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.
The IRS has announced a six-month Voluntary Disclosure program that offers lower penalties to those who come forward and pay taxes due on the secret holdings in offshore accounts. 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.
The IRS also issued a list of 30 frequently asked questions about the Voluntary Disclosure process – which offers leniency to taxpayers with unreported income relating to offshore transactions. Along with lower tax penalties, those who comply are expected to avoid criminal prosecution
We have been making one disclosure after another – including some “quiet disclosures.” While the IRS encourages taxpayer to come forward under the voluntary disclosure offer, it is also possible to file amended returns and pay any related taxes and interest for previously unreported offshore income without otherwise notifying the IRS.
Quiet disclosures should only be attempted by specialized and experienced tax experts, as any amended tax returns reporting increases in income run the risk increased scrutiny from the IRS.
Income tax relief under the voluntary disclosure process is open to all taxpayers that comply with IRS’s terms, including corporations, partnerships and trusts, as well as those taxpayers that have an offshore merchant account. The offer doesnot apply if IRS has initiated a civil examination of the taxpayer, regardless of whether it relates to undisclosed foreign accounts or undisclosed foreign entities.
Under the plan, owners who disclose foreign accounts would pay:
* Back taxes and interest for a minimum of six years.
* A 25% delinquency penalty for each year in which tax returns weren’t filed, or a 20% accuracy penalty for years in which returns were filed but income from offshore accounts wasn’t included.
* A penalty equal to 20% of the highest aggregate value at any point during the last six years for all previously secret foreign accounts.
Robert McKenzie, a lawyer for more than a dozen American clients with UBS accounts, predicted the program would prompt more disclosures because it would enable evaders to compute their liability “almost to the penny” — which wasn’t possible before. The IRS said the number of Americans who have disclosed foreign accounts has more than doubled this federal fiscal year over 2007-08.
** If you require assistance with a voluntary disclosure or need help resolving other IRS problems, contact our specialized staff of tax attorneys, CPAs, EAs and tax professionals. Visit the Tax Resolution Services web site for a free income tax relief consultation or call us at 866-IRS-PROBLEMS.
President Obama announced an overhaul of the tax code to “detect and pursue” U.S tax evaders and go after their offshore tax shelters.
The President’s two-part plan calls for nearly 800 new IRS agents to enforce the U.S. tax code – and help wage war against multi-national corps and their offshore tax havens.
Under the current tax code, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. If they keep the profits offshore, they can defer paying taxes indefinitely.
Obama’s plan, which would take effect in 2011, would crack down on these loopholes and companies would no longer be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries.
The president said that his plan would generate $210 billion in new taxes over 10 years and “make it easier” for companies to create jobs at home. Over a decade, $210 billion would make a modest dent in the forcasted $1.8 trillion federal deficit.
While the administration is not seeking to repeal all overseas tax benefits, Congress is expected to resist significant portions of Obama’s plan.
Meanwhile, the government will be looking to collect funds as the federal deficit continues to grow. Taxpayers can expect more aggressive collection tactics by the IRS to close in on the $400 billion tax gap that estimated each year,.
Individuals and businesses – both big and small – will see a noticeable increase in IRS enforcement. In the current economic downturn, we are seeing many struggling businesses falling behind on payroll tax deposits. And business owners need expert tax representation to protect the future of their companies and avoid IRS levies on their wages and bank accounts.
** If you are in trouble with the IRS, our specialized staff of tax attorneys, CPAs, EAs and tax professionals can help. Visit the Tax Resolution Services web site for a free tax relief consultation or call us at 866-IRS-PROBLEMS.
Internal documents reveal IRS has made offshore tax evasion its highest-priority target; investigators will focus on unreported income By Michael Rozbruch
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The memo sent to examination staff of the Internal Revenue Service was clear.
Investigators should make sure offshore tax cases “receive priority treatment.”
Indeed, internal documents released by the tax-collecting agency, coupled with public comments from IRS Commissioner Doug Shulman, leave little doubt the government will focus the brunt of its enforcement efforts on taxpayers who use offshore bank accounts to hide income.
In anticipation of this newly aggressive tax enforcement, the IRS is offering temporary amnesty to those taxpayers hiding money overseas. Taxpayers who come forward will face fines, penalties and interests — but the IRS will waive all criminal charges, Shulman announced recently.
