ABA Webinar “ANSWERING YOUR CIVIL AND CRIMINAL OFFSHORE DISCLOSURE QUESTIONS” – Tuesday, February 24, 2015 at 12:00 to 1:30PM ET.
The Department of Justice’s greater concern is over funds that
originated in the U.S. as opposed to funds that were always offshore.
Thus, U.S. profits and gains diverted to offshore accounts garner more
attention on the criminal side than do foreign gifts or inheritances
that were deposited into offshore accounts.Swiss Bank Secrecy laws still prevent banks in the program from turning over a client’s name unless the client consents or a proper Treaty Request is made (must indicate fraud) such as where
nominee entity was employed although a Treaty Protocol pending in the
U.S. Senate would expose personal numbered accounts to being turned
over.The banks must turn over the name and location of bank accounts to
which “Leavers” transferred funds but not the name itself. With that
information IRS will be able to identify the individuals by obtaining a
John Doe Summons requiring the bank to turn over names.
Saturday, February 28, 2015
Friday, February 27, 2015
U.S. FATCA: American Legal Imperialism?
ILSA Journal of International & Comparative Law, Vol. 21, No. 2, 2015
Nevertheless it is important to keep
A. Reminding the US that the there is a world outside the United States;
B. Demonstrating that there are people who resent the attempts of the United States to impose its laws on the rest of the world;
C. Illuminating the immorality of (during a time when the U.S. Senate Finance Committee is considering tax reform): the
U.S. practice of attempting to levy taxes on people who do NOT reside
in the United States on income and property not associated with the
United States. What
the United States proudly calls "citizenship based taxation" is
primarily an attempt to levy taxes on people based on a U.S. place of
birth or because their parents had a U.S. place of birth.
Thursday, February 26, 2015
ABA Webcast on streamlined part II
There seems to be two important points that are being overlooked as to why obtaining a Pre-Clearance is important:
1. My understanding is that to do a Voluntary Disclosure you have to inform the IRS of your decision to want to become compliant before the IRS receives information that would have led them to you. By obtaining a Pre-Clearance you put a tourniquet on the non-compliance and stop the bleeding. You provide a date after which if the IRS receives information, that information can't be used to keep you out of the OVDP. A few years ago I had a client that was initially denied entry into the program but was later allowed into the OVDP because my Pre-Clearance was earlier by a day or so of the IRS obtaining information about the client. I was surprised that Jeff Neiman didn't comment on this a little more at the Webinar. When he was an AUSA in Florida and prosecuting the UBS cases he obtained the names of about 280 persons with accounts at UBS on February 18, 2009. Once those names were obtained, if those people applied to the OVDP, they were rejected and often prosecuted. Being on the audit list is not the only way your Pre-Clearance can be denied.
2. Clients, especially the new ones, are never "non-willful" in their eyes. Almost all "new" clients want to go Streamline because of the reduced penalty. By doing the Pre-Clearance you obtain some breathing room, like the automatic stay in bankruptcy, to discuss with the client how "non-willful" the client is. You also have time to investigate the client's circumstances. In many cases, clients, when presented with incidents of their willfulness, change their mind and go into the OVDP. It usually happens after you present them with a tax return organizer sent by their CPA where the client claims in the organizer that they don't have a foreign bank account. Later, when you speak to their CPA, he tells you that they were also asked by the CPA about a foreign bank account and your client always said "no".
I think that it is very risky not to do a Pre-Clearance.
1. My understanding is that to do a Voluntary Disclosure you have to inform the IRS of your decision to want to become compliant before the IRS receives information that would have led them to you. By obtaining a Pre-Clearance you put a tourniquet on the non-compliance and stop the bleeding. You provide a date after which if the IRS receives information, that information can't be used to keep you out of the OVDP. A few years ago I had a client that was initially denied entry into the program but was later allowed into the OVDP because my Pre-Clearance was earlier by a day or so of the IRS obtaining information about the client. I was surprised that Jeff Neiman didn't comment on this a little more at the Webinar. When he was an AUSA in Florida and prosecuting the UBS cases he obtained the names of about 280 persons with accounts at UBS on February 18, 2009. Once those names were obtained, if those people applied to the OVDP, they were rejected and often prosecuted. Being on the audit list is not the only way your Pre-Clearance can be denied.
