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Thursday, May 14th, 2009
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 announcement comes amid a U.S. legal battle to get owners’ names for 52,000 UBS accounts in which Americans evaded taxes by holing at least $14.8 billion in Swiss banks.
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 does not apply if IRS has initiated a civil examination of the taxpayer, regardless of whether it relates to undisclosed foreign accounts or undisclosed foreign entities.
According to USA Today:
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.
Tags: amending tax returns, back tax, filing tax returns, income tax relief, IRS help, IRS penalties, irs problems, IRS tax problems, Michael Rozbruch, off shore banking, quiet disclosures, tax attorney, tax evasion, tax expert, tax resolution, tax resolution services, UBS legal battle, Voluntary Disclosure
Posted in Tax news and tips, Voluntary Disclosure | 1 Comment »
Monday, May 4th, 2009
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.
Tags: federal deficit, increased IRS enforcement, IRS bank levy, IRS levies, irs problems, obama tax plan, offshore tax shelters, overseas tax benefits, Payroll Taxes, tax attorney, tax cheat, tax evasion, tax expert, tax fraud, tax gap, tax havens, tax help, tax resolution, tax resolution expert, tax resolution services, ways levy
Posted in Tax news and tips | 5 Comments »
Tuesday, April 14th, 2009
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.
UBS, the largest bank in Switzerland, has agreed to provide the U.S. government with the names of those it suspects of using its accounts to evade paying taxes in the United States. The agreement came after UBS agreed to pay $780 million to settle an investigation of its activities.
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.
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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).
Tags: aggressive tax enforcement, amnesty to taxpayers hiding money overseas, doug shulman, evade income taxes, Free Tax Consultation, free tax relief consultation, hiding income, offshore bank accounts, offshore tax cases, offshore tax evasion, Swiss banks, tax cheats, tax evasion, UBS, unreported income
Posted in IRS Tax Cases, IRS Times and Inquirer, Seeking Professional Tax Help, Working with the IRS | 3 Comments »
Tuesday, April 14th, 2009
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.
Tags: dirty dozen, economic stimuls payment, frivolous argument, frivolous tax argument, fuel tax credit, hiding offshore income, IRS enforcement, IRS help, IRS problem solver, irs problems, IRS tax problems, Michael Rozbruch, phishing, tax attorney, tax expert, tax help, tax relief, tax resolution, tax resolution expert, tax resolution services, Tax Scams, zero wages
Posted in Tax news and tips | 3 Comments »
Tuesday, March 31st, 2009
Bloomberg News columnist John M. Berry makes some interesting points regarding President Obama’s new task force created to close the tax gap by focusing on closing loopholes, streamlining tax code and generating revenue.
“It may not accomplish much,” he says.
Highlights from the article include:
With April 15 fast approaching, stronger enforcement and a lot more resources for the Internal Revenue Service should head the administration’s to-do list.
The tax code could be undoubtedly improved, but the biggest problem is in terms of the tax gap, is a lack of adequate enforcement (making it harder for taxpayers to cheat and easier to catch those who do) and the Obama-ordered code review won’t much help that.
Recommendations for bolstering IRS complaince are due in early December, and eight months isn’t nearly enough time to lay the groundwork for big changes.
SMALL TIME TAX CHEATS
Research shows that the tax gap is the result of “low rollers” (proprietors of small businesses and farmers) who underreport income and the fail to pay employment taxes related to that income – not just high-rollers hiding income in offshore accounts.
NEED FOR GREATER ENFORCEMENT
A study of tax returns for 2001 found a gross tax gap of $345 billion, or 16 percent of taxes due. Enforcement activity plus other late payments recovered $55 billion of that, leaving a gap of $290 billion.
The dire state of the economy may also encourage more taxpayers to cheat. You can be sure the gap resulting from the 2008 tax returns is going to be noticeably bigger than it was in 2001.
**If you are can’t afford to pay your taxes this year, find out what you can do to avoid IRS penalties and other costly financial consequences.
