Yearly Archives: 2012

We first posted this New Filing Compliance Procedures for Non-Resident U.S. on Tuesday, June 26, 2012 in our blog post entitled IRS announced a plan to Help U.S. Citizens Overseas Become Compliant and then we supplemented it with examples in our blog posts entitled
Tax amnesty offered to Americans in Mexico and Tax amnesty offered to Americans in Canada and now the IRS has a new webpage devoted to this option entitled New Filing Compliance Procedures for Non-Resident U.S. Taxpayers.

The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1. Some of these taxpayers have recently become aware of their filing obligations and now seek to come into compliance with the law.  

The Service is announcing a new procedure for current non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns to file their delinquent returns. This procedure will go into effect on Sept. 1, 2012.

Description of proposed new procedure:

While more details will be forthcoming, taxpayers utilizing the new procedure will be required to file delinquent tax returns, with appropriate related information returns, for the past three years and to file delinquent FBARs for the past six years. 

All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. These taxpayers generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years, IRS said.

Submissions that present higher compliance risk are not eligible for the procedure and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.Instructions, Questionnaire to Be Issued by IRS on Streamlined Filing Compliance Procedures.

New instructions and a questionnaire are expected to be released Aug. 31 by the Internal Revenue Service for eligible nonresident U.S. taxpayers needing to catch up on overdue federal filing requirements under a recent streamlined filing procedure in the Service's Tax-Filing Compliance Program.

If you would like to avail yourself of this new Amnesty, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).
 

Fatca and the model agreement signed with the EU’s largest economies have not been without critics, notably from the international group, Geneva-based American Citizens Abroad, and Canada, which has a large US citizen population (background from Canada’s Bankers Association).

Switzerland and the United States 21 June published a joint declaration containing key points for possible simplifications in implementing Fatca (report from GenevaLunch 22 June).

Bern says “the aim of the negotiations is to ensure an optimum framework for the Swiss financial industry with regard to the implementation of Fatca and strengthening of the financial centre strategy.” 

Behind those words about the Swiss financial centre lie concerns that Swiss banks could be heavily penalized for not complying with the new US rules because of Swiss banking laws that guarantee data privacy. The joint June declaration’s key points don’t mention banking secrecy, but rather Article 271 of the Swiss Criminal Code. 

Article 271 covers the criminal act of aiding and abetting a foreign government by providing information illegally. The new framework therefore theoretically protects Swiss banks from prosecution at home by allowing them to give agreed information to the US government without first passing it through the hands of the Swiss government. 

But negotiations are still needed to cover how, given Swiss bank privacy laws, a bank can automatically share information with the IRS and what exactly happens when a client is “recalcitrant” and refuses to sign papers giving the bank this right.”

If you have Unreported Income From Swiss Banks, contact the Lawyers at Marini & Associates, P.A. for a FREE Consultation at www.TaxAid.usor www.TaxLaw.msor Toll Free at 888-8TaxAid (888 882-9243).

The IRS releases a draft Form W-8EXP. Little of substance is changed on the form, but it incorporates the "checkbox" approach to capacity first seen on the draft Form W-8ECI.

The IRS releases a draft revised Form W-8ECI. The Internal Revenue Service has eliminated a troublesome requirement that people authorized to sign some forms related to withholding and effectively connected income under the Foreign Account Tax Compliance Act certify that they have the authority to sign and in place of the capacity line is a simple checkbox where the signer certifies that he or she has the capacity to sign the form.

For more information, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).

 

The Fifth Amendment privilege against self-incrimination does not apply to records that fall under the Required Records Doctrine, and a taxpayer who is the subject of a grand jury investigation into his use of offshore bank accounts cannot invoke the privilege to resist compliance with a subpoena seeking records kept pursuant to the Bank Secrecy Act, the U.S. Court of Appeals for the Seventh Circuit ruled Aug. 27 (In re Special February 2011-1 Grand Jury Subpoena DatedSeptember 12, 2011, 7th Cir., No. 11-3799, 8/27/12).

The records were sought as part of a grand jury's investigation of a taxpayer, known only as T.W., regarding his possible use of secret offshore bank accounts to avoid U.S. taxes.

The U.S. District Court for the Northern District of Illinois quashed the subpoena, agreeing with T.W. that the act of producing the records was testimonial and could result in T.W. incriminating himself.

The U.S. Court of Appeals for the Seventh Circuit joined the Ninth Circuit in holding that the required records exception to the Fifth Amendment privilege against self-incrimination applies to records of foreign bank accounts.

"Having determined that T.W.'s act of production privilege is not an obstacle to the Required Records Doctrine, we must decide whether the records sought under the subpoena fall within the Required Records Doctrine. In order for the Required Records Doctrine to apply, three requirements must be met: (1) the purposes of the United States inquiry must be essentially regulatory; (2) information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept; and (3) the records themselves must have assumed public aspects which render them at least analogous to public document. Grosso, 390 U.S. at 67–68 (emphasis added)."

"Recently, in a case nearly identical to this one, the Ninth Circuit held that records required under the Bank Secrecy Act fell within the Required Record Doctrine. In re M.H., 648 F.3d 1067 (9th Cir.2011) cert. denied, No. 11–1026, 2012 WL 553924 (U.S. June 25, 2012). In the Ninth Circuit's case, the court held that the witness could not resist a subpoena—identical to the one in this case—on Fifth Amendment grounds because the records demanded met the three requirements of the Required Records Doctrine. Id. We need not repeat the Ninth Circuit's thorough analysis, determining that records under the Bank Secrecy Act fall within the exception. It is enough that we find—and we do—that all three requirements of the Required Records Doctrine are met in this case."

Because the Required Records Doctrine is applicable, and the records sought in the subpoena fall within the doctrine, T.W. must comply with the subpoena.

This holding means that people who have foreign bank accounts can be forced to produce records that may prove that they have committed tax crimes, including failure to file FBARs, filing false tax returns, tax evasion, and conspiracy to defraud the U.S.

The Southern District of California, in the M.H.case, has gone a step further by holding that even if the account holder does not have the records, he or she must go to the bank and request the records for the government. These decisions, while valid precedents, are limited to the Seventh and Ninth Circuits.

For more information on the IRS' Offshore Enforcement Program, FBAR penalties, and the IRS’s Offshore Voluntary Disclosure Program (OVDP), contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).