2. Clients, especially the new ones, are never "non-willful" in their eyes. Almost all "new" clients want to go Streamline because of the reduced penalty. By doing the Pre-Clearance you obtain some breathing room, like the automatic stay in bankruptcy, to discuss with the client how "non-willful" the client is. You also have time to investigate the client's circumstances. In many cases, clients, when presented with incidents of their willfulness, change their mind and go into the OVDP. It usually happens after you present them with a tax return organizer sent by their CPA where the client claims in the organizer that they don't have a foreign bank account. Later, when you speak to their CPA, he tells you that they were also asked by the CPA about a foreign bank account and your client always said "no".
I think that it is very risky not to do a Pre-Clearance.
Illinois Republican Introduces Bills Aimed at Protecting Taxpayers from the IRS
see also : "I was guilty until proven innocent."
Wednesday, February 25, 2015
ABA webcast on streamlined
Tax Notes Today has an article on a webcast yesterday on the offshore account initiatives. Andrew Velarde, No Acknowledgment of Filing Coming for Streamlined Process, 2015 TNT 37-4 (2/25/15)
1. There is and will be no acknowledgment of filing following entry into the Streamlined procedures. The cashing of checks is not an indication that the IRS has accepted the certification of nonwillfulness. If the taxpayer desires closure, the OVDP program can be used.
2. There is no benefit to requesting pre-clearance in OVDP and then pursuing the streamlined treatment. The notion apparently is that, if the taxpayer is non-willful, he does not need the placeholder benefit that pre-clearance might offer.
3. The article does have this from Kathryn Keneally, former DOJ Tax AAG:
Keneally also warned practitioners they could be sending the wrong message when they use pre-clearance for their clients when it isn't needed. "If there's a pre-clearance and then there isn't an OVDP filing, that's also saying something to the government," Keneally said. "If . . . there are treaty request responses that actually disclose those accounts, or there's a whistleblower, and that information comes forward, you're at least risking some investigation into why you tr[ied] the pre-clearance and then [did] not come in, because we have this mismatch," she said, adding that "it is not a free pass" to take such action.
1. There is and will be no acknowledgment of filing following entry into the Streamlined procedures. The cashing of checks is not an indication that the IRS has accepted the certification of nonwillfulness. If the taxpayer desires closure, the OVDP program can be used.
2. There is no benefit to requesting pre-clearance in OVDP and then pursuing the streamlined treatment. The notion apparently is that, if the taxpayer is non-willful, he does not need the placeholder benefit that pre-clearance might offer.
3. The article does have this from Kathryn Keneally, former DOJ Tax AAG:
Keneally also warned practitioners they could be sending the wrong message when they use pre-clearance for their clients when it isn't needed. "If there's a pre-clearance and then there isn't an OVDP filing, that's also saying something to the government," Keneally said. "If . . . there are treaty request responses that actually disclose those accounts, or there's a whistleblower, and that information comes forward, you're at least risking some investigation into why you tr[ied] the pre-clearance and then [did] not come in, because we have this mismatch," she said, adding that "it is not a free pass" to take such action.
Tuesday, February 24, 2015
The question is whether, in the year of expatriation, you must file the dreaded FBAR, now named FinCen Form 114.
I sent an email to this
IRS recommended address: FBARquestions@irs.gov. Here follows the
reply I received. Its beauty might appeal to you. It is a record of
incomprehension and increasing anxiety from both parties. I am being
told that the FinCen 114 is not needed in the year of expatriation.
BUT.......
BUT.......
Sunday, February 22, 2015
I’ve known for quite some time that the US system of “worldwide” income taxation imposed on US citizens and green card holders regardless of where they live or where they may earn income, is viewed as inequitable and overly burdensome.