“This is a chance for people to come clean on their own,” said the IRS commissioner.
The rank-and-file investigators of the IRS, meanwhile, have received memos pushing them toward investigating more thoroughly taxpayers who use offshore bank accounts.
“Offshore cases sent to the field are work of the highest priority,” said an IRS internal documents. “Examiners should utilize the full range of information gathering tools in properly developing offshore issues with special emphasis on detecting unreported income. This includes interviewing taxpayers, making third-party contacts and timely issuing summonses to taxpayers and third parties.”
The emphasis on offshore accounts comes at an opportune time for the IRS. For the first time, U.S. officials have successfully pierced the secrecy veil of banks in Switzerland, where many wealthy Americans hide money.
Earlier this year, Switzerland agreed to cooperate more on tax evasion cases due to an IRS investigation and lawsuit concerning UBS.
From 2002 to 2007, UBS helped American clients evade as much as $300 million a year in taxes, prosecutors allege.
Those using Swiss banks to evade income taxes aren’t the only ones who risk being caught by the IRS, however.
Earlier agreements with credit cards companies have given the IRS unprecedented information about taxpayers who use a credit card linked to offshore accounts, such as in the Caribbean. A common tactic for tax cheats has been to funnel money to an overseas account, link the account to a credit card, and then pay all expenses in the United States using that credit card.
Now that Swiss banks are cooperating and credit card companies are providing records, there’s no safe place to hide your money. It’s time to come forward.
———————————- 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 866-477-7762 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer. If you are seeking tax relief, fill out the free tax consultation form on Tax Resolution’s website or contact us at 1-866-IRS-PROBLEMS (1-866-477-7762).
According to the IRS annual Dirty Dozen list of most common tax schemes, phishing “expeditions” are on the rise this year along with frivolous tax arguments. I even got a phishy email the other day. These scam email look real too.. on IRS simulated letterhead complete with the logo and all.
It’s no surprise that these tax scams are being peddled to Americans in full force - as IRS enforcement is on the rise and struggling taxpayers may be desperate for any way out of paying their taxes in this down economy.
But fall victim to one of these scams, and you are certain to find yourself in serious trouble with the IRS.
“Taxpayers should be wary of scams and promises to avoid paying taxes that seem too good to be true,” Acting IRS Commissioner Linda Stiff said. “There is no secret formula that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.”
With the tax deadline looming, this annual list from the IRS is an important reminder that it’s real easy to get in tax trouble. But it’s also possible to resolve your tax problems, if you help from certified tax resolution experts.
Here are the common tax scams taxpayers need to avoid:
1. Phishing
Phishing is a tactic used by Internet-based thieves to trick unsuspecting victims into revealing personal information they can then use to access the victims’ financial accounts. These criminals use the information obtained to empty the victims’ bank accounts, run up credit card charges and apply for loans or credit in the victims’ names. Phishing scams often take the form of an e-mail that appears to come from a legitimate source. Some scam e-mails falsely claim to come from the IRS. To date, taxpayers have forwarded more than 33,000 of these scam e-mails, reflecting more than 1,500 different schemes, to the IRS. The IRS never uses e-mail to contact taxpayers about their tax issues. Taxpayers who receive unsolicited e-mail that claims to be from the IRS can forward the message to a special electronic mailbox, phishing@irs.gov, using instructions contained in an article titled “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes.” Remember: the only official IRS Web site is located at www.irs.gov.
2. Scams Related to the Economic Stimulus Payment
Some scam artists are trying to trick individuals into revealing personal financial information that can be used to access their financial accounts by making promises relating to the economic stimulus payment, often called a “rebate.” To obtain the payment, eligible individuals in most cases will not have to do anything more than file a 2007 federal tax return. But some criminals posing as IRS representatives are trying to trick taxpayers into revealing their personal financial information by falsely telling them they must provide information to get a payment. For instance, a potential victim is told by phone or e-mail that he or she is eligible for a rebate but must provide a bank account number (or similar information) to get the payment. If the target is unwilling, the victim is then told that he cannot receive the rebate unless the information is provided. Individuals should remember that the only way to get a stimulus payment is to file a 2007 tax return. The IRS urges taxpayers to be extra-vigilant. The IRS will not contact taxpayers by phone or e-mail about their stimulus payment.