Tags: delinquent tax returns, employment taxes, IRS compliance, IRS enforcement, irs problems, Michael Rozbruch, small business taxes, tax cheats, tax evasion, tax expert, tax gap, tax help, tax relief, tax resolution, tax resolution expert, tax resolution services, unfiled tax returns
Posted in Tax news and tips | 1 Comment »
Monday, March 30th, 2009
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.”
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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!
Tags: doug shulman, Free Tax Consultation, John DiCicco, offshore accounts, offshore tax evasion, Swiss bank accounts, Swiss banking, tax cheats, tax evasion, tax problems, UBS
Posted in IRS Tax Cases, IRS Times and Inquirer | 1 Comment »
Friday, March 27th, 2009
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.”
By Torie Cole and Sherri Morris, CCH News Staff
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Tags: avoid IRS penalties, Douglas Shulman, Michael Rozbruch, offshore accounts, offshore tax evasion, reduce IRS penalties, tax evasion, tax expert, tax help, tax relief, tax resolution, tax resolution expert, tax resolution services, tax settlement, tax shelter, Voluntary Disclosure
Posted in Tax news and tips, Voluntary Disclosure | 2 Comments »
Monday, March 9th, 2009
Last week, Sen. Carl Levin, chairman of the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, examined the recent deferred prosecution agreement between the Department of Justice and UBS AG Bank of Switzerland, as well as the DOJ’s ongoing attempts to force the bank to identify its U.S. customers with secret Swiss bank accounts.
Recently, a senior executive of a large Swiss bank was charged with conspiring with other executives, managers, private bankers and clients to defraud the United States by concealing $20 billion in assets from the IRS.
Levin reintroduced his “Stop Tax Haven Abuse Bill” to “fight back and end the abuses inflicted on us by those tax havens.” IRS Commissioner Douglas H. Shulman testified at the hearing and responded to Levin’s suggestions for putting pressure on taxpayers using Swiss banks’ secrecy to avoid paying U.S. tax.
Another sign of the times: IRS enforcement is of rise.
If you are in trouble with the IRS, our specialized staff of 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 866-477-7762.
Tags: carl levin, IRS audits, IRS debt, IRS enforcement, IRS help, irs news, IRS problem solver, irs problems, IRS tax problems, Michael Rozbruch, offshore asset, shulman, tax cheat, tax evasion, tax expert, tax haven, tax help, tax news, tax resolution, tax resolution expert, tax resolution services, Tax Tips
Posted in Tax news and tips | 1 Comment »
Monday, February 23rd, 2009
Though slightly down from 2007, tax enforcement number in 2008 were among the highest in a decade.
By Michael Rozbruch
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The large number of tax evasion and audit cases you’re hearing about today isn’t a symptom of yellow journalism.
In fact, the fiscal-year 2008 tax enforcement numbers released by the Internal Revenue Service are among the highest in a decade.
In fiscal-year 2008, the IRS collected $56.4 billion through collection, examination and document-matching efforts. That figure is a slight decrease from 2007’s $59.2 billion but a dramatic increase from 1999, when the government had $32.9 billion in enforcement collections.
But the most dramatic figure in the recent numbers comes in the staffing column. Even as the IRS collected nearly twice as much last year as it did in 1999, the agency accomplished this with fewer enforcement staff members — 20,722 in 2008, compared to 22,543 in 2007 — suggesting the government is becoming more efficient even as it becomes more aggressive.
Last year, the IRS stepped up its investigations of offshore accounts used to hide income and evade taxes. The agency has begun to examine these accounts — and the taxpayers who use them — using the same tools criminal investigators use in looking at those headline-grabbing cases you see in the newspapers.
In fact, these days, IRS agents are doing more than just following the money. They’re building sources.
“Using informants is another part of our toolkit,” IRS Commissioner Douglas Shulman said during a December tax conference.
“Since the inception of the Whistleblower Office in 2007, the IRS has received hundreds of tips on financial institutions and individuals with foreign accounts and international compliance issues. Some of these have become big money cases.
“Dozens of these tips involve the names of individuals with offshore accounts; others involve the names and practices of financial institutions in those countries that typically have strict bank secrecy laws. And keep in mind the value here is far greater than just the names of specific individuals,” Schulman continued.