Anon may have been born in the US by happenstance while his parents were studying there and thus, Anon obtained US citizenship at birth regardless of whether he or his parents actually wanted it. His US status probably resulted because he was simply a victim of the US adherence to the common law principle of “jus soli”, the “law of the soil” under which the place of a person’s birth determines his citizenship regardless of any other factor. He probably obtained Saudi nationality because his father was a Saudi national. The case of this “Accidental American” demonstrates that multiple citizenship can arise because different countries often have different rules governing the criteria for citizenship with the result that the individual may satisfy the citizenship requirements of more than one nation at the same time.
The IRS Scandal, Day 654
The American Spectator, The Real ‘Dirty Dozen’ at the IRS: For Some Reason, It Fails to Include Itself on its List of Abusers, Scammers, and Cheats:
The IRS just released its “dirty dozen” list
of tax scams and schemes for the American people to avoid. In addition
to normal phishing and identity theft, a slew of new phone scams around
the nation has caught many taxpayers off guard. Plus, unscrupulous
return preparers take advantage of confused Americans, especially given
that 60 percent of taxpayers need assistance figuring out all those
documents, tables, and exemptions. The list also warns the less honest
among us to avoid hiding money offshore, in abusive tax shelters, or
with false documents. Additionally, it urges people not to falsify
income or claim too much in fuel tax credits, either.
But there is an even more concerning “dirty dozen” list that the IRS wants the public to forget.
It’s
been almost two years since the news broke that the IRS had been
targeting Tea Party, pro-Israel, and other conservative groups — and a
scandal erupted. Here are just a select few ways the IRS has mismanaged
its problems and shown itself to be incompetent and untrustworthy:
1. Internal emails show these groups were targeted because IRS employees thought them “icky.”
2. Other emails showed that Lois Lerner was conspiring with the Department of Justice to prosecute conservative groups on trumped-up charges.
3. Lerner herself refused to testify to investigating committees and was held in contempt.
4. That didn’t stop her from defending herself to Politico magazine and complaining about being “harassed” for her role.
5. Then, the IRS claimed it had lost the most crucial batch of Lerner’s emails.
6. Oh yeah, and her Blackberry was destroyed too.
7. Six months later, the Tax Inspector General may have found those lost emails. (Still no word yet on what was in them.)
Scandal events aside, the IRS showed its general incompetence in many other ways.
8. IRS workers campaigned for political candidates while on the job.
9. The agency awarded bonuses to its own employees who owed taxes.
10. Guess who was audited ten times more often than the average taxpayer? Supporters of the Tea Party.
11. The IRS illegally shared confidential, protected information with the FBI, the White House, and more.
12. And it has the nerve to constantly ask for a raise.
It all adds up to an agency that doesn’t merit the trust of taxpayers.
For
at least three years, the IRS has egregiously wronged this nation —
including at least one person on a director level. Yet, it still hasn’t
apologized or come clean.
But
despite all the excuses and diversions offered by the IRS, the American
people are still saying what Senator Ron Johnson expressed: “I smell a
rat. I smell a number of rats, and that’s what we are going to get to the bottom of.”
Open source free download of new paper, which mentions growing opposition to FATCA and number of renunciations rising
Avi-Yonah, Reuven S. and Savir, Gil, Find It and Tax It: From TIEAs to IGAs (February 20, 2015). Available at SSRN: http://ssrn.com/abstract=2567646
and also Hatfield,
Michael, Taxation and Surveillance: An Agenda (December 17, 2014). Yale
Journal of Law & Technology, 2015, Forthcoming; University of
Washington School of Law Research Paper No. 2014-34. Available at SSRN: http://ssrn.com/abstract=2539835 or http://dx.doi.org/10.2139/ssrn.2539835
“….This
Essay provides an agenda of items for discussion, debate, and research
related to the development, implementation, and effects of moving
towards a surveillance-facilitated tax system.”
Monday, February 16, 2015
More on US hypocrisy
Article
from the NYTimes investigating US real estate investments and
“….United States laws that foster the movement of largely untraceable
money through shell companies..”.
More
US hypocrisy – as long as the US profits, they don’t give a damn about
other countries. The goal is for the US to hold all the chips, and
receive tribute and hold on to assets originating from the rest of the
world.
