntarily admit to tax evasion in order to reduce the amount they are fined. Before this period, the penalty is only 5-20% of the tax amount. However, after September 22, 2009, the penalty will be five to seven times the largest amount in your account over the last 6 years. Therefore, it is a really good idea to get your tax problems sorted out now before the September deadline.
Currently, the problem is that in this strenuous effort to enforce overseas tax cheats, a lot of people are going to get caught up in trouble who have not done anything wrong and who in the past, would have done the same thing without thinking twice about it, such as making a standard bank transaction. It is important to remain emotionally detached when dealing with the IRS, and it is an especially good idea to hire professional tax help–someone who knows the laws and are familiar with the IRS–to help defend you against unjust penalties.
I deal with tax problems every day and this year alone, my firm has successfully negotiated hundreds of IRS settlements at a rate of $0.13 on the dollar. For a free, no-risk consultation, please call my office at 866-IRS-PROBLEMS (1-866-477-7762) or visit the Tax Resolution Services web site.
Glenn E. Lockwood, 61, of Kenai, Alaska, was sentenced to five years in prison for his conviction on four counts of tax evasion. In addition to prison, Lockwood was ordered to pay a $10,000 criminal fine and an additional $42,000 for the costs of prosecution.
According to court records, Lockwood was a practicing dentist who owned the Kenai Dental Clinic and attempted to evade more than $575,000 in federal income taxes for the years 2000 to 2003. As set forth in the indictment, Lockwood improperly leased his professional services to an Irish entity, which leased his services to a Nevada company, which in turn leased Lockwood’s services back to his professional corporation, Glenn E. Lockwood, DDS, PC.
The evidence presented at trial established that Lockwood used nominees, offshore accounts and a sham trust to disguise his interest in assets. He hid his money offshore, funneling it through Ireland and the Caribbean island of Nevis and the Bahamas.
Evidence at trial also showed that Lockwood deducted practically every expense in his life from the relatively little income he did report, including deducting expenses to massage parlors as “continuing education.”
The Treasury Department released its “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals,” including greater detail on the Obama administration’s proposed tax provisions, plans for tax relief, and efforts to boost IRS enforcement budgets. The “Green Book” also explains tax rate increases, measures to close loopeholes in the tax code, and broad international tax changes, that would collectively bring in over $900 billion of tax revenue over 10 years.
CCH (http://tax.cchgroup.com/) reports:
The Treasury Department released its “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals,” (“Green Book”), which provides details of the tax provisions initially unveiled in the Obama administration’s budget outline on February 1. The Office of Management and Budget (OMB), meanwhile, updated its deficit projections, concluding that the federal deficit in fiscal year (FY) 2009 and FY 2010 will be $90 billion higher each year than the administration’s February estimates. The economic assumptions will be revisited as part of the OMB’s mid-session review in the summer. The Board of Trustees of the Social Security Trust Funds released a report indicating that expenses are outpacing income for the Medicare and Social Security programs, while a Senate Finance Committee hearing addressed health care proposals.
White House
The higher deficit numbers reported by the OMB are attributed largely to lower projected receipts and new data on the administration’s financial stabilization efforts undertaken through the Troubled Asset Relief Program and the FDIC (TAXDAY, 2009/05/12, T.1). OMB Director Peter Orszag maintained that the updated deficit forecast has not changed the administration’s key priorities to invest in education, health care reform and clean energy or its goals to cut the federal deficit in half over the next four years and provide a middle-class tax cut for 95 percent of U.S. taxpayers.
Congress
The Board of Trustees of the Social Security Trust Funds released its annual report on May 12 that shows that expenses are outpacing income for the Medicare and Social Security programs (TAXDAY, 2009/05/13, C.2). In order to make up the shortfall, the report suggests either cutting benefits or raising payroll taxes. The report notes that the financial imbalance has been made worse by the current economic recession. In addition, the report projects a two-year drop in the Medicare solvency date, from 2019 to 2017. According to the report, Social Security could be brought into actuarial balance over the next 75 years with changes equivalent to an immediate 16-percent increase in the payroll tax (from a rate of 12.4 percent to 14.4 percent) or an immediate reduction in benefits of 13 percent or some combination of the two.
Senate Subcommittee on Aviation Operations, Safety, and Security Chairman Byron L. Dorgan, D-N.D., said on May 13 that Senate lawmakers are just beginning the process of drafting their version of the FAA Reauthorization Bill of 2009 (HR 915) (TAXDAY, 2009/05/14, C.1). Dorgan said he expects to have the process completed within the next few weeks and that the measure will likely be passed by the Senate during the 111th Congress. The House Transportation and Infrastructure Committee approved HR 915 on March 5. The bill would provide $70 billion to the FAA and federal aviation infrastructure programs for the next four years.