3.Frivolous Arguments
Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. Most recently, the IRS expanded its list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of these positions on the list are subject to a $5,000 penalty. The most recent update of the list of frivolous positions includes: misinterpretation of the 9th Amendment to the U.S. Constitution regarding objections to military spending, erroneous claims that taxes are owed only by persons with a fiduciary relationship to the United States, a nonexistent “Mariner’s Tax Deduction” related to invalid deductions for meals and the misuse of the fuel tax credit (see below). The complete list of frivolous arguments is on the IRS Web site at IRS.gov.
4. Fuel Tax Credit Scams
The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit was recently added to the list of frivolous tax claims, potentially subjecting those who improperly claim the credit to a $5,000 penalty.
5. Hiding Income Offshore
Individuals continue to try to avoid paying U.S.taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans. The IRS and the tax agencies of U.S. states and possessions continue to aggressively pursue taxpayers and promoters involved in such abusive transactions.
6. Abusive Retirement Plans
The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to Roth IRAs. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into Roth IRAs or companies owned by their Roth IRAs at less than fair market value. In one variation of the scheme, a promoter has the taxpayer move a highly appreciated asset into a Roth IRA at cost value, which is below annual contribution limits even though the fair market value far exceeds the amount allowed.
7. Zero Wages
Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.
8. False Claims for Refund and Requests for Abatement
This scam involves a request for abatement of previously assessed tax using Form 843, “Claim for Refund and Request for Abatement.” Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is “Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service.”
9. Return Preparer Fraud
Dishonest tax return preparers can cause many problems for taxpayers who fall victim to their schemes. These scam artists make their money by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Some preparers promote the filing of fraudulent claims for refunds on items such as fuel tax credits to recover taxes paid in prior years. Taxpayers should choose carefully when hiring a tax preparer, especially one who promises something that seems too good to be true.
10. Disguised Corporate Ownership
Some people are going as far as forming domestic shell corporations in certain states for the purpose of disguising the ownership of a business or financial activity. Once formed, these anonymous entities can be used to facilitate underreporting of income, non-filing of tax returns, engaging in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.
11. Misuse of Trusts
For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.
12. Abuse of Charitable Organizations and Deductions
The IRS continues to observe the misuse of tax-exempt organizations. Misuse includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property and overvaluation of contributed property. In addition, IRS examiners are seeing an upturn in instances where taxpayers try to disguise private tuition payments as contributions to charitable or religious organizations.
** If you are in trouble with the IRS and need tax help, contact our specialized staff of tax attorneys, CPAs, EAs and tax professionals. Visit the Tax Resolution Services web site for a free tax relief consultation or call us at 866-IRS-PROBLEMS.
In a blow to tax cheats, Switzerland’s largest bank agrees to divulge the names of those suspect of using offshore accounts to evade U.S. taxes By Michael Rozbruch
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In the world of tax cheats, the news doesn’t get much bigger.
UBS, the largest bank in Switzerland, agreed to provide to the U.S. government with the names of those it suspects of using its accounts to evade paying taxes in the United States. The unprecedented move comes after UBS agreed to pay $780 million to settle an investigation of its activities.
Federal prosecutors suspected UBS helped American clients evade as much as $300 million a year in taxes from 2002 to 2007.
How many names of wealthy American tax cheats UBS will provide in this newest measure is unclear. However, according to a lawsuit the Department of Justice filed against UBS in Miami, as many as 52,000 U.S. customers hid their UBS accounts from the government in violation of tax laws.
According to a UBS document filed with that Miami lawsuit, as of the mid-2000s, those secret accounts held about $14.8 billion in assets.
“At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes,” said John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, in a statement at the time of the lawsuit’s filing.
“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.”
For those using offshore accounts to evade taxes, this should be among the final warnings that they are not safe. Even the wealthiest of tax cheats, the ones using the Swiss banks whose records many considered impenetrable by the U.S. government, are now at risk of total exposure and prosecution by the IRS and the Department of Justice.
While the news is certainly surprising, it isn’t shocking.
For several years, the IRS has been moving more and more aggressively toward tax cheats who use offshore accounts to hide their assets. Many tax cheats once used offshore accounts linked to credit cards that then were employed to purchase goods and services in the United States — seemingly a way of keeping money off the IRS’s books.