US
FATCA is a foreign aid program where all other countries of
the world are forced via US extortion to send a portion of the fruit of
their own citizens and resident labour to the US – in tribute, as a
form of foreign aid to the US Treasury.
Comment on FBAR Willful Penalty
Kyle Niewoehner, Feigning Willfulness: How Williams and McBride
Extend the Foreign Bank Accounts Disclosure Willfulness Requirement and
Why They Should Not Be Followed, 68 Tax Lawyer 251 (2014), here.
and DOJ and IRS Use “Carrot ‘n Stick” to Enforce Global Tax Laws, 29 Criminal Justice 4 (2014), here.
In Williams, the court held that failing to file an FBAR after signing a tax return constitutes “a conscious effort to avoid learning” about the FBAR requirement, which satisfies the willfulness requirement. In McBride, the court held that signing a tax return constitutes knowledge of the duty to comply with FBAR, which satisfies the willfulness requirement. By holding that taxpayers willfully violate the FBAR statute simply by signing a tax return and then failing to file, both Williams and McBride construe the willfulness requirement more broadly than applicable precedent would have dictated.
This Comment argues that the current text of the statute and precedent require a more narrow reading of the FBAR willfulness requirement. It argues that taxpayers should not be charged with constructive knowledge after signing a tax return. Instead, a court should have to find that the taxpayer is aware of the existence of the FBAR requirement in order to find a willful violation. In addition to being consistent with the text of the statute and precedent, this approach would avoid the liability nightmare created by a combination of the Williams–McBride strict liability standard and the ill-defined “other financial account” language in the law.
Using the Williams–McBride standard of willfulness, it is difficult to conceive of how a violation could be nonwillful.
The Williams–McBride interpretation of the willfulness requirement in 31 U.S.C. § 5321(a)(5) is flawed because it imposes a strict liability standard where both the statute and the case law indicate otherwise.
The proper use of willful blindness is not to compel a finding of willfulness from facts from which a jury could infer the defendant willfully blinded himself, but to permit a finding of willfulness from such facts. In other words, the jury must still find willfulness an intentional violation of a known legal duty -- but only as an inference which it makes applying the proper standard (preponderance, clear and convincing or beyond a reasonable doubt). This test would then let the trier of fact determine willfulness. The trier of fact's factual determination or willfulness or nonwillfulness could be reversed under the appropriate appellate standing -- clearly erroneous in a bench trial or no reasonable juror could find willfulness or nonwillfulness in a jury trial. That is not the standard the Williams court applied and instead applied a legal conclusion that compelled the determination from the fact that the defendant did not read the 1040 and, for that reason, was willfully blind.
The solution for future courts is to look past the flawed Williams–McBride reasoning and adhere to the Sturman standard, which looked for an actual intent to violate the FBAR requirement or a course of conduct that would allow a court to infer willfulness. This would clearly avoid the liability problems created by the strict liability of Williams–McBride while upholding the relevant Supreme Court precedent and the current version of the statute.
and DOJ and IRS Use “Carrot ‘n Stick” to Enforce Global Tax Laws, 29 Criminal Justice 4 (2014), here.
In Williams, the court held that failing to file an FBAR after signing a tax return constitutes “a conscious effort to avoid learning” about the FBAR requirement, which satisfies the willfulness requirement. In McBride, the court held that signing a tax return constitutes knowledge of the duty to comply with FBAR, which satisfies the willfulness requirement. By holding that taxpayers willfully violate the FBAR statute simply by signing a tax return and then failing to file, both Williams and McBride construe the willfulness requirement more broadly than applicable precedent would have dictated.
This Comment argues that the current text of the statute and precedent require a more narrow reading of the FBAR willfulness requirement. It argues that taxpayers should not be charged with constructive knowledge after signing a tax return. Instead, a court should have to find that the taxpayer is aware of the existence of the FBAR requirement in order to find a willful violation. In addition to being consistent with the text of the statute and precedent, this approach would avoid the liability nightmare created by a combination of the Williams–McBride strict liability standard and the ill-defined “other financial account” language in the law.
