Swiss Asset Manager Pleads Guilty in Federal Court to Conspiring with U.S. Taxpayers to Evade Federal Income Taxes and File False Tax Returns

A Swiss citizen and former asset manager at a Swiss asset management firm pleaded guilty to conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide millions of dollars in offshore accounts from the Internal Revenue Service (IRS), and to evade U.S. taxes on the income earned in those accounts, the Justice Department announced.
Peter Amrein, 53, a Swiss citizen, pleaded guilty before U.S. District Judge Sidney H. Stein of the Southern District of New York pursuant to a plea agreement to one count of conspiracy to defraud the IRS, to evade federal income taxes and to file false federal income tax returns.  Amrein faces a maximum sentence of five years in prison at his July 1 sentencing before Judge Stein.

capital gains tax : sales price minus expenses of sale minus basis, multiplied by the tax rate

A TP [now a U.S. resident] sold his house in CH. Since the capital gain is calculated based on the original purchase price, why do some articles say that properties should be appraised before landing to this country?

Appraisals of property are a good idea when becoming a U.S. resident, unless you think you will never be covered expatriates sometime in the future.

Form W-8BENs for Expatriates

Once I have successfully expatriated, I want to keep my bank account, IRA, 401(k), brokerage account, etc. open in the United States. What paperwork is required and how will I be taxed?

Form W-8BEN. That is what you give the financial institution. It is pretty easy unless you want to reduce your U.S. income tax from the default 30% to a lower number (like zero).

The government has eroded the distinction between willful and non-willful violations.......

Court victories (bad facts) by the government in civil FBAR enforcement actions (Zwerner, Williams, McBride) have diluted the willfulness threshold, from the more appropriate standard of an intentional and voluntary violation of a known legal duty, to a standard of mere recklessness. A “recklessness” standard lacks precision and invites severe penalties simply because an individual is presumed – or is concerned about being presumed – to have “known better,” even if he in fact did not know.
It is clear that the willfulness requirement for civil FBAR actions must be amended legislatively to make clear that willfulness requires not just recklessness, but a voluntary and intentional violation of a known legal duty. This erosion of the willfulness standard fails to distinguish adequately between most account holders and true bad actors, and therefore can discourage those who otherwise wish to become fully compliant. (prior to the current offshore enforcement campaign, willfulness in the civil FBAR context was understood to be equivalent to willfulness in the criminal context)
If an individual did not act with the intent to violate a known legal duty, then it is difficult to argue why he should be subject to a very draconian, albeit civil, penalty from the perspective of either fairness or the smart use of limited enforcement resources.
The enhanced civil penalties for willful conduct were enacted to target bad actors, not to ensnare the inadvertent or negligent. Moreover, and aside from the benefits of attaining consistency between the civil and criminal penalty regimes for willful conduct, the practical reality is that the current IRS “streamlined” program for disclosing offshore accounts, which requires that the taxpayer submit a certificate attesting to his non-willfulness, is complicated by the possibility that the taxpayer is really being asked to assert that he did not act “recklessly,” which is a potentially much murkier claim than asserting that he did not act with fraudulent intent. Indeed, even the IRS used to state that willfulness for the substantial civil FBAR penalties demanded the same heightened showing required for criminal willfulness. Any legislative or policy change should prevent the government from meeting its burden through use of circumstantial evidence or the doctrine of willful blindness. Such proposals would contradict well-settled methods of showing mental state, and would be unworkable in practice.

THE SERVICE’S DUTY TO FOSTER VOLUNTARY COMPLIANCE THROUGH IRC SECTIONS 6014(a) AND 6020(a) -

American expatriates are especially good candidates to have their federal tax returns prepared under section 6014(a) or 6020 (a), because approximately 82% of them will owe no U.S. tax.
The cost for an American expatriate to comply with the Code is estimated to be, on average, between $2,000 and $4,000 per year per return.
Sections 6014(a), which allows individuals who meet certain income thresholds to elect for the IRS to compute taxes owed, and 6020(a), which allows the Service to prepare returns for persons who “consent to disclose all information necessary for the preparation thereof,” in lieu of self-assessment, may be a means to compel the government to assume the cost of compliance and complexity.
 As to the section 6020(a) return, a U.S. citizen or resident alien living abroad can proactively contact the Service to prepare his or her return under section 6020(a) by completing the “Tax Return and Consent to Assessment of Tax Pursuant to I.R.C. § 6020(a).”