That, of course, stopped working once the IRS forced MasterCard to turn over records of those customers whose cards were linked to offshore accounts.
At this point, now that the largest Swiss bank is cooperating with the federal government, there are no safe havens for tax cheats. It’s time to turn yourself in.
“Taxpayers should talk to a tax professional and come forward under our voluntary disclosure process,” said IRS Commissioner Doug Shulman. “Having the IRS find you could mean a much heavier price than coming forward on your own.”
———————————- 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 866-477-7762 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer. If you are having tax problems, contact us for a free consultation with one of our tax attorneys and IRS problem solvers!
The IRS announced new voluntary disclosure practices for offshore account holders. Voluntary disclosure can help taxpayers avoid prosecution for possible tax evasion and reduce taxes, penalties, and interest owed. The IRS offers leniency for voluntary disclosure and Americans with IRS tax problems should take advantage of this policy to mitigate legal problems later.
While taxpayers can participate in the voluntary disclosure program before the IRS has initiated a civil or criminal examination or before the taxpayer has received notice of such an investigation, it remains unclear as to whether those charged with offshore tax evasion and concealing back accounts in Switzerland may successfully participate in this initiative.
CCH (http://tax.cchgroup.com/) reports:
The IRS has announced new steps to coax U.S. taxpayers with undisclosed foreign bank accounts to come forward. In return for paying back taxes for the past six years, plus interest and a set of stiff penalties, the IRS will promise not to bring criminal charges or the 75-percent fraud penalty. IRS Commissioner Douglas H. Shulman announced this policy shift and clarification at a press briefing from his Washington, D.C. offices on March 26, at which he also released internal IRS documents that put the plan into motion.
“We believe the guidance represents a firm, but fair, resolution of these cases and will provide consistent treatment for taxpayers,” Shulman explained. “The goal is to have a predictable set of outcomes to encourage people to come forward and take advantage of our voluntary disclosure practice while they still can.” He set a deadline of six months for disclosures under the terms of the guidance, at which time the program will be re-evaluated.
The IRS has issued a series of three memoranda, and has revised the Internal Revenue Manual (IRM), to reflect updated policies concerning voluntary disclosure, primarily in connection with offshore transactions. Voluntary disclosure occurs when a taxpayer timely discloses information necessary to determine or correct the taxpayer’s liability. The IRM continues to provide that its voluntary disclosure practices do not create any substantive or procedural rights for taxpayers, but are a matter of internal IRS practice.
Voluntary Disclosure Terms
Shulman emphasized that the terms being offered for the disclosure of offshore accounts are an outgrowth of current policy and carry penalties at a level consistent with voluntary disclosure programs in the past. Within this framework, Shulman enumerated the amounts that would need to be paid by taxpayers with heretofore undisclosed offshore accounts who “come clean” under the program:
Back taxes due on newly disclosed assets for the last six years;
Interest due on these back taxes for the last six years;
A 20-percent accuracy-related under Code Sec. 6662 or a 25-percent delinquency penalty under Code Sec. 6651 for each tax year at issue; and
Looking to the past six years, a 20-percent penalty on the total balance of all the taxpayer’s foreign bank accounts or assets during the year among the past six in which the accounts had their highest aggregate value.
While Shulman observed that the penalties demanded under the program are not insubstantial, he pointed to several advantages to participating taxpayers regarding what the IRS will not do:
The IRS will not pursue charges of criminal tax evasion against taxpayers who voluntarily disclose their offshore assets under this new policy; and
The IRS will not pursue other penalties against participating taxpayers, such as the Code Sec. 6663 fraud penalties (75-percent of the unpaid tax) or the statutory penalty for willful failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50-percent of the foreign account balance) that both annually apply to undisclosed accounts and assets during the relevant tax years.
Shulman also touted the advantage to offshore account holders of “getting the matter behind them” and giving them certainty as to their tax liability.
In a follow-up comment, an IRS spokesman emphasized that “it is too late for any taxpayer who is under criminal investigation to make a voluntary disclosure. The IRS cannot discuss specific situations, but the voluntary disclosure process does not apply when the IRS has information related to a specific taxpayer from a criminal enforcement action.”
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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