Using the Williams–McBride standard of willfulness, it is difficult to conceive of how a violation could be nonwillful.
The Williams–McBride interpretation of the willfulness requirement in 31 U.S.C. § 5321(a)(5) is flawed because it imposes a strict liability standard where both the statute and the case law indicate otherwise.
The proper use of willful blindness is not to compel a finding of willfulness from facts from which a jury could infer the defendant willfully blinded himself, but to permit a finding of willfulness from such facts. In other words, the jury must still find willfulness an intentional violation of a known legal duty -- but only as an inference which it makes applying the proper standard (preponderance, clear and convincing or beyond a reasonable doubt). This test would then let the trier of fact determine willfulness. The trier of fact's factual determination or willfulness or nonwillfulness could be reversed under the appropriate appellate standing -- clearly erroneous in a bench trial or no reasonable juror could find willfulness or nonwillfulness in a jury trial. That is not the standard the Williams court applied and instead applied a legal conclusion that compelled the determination from the fact that the defendant did not read the 1040 and, for that reason, was willfully blind.
The solution for future courts is to look past the flawed Williams–McBride reasoning and adhere to the Sturman standard, which looked for an actual intent to violate the FBAR requirement or a course of conduct that would allow a court to infer willfulness. This would clearly avoid the liability problems created by the strict liability of Williams–McBride while upholding the relevant Supreme Court precedent and the current version of the statute.
Sunday, February 15, 2015
HSBC Links
Tax havens for despots, criminals and the Fortune 500 The Washington Post
Cites Nicholas Shaxson’s Treasure Islands: Tax Havens And The Men Who Stole The WorldSwiss Leaks frequently asked questions answered ICIJ Politicians, regulators face questions over HSBC cases ICIJ
HSBC could face prosecution, as Swiss Leaks fallout continues ICIJ
France says it did not restrict UK from using HSBC files to pursue bank and criminals The Guardian
As HSBC shows, we’ve been timid and pathetic in dealing with tax dodgers The Guardian
HSBC files: Swiss bank aggressively pushed way for clients to avoid new tax The Guardian
Bill Black: Criminal Tax Evader HSBC’s CEO Resorts to Bank Apologist Fable of the Virgin Crisis naked capitalism
BVI Premier: Most oppose public ownership registry The BVI Beacon
See also recent blog British government can (and should) impose public registries on its overseas territories
Mapped: The world’s biggest tax havens City A.M.
Draws on TJN’s Financial Secrecy Index
Cites Nicholas Shaxson’s Treasure Islands: Tax Havens And The Men Who Stole The WorldSwiss Leaks frequently asked questions answered ICIJ Politicians, regulators face questions over HSBC cases ICIJ
HSBC could face prosecution, as Swiss Leaks fallout continues ICIJ
France says it did not restrict UK from using HSBC files to pursue bank and criminals The Guardian
As HSBC shows, we’ve been timid and pathetic in dealing with tax dodgers The Guardian
HSBC files: Swiss bank aggressively pushed way for clients to avoid new tax The Guardian
Bill Black: Criminal Tax Evader HSBC’s CEO Resorts to Bank Apologist Fable of the Virgin Crisis naked capitalism
BVI Premier: Most oppose public ownership registry The BVI Beacon
See also recent blog British government can (and should) impose public registries on its overseas territories
Mapped: The world’s biggest tax havens City A.M.
Draws on TJN’s Financial Secrecy Index
It appears someone is listening in the Administration at the Treasury; at least a little bit?
General Explanations of the Administration’s Fiscal Year 2016 Revenue Proposals (Released February 2015)
Buried deep into the proposal of the US$3.99 trillion fiscal year 2016 expenditure plan, is a provision to “provide relief for certain accidental dual citizens.” See pages 282 and 283 of the proposal.
The proposal has a window of opportunity that starts to close with time and then shuts in January 1, 2018; i.e., the 2 year period after January 1, 2016.
Obama Budget Proposal to “Provide Relief for Accidental Americans”? Will the Proposal to Modify the Expatriation Rules Become Law?