 Section 6014(a) and section 6020(a) are but two statutory tools available to help American expatriates reduce their ever-increasing cost of compliance.

http://www.agostinolaw.com/wp-content/uploads/2015/03/AA-Newsletter-2015-March.pdf

Ex-Credit Suisse Banker Wants Probation For Tax Evasion Plot

A former Credit Suisse AG banker on Friday urged a Virginia federal judge to spare him prison time for advising U.S. clients on how to dodge taxes through Swiss bank accounts, saying his ready cooperation with investigators and low place on the bank’s totem pole warrant probation.

Andreas M. Bachmann, who pled guilty last March to conspiring to defraud the U.S., voluntarily came to the U.S. to answer for the charges and has provided valuable information to the government on a “massive conspiracy".....
 https://www.law360.com/tax/articles/634173/ex-credit-suisse-banker-wants-probation-for-tax-evasion-plot

I think it might be worthwhile to repeat what information category 2 banks exchange in detail and how they exchange it at this stage.

U.S. taxpayers resolving their U.S. tax consequences by OVDP, streamlined (by transition or otherwise) or still otherwise might be better off to advise the Swiss Category 2 banks if they have been less than truthful in their resolution of the U.S. tax consequences.
Category 2 banks are sending over account numbers (without names), balances and transactions to DOJ. They divide them in a "red flag" list which they pay penalties on and a "green light" list which they don't pay penalties on because the account holder is already in compliance or have joined the OVDP (and provided proof to the bank). The information is the same at this stage, except that the "green flag" list include some form of evidence of the requirements, such as a copy of the OVDP acceptance letter. The bank has to receive this from the client, as well as consent to share this info with the DOJ, otherwise they would commit a Swiss banking law crime at this stage.
Its fair to assume that the "red flag" list will be subject to John Doe requests already being prepared and that more detailed information such as communication between bank and client, account opening papers etc might be included in the John Doe summary.
One critical issue is if there will be a John Doe request on the "green light" list. I guess it could be possible but would they spend all that resources? And would the Swiss agree to this since it is a huge workload considering the banks are bending backwards already?
From what I understand at the heart of the deal was what info could be shared (without consent from the client) and that is after all fairly limited. I assume that all clients who are cooperating with the bank are smart enough not to sign a blank POA for the bank to give IRS anything but the specific limited information they need to prove their entry into OVDP.
If you have joined the OVDP (or streamlined), you have given proof of this to your bank of this so that they have put you on the "green light" list. As long as you don't lie in your OVDP documentation about basic things like account numbers, balances or transactions (which would be beyond stupid), I have a hard time seeing any other information being shared automatically?
The only way the DOJ could later get more information on the account would to pressure the client to hand it over within the ODVP process, or, if the balances or account numbers do not add up, use that as an indication of fraud and make a treaty request for that specific account. But again, it is really only things like account numbers, balances and transactions that could be subject to scrutiny here from what I understand and that I assume almost everyone hands over that same data in the OVDP or streamlined process in any case.
One conclusion from all of this is that it actually might make a lot of sense to cooperate with your category 2 bank in order to end up on the green list (if it is not too late already). Thereby you control/are aware of the bulk of the information being handed over assuming I am right about the future John Doe requests.

Here’s another big, fat, hairy lie being trotted out right now by President Obama, Congress, and the mass media: ‘Offshore tax evasion costs the US Treasury more than $150 billion annually.’