“With work, these tips provide the information the IRS needs to pursue John Doe summonses – our next important tool.
“The IRS generally uses the John Doe summons authority to identify individuals, groups or classes of US taxpayers whose member identities are unknown, who are involved in specific areas of tax noncompliance and who cannot be identified through other means.”
For taxpayers, the implications of these recently released numbers and Commissioner Schulman’s statements are obvious: The IRS is doing everything and anything it can in its considerable power to investigate and curb tax evasion, from simple audits to examinations of complex, multinational tax shelter programs.
This situation isn’t likely to change. With the economy down and tax revenues decreased, Uncle Sam’s tax-collecting agency is going to take every step it can to collect what’s due. Be warned.
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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.
Tags: Douglas Shulman, IRS audits, offshore accounts, tax audits, tax enforcement, tax evasion, tax noncompliance, tax shelters, Whistleblower Office
Posted in IRS Times and Inquirer | No Comments »
Tuesday, November 25th, 2008
The IRS has is reportedly going after the relatives of Holocaust survivors and refugees who hid money in Switzerland before World War II broke out.
Reports out of Zurich indicate the Swiss government has agreed to give the IRS information about some overseas accounts for people trying to avoid U.S. banking laws. The development stems from a U.S. Justice Department investigation of UBS’ alleged courting of wealthy Americans for such offshore tax evasion. As the Justice Department expands its investigation to include other overseas banking entities, some owners of Holocaust-era accounts have sought legal help in “coming clean” with the IRS.
Among the 20,000 or so accounts currently being targeted by the IRS, it’s estimated, perhaps a thousand or so involve Holocaust-era funds. The amounts in the accounts range from as little as $25,000 to complete hidden fortunes in the millions.
The clients of the Swiss banks are being advised that that voluntary disclosure can help mitigate legal problems later. The IRS offers leniency for voluntary disclosure and it is good advice for any American with IRS tax problems to take advantage of this policy.
A timely disclosure of a substantial unreported tax liability shows that the taxpayer is willing to cooperate with the IRS in determining his or her correct tax liability. This is an important factor in deciding whether the taxpayer’s case should ultimately be referred for criminal prosecution.
Tags: offshore tax evasion, tax evasion, tax expert, vountary disclosure
Posted in Tax news and tips, Voluntary Disclosure | No Comments »
Thursday, October 9th, 2008
Arnold & Porter the latest to be effected in IRS’s continued push against tax cheats and tax shelters as the government continues to press on.
By Michael Rozbruch
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The onslaught continues.
The Internal Revenue Service’s latest victim: Arnold & Porter, an international law firm and a heavyweight in the corporate world.
The IRS reached a settlement agreement with Arnold & Porter in September which required the law firm to pay a civil tax promoter penalty.
The settlement relates to the firm’s failure in 2000, 2001 and 2002 to comply with tax shelter registration requirements and its participation in the organization of the following listed transactions that were sold to high-net worth individuals and corporations: Partnership Option Portfolio Securities (POPS), Personal Investment Corporation (PICO), and Family Office Customized Partnerships (FOCUS).
According to the IRS, Arnold & Porter cooperated with the government’s examination. The firm has put into place a compliance program designed to assure ongoing adherence to all tax shelter disclosure and list maintenance requirements of the Internal Revenue Code and related laws.
“Today a former Arnold & Porter partner pled guilty to charges that arose in connection with a government investigation of certain tax shelter transactions that took place in the time period 2000 to 2002,” the firm said in a prepared statement distributed to the news media.
“We have cooperated fully with the government. The firm previously entered a civil settlement with the Internal Revenue Service in connection with these transactions, and has resolved all related private civil claims.”
The settlement with Arnold & Porter comes after several years of highly aggressive IRS action toward tax cheats, tax promoters and institutions that help taxpayers avoid their obligations.
Recent actions have included:
• Requiring all U.S. citizens to report to the IRS any offshore bank accounts they use.
• The U.S. government announced it was taking action against more than 100 U.S. taxpayers who used bank accounts in Liechtenstein to evade taxes here at home.