The proposal would not adopt residency based taxation for all U.S. citizens, as it exists in the rest of the world, but would exclude certain U.S. citizens from the “mark to market” tax on expatriation (i.e., the “exit tax”) who :
Buried deep into the proposal of the US$3.99 trillion fiscal year 2016 expenditure plan, is a provision to “provide relief for certain accidental dual citizens.” See pages 282 and 283 of the proposal.
The proposal has a window of opportunity that starts to close with time and then shuts in January 1, 2018; i.e., the 2 year period after January 1, 2016.
Obama Budget Proposal to “Provide Relief for Accidental Americans”? Will the Proposal to Modify the Expatriation Rules Become Law?
The proposal would not adopt residency based taxation for all U.S. citizens, as it exists in the rest of the world, but would exclude certain U.S. citizens from the “mark to market” tax on expatriation (i.e., the “exit tax”) who :
- became at birth a citizen of the United States and a citizen of another country,
- at all times, up to and including the individual’s expatriation date, has been a citizen of a country other than the United States,
- has not been a resident of the United States (as defined in section 7701(b)) since attaining age 18½,
- has never held a U.S. passport or has held a U.S. passport for the sole purpose of departing from the United States in compliance with 22 CFR §53.1,
- relinquishes his or her U.S. citizenship within two years after the later of January 1, 2016, or the date on which the individual learns that he or she is a U.S. citizen, and
- certifies under penalty of perjury his or her compliance with all U.S. Federal tax obligations that would have applied during the five years preceding the year of expatriation if the individual had been a nonresident alien during that period.
Just a reminder of the phrase offshore FORMCRIME I created in 2012......
The
IRS demands abject ‘compliance’ and obeisance to US extraterritorial
taxation of citizenship, while increasing the burdens on and
incomprehensible FORMCRIME enforcement campaign against those it insists
are ‘US taxable persons’ ‘overseas/abroad’ around the entire globe, but
laughably claims that “…. technological advances in communication have
made the overseas field offices expendable.
40% accuracy related penalty Section 6662(a) and (j) anyone ?
Income tax penalty related to foreign asset noncompliance where the base is the income, not the amount in the account.
Keep in mind, however, that that penalty applies only to years 2011 and forward. So earlier years are not subject to that penalty.
You may have to pay an accuracy-related penalty if you underpay your tax if, among others:
1. You showed negligence or disregard of the rules or regulations.
2. You substantially understated your income tax.
3. You claimed tax benefits for a transaction that lacks economic substance.
The penalty is 40 % of any portion of the underpayment that is attributable to an undisclosed noneconomic substance transaction or an undisclosed foreign financial asset transaction.- but it is were just deposits directly held in a foreign bank, obviously intended as an economic transaction, that penalty should not apply. Further the 20% and 40% accuracy penalty are not cumulative.
In 2010, Congress included within the accuracy related penalty provisions a penalty for “any undisclosed foreign financial asset understatement. I discussed above contemporaneous enactment of a requirement that individuals disclose their foreign financial assets on their tax returns, and this requirement somewhat overlaps the information requirement for the FBARs (which are not tax return forms and are not required by the Internal Revenue Code). There is now a separate Code penalty just for failure to provide the information, but if there is an understatement with respect to “any transaction involving an undisclosed foreign financial asset,” an accuracy related penalty of 40% applies. This penalty applies not only to the new required Form 8938 for return disclosure for foreign financial assets, but also to certain other information disclosures for foreign activities. The effective date for this provision is for taxable years beginning after the date of enactment (taxable year 2011 for most individuals).
The footnote for last paragraph is: "§ 512(b) of the HIRE Act (FATCA provisions)." Generally penalties are not made retroactive to years earlier than the legislation enacting the penalty. (By contrast, the 6-year statute of limitations for failure to report income related to foreign assets (Section 6501(e)(1)(A)(ii)) did have a retroactive date to cover all open years at the time of enactment. But, so the notion is, that is just a statute of limitations and not a penalty.
Keep in mind, however, that that penalty applies only to years 2011 and forward. So earlier years are not subject to that penalty.