I have written last year a couple of blog posts about this subject.
http://www.nestmann.com/government-stats-strike-again#.VQ0LgU1_lMt
Sadly, the article is from 2014. It is still relevant though- it should be published in mainstream media again and again! But the world believes what they want to believe, and when faced with such debt – even more so and a feeding frenzy ensues.
Funny enough in 2001, it was $70 billion annually. By 2010, the number was $100 billion. According to a recently published Senate report, it’s now $150 billion.
That’s one hell of a jump. Either the rich are totally sticking it to “the man,” or someone has been massaging the numbers just a tad.
Let’s look at the history, shall we?
The $70 billion figure originated with Jack Blum, an attorney and former congressional researcher. Blum cited this figure in 2001, when he signed an affidavit in support of an IRS summons for records from MasterCard and American Express.
He never explained how he arrived at this number…he never had to either or was ever challenged.

Actually, the analysis he makes is a bit of apples and oranges. All of the govt whoppers make the assumption that the money going “offshore” is principle that was never taxed as income. The analysis ignores that and calculates on missed taxation of interest upon the principle.
Those govt/media assumptions are what is scary and is the prejudice that is built into FBAR and OVDP.

http://www.fas.org/sgp/crs/misc/R40623.pdf
Tax Havens: International Tax Avoidance and Evasion
Jane G. Gravelle Senior Specialist in Economic Policy
January 15, 2015
Congressional Research Service
It has quite a history of Obama’s proposals in it. Together with a record of the known things such as Ex Patriot Act.

One Country/Two Citizenships

The first form of US citizenship is delineated for purposes of the immigration and nationality laws, while the second form of US citizenship is defined strictly by the US tax laws.  An individual can be a US “tax citizen” and therefore subject to US income taxation on his worldwide income regardless of where he lives or where the income was earned. In addition, at death, the estate of such a “tax citizen” is subject to US estate tax on the fair market value of the citizen’s worldwide assets.  All of these burdens will apply to the “tax citizen” even though the individual is not a “citizen” for purposes of the immigration and nationality laws, and therefore is not entitled to a US passport or to enter the US without a visa or eligibility for a visa waiver.

With regards to an inheritance. How does taxation change upon renunciation?

Getting

Receiving an inheritance is no problem at all. No tax.

Giving

Leaving an inheritance to someone depends on two factors: whether you are a covered expatriate (or not), and whether the recipient is a U.S. taxpayer (or not):

• Noncovered expatriates can make gifts or leave bequests to anyone at all. The recipients do not have any U.S. tax burdens. The noncovered expatriate's assets are subjected to U.S. estate tax under the normal rules that apply to nonresident noncitizens (i.e., assets in the U.S. get taxed; assets outside the U.S. don't).
• Covered expatriates cannot make a gift or leave a bequest to a U.S. citizen or resident without a traumatic tax liability being imposed on the recipient. (A 40% tax, under current conditions). The covered expatriate's assets are also subject to the normal estate and gift tax rules (assets in the USA are at risk, while assets outside the USA are not).

Drumming-up FATCA business in the Caymans

A new video report from CNS Business in the Cayman Islands dives right into the front-lines of the rapidly-spreading FATCA compliance business. A good-sized group of Caman-based US Persons attended a free seminar last week at the Caribbean Club entitled "Navigating US Tax Requirements and Strategic Methods of Coming into Compliance" Some of them were interviewed on-camera for the story, as was an attorney from Caplin & Drysdale, a DC-based law firm specializing in "the tax controversy area" and event co-host with Ham, Langston & Brezina LLP, a multi-service accounting firm based in Texas.

As the story reports:

“It’s becoming harder and harder to hide and you really want to be ahead of the situation. You don’t want the IRS knocking on your door. There are options for you to come forward and come into compliance now before they come to you because once they come to you, it’s a very different conversation,” added Caplin & Drysdale attorney, Zhanna Ziering.

“Right now the message I deliver is FATCA is changing all of that and just because you’ve had an account here for 20 or 30 years without issues doesn’t mean you won’t get a letter in the mail. We’ve had clients in Cayman, as well as a host of other countries, receiving these letters,” stated [Caplin & Drysdale attorney, Dianne Mehany].