• One out of 11 individuals with incomes of $1 million or more faced an audit in 2007.
• The IRS launched an audit program that randomly selected 13,000 taxpayers.
• Mellon Bank entered into a civil settlement agreement with the United States and agreed to pay $16.5 million for civil damages and penalties under the federal False Claims Act.
Of course, these are just a few examples of recent actions.
But if you’re considering cheating on your taxes, you might want to keep these in mind.
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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 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
Tags: tax shelters
Posted in IRS Tax Cases, IRS Times and Inquirer | 2 Comments »
Friday, July 25th, 2008
Tax-collecting agency is questioning how many Americans have offshore accounts and how they’re being used
By Michael Rozbruch
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Have a bank account overseas?
Be sure to tell the IRS about it.
The U.S. tax-collecting agency asked Americans with overseas accounts to report them by June 30. If you haven’t done so, you could be in trouble.
Owing to globalization, more people in the United States have foreign financial accounts. There is nothing improper about setting up or maintaining such accounts. However, IRS officials are concerned U.S. citizen may overlook that their accounts are large enough to trigger reporting obligations.
“There are responsibilities that go along with owning such foreign bank and financial accounts,” said IRS Commissioner Doug Shulman in a statement. “Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.”
Since 2000, the number of Report of Foreign Bank and Financial Accounts (FBAR) forms received by the Treasury has increased by nearly 85 percent, from 174,528 in 2000 to 322,414 in 2007. Despite this significant increase in filings, concern remains about the degree of reporting compliance for those who are required to file.
U.S. citizen are required to file a Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1, each year if they have a financial interest in or signature authority or other authority over any financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.
Civil and criminal penalties for non-compliance with the FBAR filing requirements are severe. Civil penalties for a non-willful violation can range up to $10,000 per violation. Civil penalties for a willful violation can range up to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine or 10 years imprisonment or both. Civil and criminal penalties may be imposed together.
That the IRS is aggressively asking for such information should come as no surprise to those who read enforcement news closely.
For several years, the IRS kept a close eye on overseas accounts and their use in tax-avoidance schemes.
Until a recent crackdown, many Americans used overseas accounts to hide money and then linked those accounts to Visa and MasterCard accounts, allowing them to pay for expenses in the United States using money that was tax sheltered overseas.
That worked marvelously — until the IRS was able to get the credit card companies’ records.
Since then, the IRS has been keeping closer tabs on offshore accounts.
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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 1-866-477-7762 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
Tags: Foreign Bank and Financial Accounts (FBAR), Offshore Banking, Overseas Banking
Posted in Tax Problem FAQs | 1 Comment »
Monday, April 7th, 2008
The tax deadline is looming. But to remind readers how easy is to get in tax trouble, here’s the IRS’s annual “Dirty Dozen” list.
By Michael Rozbruch
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It’s become an annual tradition for the IRS. And it isn’t Tax Day.
It’s the “Dirty Dozen.” Every year, auditors and investigators at the IRS compile the most frequently employed scams peddled to American taxpayers as ways to avoid income tax. Fall victim to one, and you can find yourself in a tax world of trouble:
1. Phishing: Phishing is a trick used by Internet thieves to trick taxpayers into revealing personal information they can then use to access the victims’ financial accounts. This form of identity theft often takes the form of an e-mail that appears to come from a legitimate source. To date, the IRS has documented 33,000 versions of this e-mail scam.
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 related to the economic stimulus payment, often called a “rebate.”
3. Frivolous Arguments: Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe.
4. Fuel Tax Credit Scams: The IRS is receiving claims for the fuel tax credit that are unreasonable or frivolous.
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.
6. Abusive Retirement Plans: 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.
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.
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.”
9. Return Preparer Fraud: Dishonest tax return preparers can cause many problems for taxpayers who fall victim to their schemes.
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.