You may have to pay an accuracy-related penalty if you underpay your tax if, among others:
1. You showed negligence or disregard of the rules or regulations.
2. You substantially understated your income tax.
3. You claimed tax benefits for a transaction that lacks economic substance.
The penalty is 40 % of any portion of the underpayment that is attributable to an undisclosed noneconomic substance transaction or an undisclosed foreign financial asset transaction.- but it is were just deposits directly held in a foreign bank, obviously intended as an economic transaction, that penalty should not apply. Further the 20% and 40% accuracy penalty are not cumulative.
In 2010, Congress included within the accuracy related penalty provisions a penalty for “any undisclosed foreign financial asset understatement. I discussed above contemporaneous enactment of a requirement that individuals disclose their foreign financial assets on their tax returns, and this requirement somewhat overlaps the information requirement for the FBARs (which are not tax return forms and are not required by the Internal Revenue Code). There is now a separate Code penalty just for failure to provide the information, but if there is an understatement with respect to “any transaction involving an undisclosed foreign financial asset,” an accuracy related penalty of 40% applies. This penalty applies not only to the new required Form 8938 for return disclosure for foreign financial assets, but also to certain other information disclosures for foreign activities. The effective date for this provision is for taxable years beginning after the date of enactment (taxable year 2011 for most individuals).
The footnote for last paragraph is: "§ 512(b) of the HIRE Act (FATCA provisions)." Generally penalties are not made retroactive to years earlier than the legislation enacting the penalty. (By contrast, the 6-year statute of limitations for failure to report income related to foreign assets (Section 6501(e)(1)(A)(ii)) did have a retroactive date to cover all open years at the time of enactment. But, so the notion is, that is just a statute of limitations and not a penalty.
Tuesday, February 10, 2015
Step-By-Step Tax Filings For a Noncovered Expatriate
- File your 2014 income tax return before the deadline. Depending on your situation, the deadline is either 15 April 2015 or 15 June 2015. I recommend that you file for an extension right now, and make an estimated payment that will more than cover any remaining income tax liability you think you might have to the IRS. The extension request will give you until 15 October 2015 to file your 2014 income tax return.
- File your 2014 FinCen Form 114 by the 30 June 2015 deadline.
- Your 2015 income tax return is a “dual status” tax return. It will consist of Form 1040NR, with information attached (usually in the form of a Form 1040) to explain your life from 01 Jan 2015 until 12 Feb 2015. It will also have Form 8854 attached to it. File it no later than the deadline for 2015 tax returns generally–either 15 April 2015 or 15 June 2015. Again, you can apply for an extension I would definitely do that as a pre-emptive strike prevent problems with deadlines.
- You will also file 2015 Form 8854 by the filing deadline that applies to you for your 2015 tax return: 15 April 2016, 15 June 2015, or whatever the extended filing date is, if you request a filing extension.
- File your 2015 FinCen Form 114 by the 30 June 2016 deadline.
Wednesday, February 4, 2015
ABA Tax Section Meeting Developments on Streamlined Disclosures
Andrew Velarde, No Letters of Intent Allowed Before Entering Streamlined Program, 2015 TNT 22-7 (2/3/2015)
1. The IRS will not offer for the streamlined programs any analog to pre-clearance that is offered in the full-blown OVDP. Taxpayers thus, theoretically, are at risk until they make the submissions required by the streamlined programs. The taxpayer receives no official acceptance if their request is approved, basically no news is good news with a 3 to 6 year potential audit period.
2. The IRS has not yet developed statistics on the streamlined program (taxpayers joining and those rejected).
3. The flagging of streamlined cases with at least 5 foreign information returns. The IRS representative "said the initial examination referred to in the IRM is more for completeness and coherence.
4. There is no solution in sight to the long delays for some long-time foreign residents without Social Security Numbers (SSNs). The problem is that those taxpayers, often prime candidates for the streamlined solution, cannot pursue the solution until they get SSNs, but have significant difficulty and time delays in getting SSNs. ( So long as the US taxpayer has begun the process of applying for a SSN, he can submit to the IRS the required Streamlined (or OVDP) paperwork along with a passport copy and a cover letter explaining that the SSN has been applied for. The IRS will issue a special IRS number for that taxpayer to use on all correspondence with the IRS. Once the SSN is obtained, the taxpayer must advise the IRS).