Both attorneys explained they are not trying to scare anyone, but want them to understand there are criminal and civil penalties if you don’t come into compliance.

Be sure to watch the interview clips.

CNN Quotes compliance vulture Scott Michel on the Taxation of American Minors Living Abroad

Caplin & Drysdale's Scott D. Michel spoke with CNN Money concerning the tax compliance issues facing expats with children born outside the U.S.  Children born abroad to Americans are generally automatically granted U.S. citizenship and are required to file U.S. returns as if they resided in the U.S.  For more on the story, please visit CNN Money's website.

Excerpt taken from the article.
American citizen minors living abroad, like Gaisler's sons, are subject to the same tax obligations as children born and raised in the U.S. "If they meet the income threshold, they've got to file a tax return," said Scott Michel, a tax lawyer with Caplin & Drysdale.
. . .
"It's crazy -- you have to hire a [certified public accountant] to deal with your kid's $5,000 or $10,000 of income," Michel said. "The compliance costs associated with all of this are somewhat disproportionate to the amounts at issue in many circumstances."................oh really !!

5 Myths and Facts of Getting Audited

Although the IRS audits hundreds of thousands of returns each year, audits represent less than 1% of all returns filed so there is generally little cause for concern.  There are, however, some red flags that may cause the IRS to place additional scrutiny on your return– but those red flags might not be what you think. Myth: The likelihood of getting audited increases with e-Filing.
Fact:  You are actually less likely to be audited with e-Filing.  Mathematical errors are a trigger for a tax audit and e-Filed returns offer some safeguards for math errors thereby avoiding these kinds of mistakes.
Myth: The likelihood of getting audited increases if you file an extension.
Fact: Many tax professionals actually see fewer audits on tax returns that are submitted after tax season; some believe that IRS auditors have less incentive to audit a return once their “quota” has been met.  Whether or not this “quota” truly exists is a matter of speculation. At any rate, anyone can get a  6-month extension upon request, and millions of people and businesses request them each year, so it is unlikely to have any impact on the chance of an audit.  Remember, however, than an extension of time to file is NOT an extension of time to pay!
Myth: The likelihood of getting audited increases if you amend your return. 
Fact:  Tax returns that contain mistakes and/or inconsistencies with other records such as employer filings and other income-generating sources (e.g., partnerships, LLCs and other  pass-through entities) are what increase your chances of getting audited.  Seek advice if you believe your returns contain mistakes.
Myth: The likelihood of getting audited increases if you have a home office. 
Fact: Not any more.  The IRS recognizes that the era of virtual offices is upon us and millions of people work from home. As long as your deductions are accurate, reasonable, and don’t include personal expenses, having a home-based office does not make you any more likely to be audited than working elsewhere.
Note, however, that filing certain forms and schedules with your return may increase your chances of being audited. For example, triggers include Schedule C losses for a hobby-turned-business and high valuations on Form 8283 Noncash Charitable Contributions. Also make sure that you are filing all of your 1099s – the IRS matches your 1099s with the corresponding 1098s, and inconsistencies between them is a virtual guarantee of an audit.
Myth:  Only rich people get audited.
Fact: For the most part, tax returns are selected for audit when their DIF (Discriminant Function System) score is higher than average. Although the amount of income declared is a factor, there are 66 different areas of interest that make up a DIF score, including – as noted above - the number and type of deductions made and the schedules included in the return.  Certain businesses are more likely to be audited, such as real estate investing, employers who work with independent contractors, and new small businesses that could be classified as hobbies, to name a few.  Note that if the IRS is dissatisfied with a business return, its owners’ personal returns as well as the tax returns of related entities will be placed under increased scrutiny – being rich, however, is not the primary motivation for these audits.

FATCA and Citizenship based taxation

Video made by a young man studying in Germany ...... Interesting to see a young person's reaction to this dilemma. Worth a listen.

https://www.youtube.com/watch?v=oYEIGRezIiI