11. Misuse of Trusts: Unscrupulous promoters urge taxpayers to transfer assets into fraudulent trusts.
12. Abuse of Charitable Organizations and Deductions: The IRS continues to observe misuse of tax-exempt organizations.
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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 1-866-IRS-PROBLEMS to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
Tags: economic stimuls payment, Identity Theft, misuse of trust, phishing, tax credit scam, tax expert, tax help, tax resolution, tax scam, Working with the IRS, zero wages
Posted in IRS Times and Inquirer, Identity Theft, Penalty Abatement, Working with the IRS | No Comments »
Tuesday, March 18th, 2008
The IRS is becoming more and more aggressive with tax cheats. The agency will hunt you down, even in … Liechtenstein
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It’s March, and Tax Day nears.
It’s also time to heed some warnings: The Internal Revenue Service is searching far and high for tax cheats.
Literally far and high.
The U.S. government recently announced it was taking action against more than 100 U.S. taxpayers who used bank accounts in Liechtenstein to evade taxes here at home.
That’s right — Liechtenstein, a tiny principality in the Alps.
The national tax administrations of Australia, Canada, France, Italy, New Zealand, Sweden, United Kingdom and the United States — all member countries of the OECD’s Forum on Tax Administration — are now working together following revelations that Liechtenstein accounts are being used for tax avoidance and evasion.
“Combating offshore tax avoidance and evasion are high priorities for the IRS,” IRS Acting Commissioner Linda Stiff said in a statement. “We are determined to protect the United States tax system from abuse and ensure that taxpayers pay what they owe. We will use all our authority to fairly and effectively enforce our tax laws. It should be clear from recent events that there is no safe hiding place for the proceeds of tax avoidance and evasion. Anyone with hidden income and gains would be well-advised to make a prompt and complete disclosure to the Internal Revenue Service.”
It’s becoming harder and harder for tax cheats to find places to stash their money. Keep in mind: Liechtenstein doesn’t even have an airport, and the IRS still tracked down more than 100 U.S. tax cheats who were using bank accounts there.
The news should be sobering, particularly in light of the 2007 enforcement numbers that were recently distributed by the IRS.
During 2007, the IRS audited 84 percent more returns of individuals with incomes of $1 million or more than during 2006. Overall, enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and nearly $34.1 billion in 2002.
Still don’t believe the IRS is becoming more aggressive? Consider these headlines from last year:
• Drug giant Merck paid $2.3 billion in federal taxes, net interest and penalties to resolve a dispute regarding tax years 1993 to 2001.
• The IRS reached an agreement with the Hollywood Foreign Press Association, which organizes the Golden Globe Awards, regarding the taxability of gift bags and promotional items.
• The IRS effectively shut down the once-powerful law firm J&G after the firm promoted illegal tax shelters.
• Law firm Sidley Austin paid $39.4 million in penalties for promoting abusive tax shelters and failing to comply with tax shelter registration requirements.
Now are you ready to file your tax return?
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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 toll free at 1-866-477-7762 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
Tags: IRS becoming more aggressive, tax cheats, tax evasion, Tax Resolution Specialist
Posted in IRS Times and Inquirer | No Comments »
Saturday, February 2nd, 2008
A California banker is facing a stiff prison sentence after not declaring a six-figure income derived from a prime bank scheme.
Mary J. Clagg, 60, of Fresno, was indicted on federal income tax charges stemming from the scheme. She has pleaded not guilty.
According to the government, from approximately January 1999 to December 2002, CLAGG received commissions from Resource Development International (RDI), a scheme that raised nearly $98 million. RDI was in fact a fraudulent investment scheme that offered and sold unregistered prime bank securities, mainly targeting people seeking to invest retirement funds. Instead, investors’ funds were misappropriated and dispensed for personal and unauthorized business uses. Tens of millions of dollars were diverted from the RDI bank account to offshore accounts in the Bank of Nevis, West Indies.
Over about three years, more than $802,000 was deposited into Clagg’s Bank of Nevis account. From approximately November 1999 to June 2003, CLAGG repatriated thousands of dollars from her Bank of Nevis account into the United States and failed to declare on her tax returns the more than $634,000 of income derived from paid commissions received to her Bank of Nevis account.
She faces up to three years in prison and a fine of up to $250,000 for each count.
Tags: Banker Did Not Report Income, Mary J. Clagg
Posted in IRS Tax Cases, IRS Times and Inquirer | No Comments »