5. LoL....the IRS representative said that the IRS will not issue additional guidance on the meaning of willfulness in the streamlined program.
The problem continues to be that the IRS’ right hand does not know what the left hand is doing.
1. The IRS will not offer for the streamlined programs any analog to pre-clearance that is offered in the full-blown OVDP. Taxpayers thus, theoretically, are at risk until they make the submissions required by the streamlined programs. The taxpayer receives no official acceptance if their request is approved, basically no news is good news with a 3 to 6 year potential audit period.
2. The IRS has not yet developed statistics on the streamlined program (taxpayers joining and those rejected).
3. The flagging of streamlined cases with at least 5 foreign information returns. The IRS representative "said the initial examination referred to in the IRM is more for completeness and coherence.
4. There is no solution in sight to the long delays for some long-time foreign residents without Social Security Numbers (SSNs). The problem is that those taxpayers, often prime candidates for the streamlined solution, cannot pursue the solution until they get SSNs, but have significant difficulty and time delays in getting SSNs. ( So long as the US taxpayer has begun the process of applying for a SSN, he can submit to the IRS the required Streamlined (or OVDP) paperwork along with a passport copy and a cover letter explaining that the SSN has been applied for. The IRS will issue a special IRS number for that taxpayer to use on all correspondence with the IRS. Once the SSN is obtained, the taxpayer must advise the IRS).
5. LoL....the IRS representative said that the IRS will not issue additional guidance on the meaning of willfulness in the streamlined program.
The problem continues to be that the IRS’ right hand does not know what the left hand is doing.
Monday, February 2, 2015
IRS TO ISSUE MORE TICKETS TO THE TAX COURT IN 2015
The
IRS has signaled that it will be issuing more 90-Day Letters in
certain cases where a taxpayer fails to satisfy a revenue agent’s request for
additional facts in an examination.
Previously in an unagreed case,
it was not that hard to remove a case from the agent’s (or examination’s)
jurisdiction, and obtain a conference with an Appeals Officer before the case
status changed to “docketed status”.
To greatly simplify what the procedure was, assume a taxpayer cannot settle a
case with the agent in an audit. The taxpayer simply writes a letter to the
agent and says, “We’re getting nowhere. Please issue the 30-Day Letter
(essentially the revenue agent’s report) so that I can file a protest and go to
Appeals."
Normally upon receipt of a 30-Day Letter, the
taxpayer then has a choice to write up a Protest Letter and request either
a meeting with the agent and his manager or ask the agent to send the file to
Appeals for a conference there. If the taxpayer elects to go to Appeals, in
most cases, the examination managers are happy to do anything which will help
them reduce their inventories and gladly oblige. The case then goes to a local
Appeals Office where it sits there for a long time until an Appeals Officer is
free to work the case.
2015 the year of increased penalties
Generally, taxpayers who submit a
request for participation in the OVDP pay a miscellaneous offshore
penalty equal to 27.5 % of the highest aggregate value of OVDP
assets during the period covered by the voluntary disclosure. The
offshore penalty is in lieu of all other penalties that may otherwise
apply to the undisclosed foreign accounts, assets and entities,
including FBAR and offshore-related information return penalties and tax
liabilities for years prior to the voluntary disclosure period. These
penalties could otherwise far exceed the value in an undisclosed
offshore account. Howwever, the offshore penalty rate is increased to 50%
under certain circumstances. Under the newly released list, the 50% penalty would apply if, at the time of making the initial
submission to request participation in the OVDP to the IRS, the taxpayer
had an account at any of the following:
1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd. and swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company and Stanford Trust Company, Ltd.
9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries and affiliates
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A. and Bank Leumi USA (effective 12/22/14)
1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd. and swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company and Stanford Trust Company, Ltd.
9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries and affiliates
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A. and Bank Leumi USA (effective 12/22/14)
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