A bill aimed at boosting the financial stability of the Highway Trust Fund was introduced on May 13 by House Oversight Subcommittee Chairman John Lewis, D-Ga. (TAXDAY, 2009/05/15, C.1). The measure, called the Highway Trust Fund Fairness Bill of 2009 (HR 2391), would modify current law to allow any interest generated by trust fund monies to be retained by the fund. The measure would also shift credits for certain exemptions and repayments away from the responsibility of the trust fund into the Treasury general fund.
The Senate Finance Committee on May 12 looked at the current tax treatment of health care and considered, among other proposals, ways to modify the current unlimited exclusion for employer-provided health care as a means to raise revenue (TAXDAY, 2009/05/13, C.1). Chairman Max Baucus, D-Mont., said he also wantsto look at tax-preferred health accounts and the itemized deduction for health expenses in an attempt to make sure that those benefits are structured fairly and efficiently. Baucus made clear that elimination of the exclusion was off the table, but that there is room for modification. Witnesses said capping the exclusion or capping the deduction for the self-employed at the 90th percentile might be necessary. The Finance Committee is slated to determine revenue measures for health care reform during meetings in the week beginning May 18.
As the committee explored ways to pay for health care reform, including modifying the current unlimited exclusion for employer-based health insurance, White House Press Secretary Robert Gibbs maintained it is possible to make “sustainable progress in cutting the cost of health care without raising taxes.” He noted that President Obama opposed taxing employer-provided health insurance during the presidential campaign. Gibbs said that the president wants to preserve the employer-based health care system but in a way that “envisions significant reform in how we’re spending money.”
Treasury/IRS
The Treasury Department released its “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals,” on May 11 (TAXDAY, 2009/05/12, T.1). The 132-page “Green Book” adds much-awaited detail to the tax provisions initially unveiled in the Obama administration’s budget outline released on February 1. While some provisions are not proposed to take effect until 2011 or later, others would be effective starting in 2010. A few, such as enhanced net operating loss carrybacks, would apply to 2009. In addition to providing greater detail onta the administration’s plans for tax relief, however, the Green Book also explains the tax rate increases, “loophole” closing measures, LIFO repeal and broad international tax changes, which, collectively, would bring over $900 billion into the Treasury over 10 years.
Withholding Adjustment for Pension Plans. The IRS released new withholding adjustment procedures that allow pension plans to raise withholding amounts now being taken from distributions to pension recipients (IR-2009-50; TAXDAY, 2009/05/15, I.1). The general withholding tables that have been used since April to reflect he making work pay credit have also been used for pension distributions, often inaccurately reflecting entitlement to the making work pay credit. The IRS is also encouraging pension payors who implement the new, optional withholding adjustment procedures to contact retirees who previously submitted a Form W-4P, Withholding Certificate for Pension or Annuity Payments, to adjust for the change.
2010 Deduction Limits for HSAs.The IRS announced the 2010 inflation- adjusted amounts for health savings accounts. The annual limit on deductible contributions will rise to $3,050 for self-only coverage in 2010, up from a limit of $3,000 for 2009 ($6,150 for an individual with family coverage, up from $5,950). Likewise, the deduction floor for a “”high-deductible health plan” will rise to $1,200 for self-only coverage ($2,400 for families), and the out-of-pocket cap will increase to $5,950 ($11,900 for families) (Rev. Proc. 2009-29; TAXDAY, 2009/05/15, I.2).
2009 Renewable Electricity Production Credit Factors.The IRS published the inflation adjustment factors and reference prices to be used in computing the renewable electricity production credit for 2009. They apply to sales in calendar year 2009 of kilowatt hours of electricity produced in the United States or a U.S. possession from qualified energy resources (Notice 2009-40; TAXDAY, 2009/05/11, I.2).
Nonacquiescence. The IRS recommended nonacquiescence in a 2008 case in which the Tenth Circuit Court of Appeals held that an IRS Appeals officer was disqualified from conducting a Collection Due Process (CDP) hearing because of prior “involvement.” In the case, the officer had considered the taxpayers’ liabilities during a CDP hearing for a prior year (AOD 2009-01; TAXDAY, 2009/05/11, I.8).
Disaster Relief. The IRS extended return-filing and payment deadlines for victims of the severe storms, flooding, and tornadoes in certain counties in Alabama that were declared federal disaster areas on March 25, 2009 (TAXDAY, 2009/05/12, I.1). The IRS also updated notices released in April granting relief to victims of severe storms and flooding in Georgia (TAXDAY, 2009/05/11, I.10) and North Dakota (TAXDAY, 2009/05/15, I.3), severe storms and tornadoes in Arkansas (TAXDAY, 2009/05/11, I.10), and severe storms, flooding, tornadoes and straight-line winds in Florida (TAXDAY, 2009/05/13, I.1).
By Jeff Carlson, Stephen K. Cooper, Paula Cruickshank and George Jones, CCH News Staff
News, commentary, insight, tips and humor from tax expert Michael Rozbruch
Michael Rozbruch is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers and a Maryland CPA.
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