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Monthly Archives: June 2016

UBS Singapore Forced To Turn Over Records of US Taxpayer – What Are You Waiting For To Get Right With The IRS?

On August 28, 2013 we posted U.S. Turns Up The Pressure On Swiss Banks!  where we discussed the Swiss Banks and listed 2009 as when Switzerland’s biggest bank UBS agrees to turn over more than 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.
Then UBS then decided that it would not turn their records of a client who had a UBS account in Singapore. The government claims that despite IRS requests, UBS AG has so far not turned over records related to funds held at UBS in Singapore by “noncompliant” American taxpayer Ching-Ye Hsiaw, and it asked the court to order the bank to do so.

The federal government asked a Florida federal court on February 23, 2016 to require Swiss bank UBS to cooperate with an IRS investigation into an American taxpayer allegedly holding funds at the bank overseas, saying the government has a strong interest in determining how much the man owes in taxes.

The government claimed that despite IRS requests, UBS AG has so far not turned over records related to funds held at UBS in Singapore by “noncompliant” American taxpayer Ching-Ye Hsiaw, and it asked the court to order the bank to do so.

On June 22, 2016 DoJ announced in its post that UBS AG has complied with an Internal Revenue Service (IRS) summons for bank records held in its Singapore office.  Because UBS has now produced all Singapore-based records responsive to the request and the IRS determined that UBS complied with the summons, the Justice Department has voluntarily dismissed its summons enforcement action against the bank.
The IRS served an administrative summons on UBS for records pertaining to accounts held by Ching-Ye “Henry” Hsiaw.  According to the petition, the IRS needed the records in order to determine Hsiaw’s federal income tax liabilities for the years 2006 through 2011.  Hsiaw transferred funds from a Switzerland-based account with UBS to the UBS Singapore branch in 2002, according to the declaration of a revenue agent filed at the same time as the petition.  UBS refused to produce the records, and the United States filed its petition to enforce the summons.
The Department of Justice and the IRS are Committed to making sure that Offshore Tax Evasion is Detected and Dealt with Appropriately,”

Acting Assistant Attorney General Caroline D. Ciraolo
of the Justice Department’s Tax Division said.

"Taxpayers with Offshore Assets who Underreported their Income Should Come Forward
Before We Come Looking for Them”!!!

The IRS keeps updating its list of foreign banks which are turning over the names of their US Account Holders, who are now subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP). This penalty is based on the highest account balance measured over up to eight years. 

On March 9, 2016 the Justice Department Announced that Cayman National Securities Ltd. (CNS) and Cayman National Trust Co. Ltd.(CNT) are the 96th & 97th Offshore Banks to reached a resolution under the department’s Offshore Bank Program. See our post 97 Offshore Banks Are Turning Over Your Names To The IRS - What Are Your Waiting For?
The Tax Division aggressively pursues offshore tax evasion.  More information is available online about the Division’s Offshore Compliance Initiative and its Swiss Bank ProgramThese Banks, including UBS, have agreed to pay a total of about $5 billion in penalties and fines, turnover records of US taxpayers and aid the DoJ by being witnesses in any criminal prosecutions.

Under the program, banks are required to:

  • Make a complete disclosure of their cross-border activities;
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
  • Cooperate in treaty requests for account information;
  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

Following the success of the Swiss Bank Program, the Justice Department is now looking beyond Switzerland to financial institutions in other countries that may be havens for secret offshore accounts or undisclosed assetsInvestigators are pursuing the wealth of leads generated through the Swiss Bank Program, and following those leads to countries such as: 

  • Belize,
  • the British Virgin Islands,
  • the Cayman Islands,
  • the Cook Islands,
  • India,
  • Israel,
  • Liechtenstein,
  • Luxembourg,
  • the Marshall Islands,
  • Panama and
  • Singapore 

Non Swiss Foreign banks and financial institutions that serve U.S. customers are well-advised to heed the lessons of the Swiss Bank Program and other Justice Department enforcement actions commenced to date. Not to mention a little thing like 30% FATCA withholding for noncompliant foreign banks!

For more on where will the IRS and the DoJ will turn next as they sift through a treasure trove of data gathered from Swiss banks and from more than 50,000 U.S. taxpayers who disclosed their accounts to avoid prosecution, see our posts:

Do You Have Undeclared Income From the Foreign Bank?



 Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini& Associates, P.A.  
for a FREE Tax Consultation

Toll Free at 888-8TaxAid (888) 882-9243



Read more at: Tax Times blog

Tax Court Rejects IRS's Proposed $1.36 Billion Section 482 Tax Assessment

The Tax Court rejected the IRS's proposed transfer pricing method of re-allocating income between a U.S. parent corporation and its foreign subsidiary and ruled against the Internal Revenue Service's attempt to collect $1.36 billion in tax deficiencies, finding that the assessment did not reflected the economic realities of manufacturing these medical devices. in a case involving licenses for the intellectual property necessary to manufacture and sell high-risk, heavily regulated implantable medical devices in Medtronic, T.C. Memo. 2016-112

The Tax Court held that Medtronic met its burden of showing the Internal Revenue Service (IRS) abused its discretion by  making arbitrary and capricious Internal Revenue Code (IRC) Section 482 reallocations with respect to taxable income of Medtronic’s Puerto Rico subsidiary.
The Court also found that IRS's re-allocations undervalued the role of the licensee in a number of ways, including the skill of its workforce, the high premium on quality control, and the amount of economic risk it assumed.
However, while the Court approved the method used by the taxpayer group, it found that the royalties paid under the licenses had to be significantly adjusted upwards.
 Have a Tax Problem?  

Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).


Read more at: Tax Times blog

US Taxpayers Are Receiving Automated $10,000 Penalty Assessments For Late Filed Form 5471's & 5472's – We Can Help!

We previously posted Numerous US Taxpayers Are Receiving Automated $10,000 Penalty Assessments For Late Filed Form 5472's - We Can Help! where we discussed that we have been receiving a lot of calls from businesses who have recently received penalty notices regarding late filed or non-filed Form 5472's. The Internal Revenue Service imposes an automatic penalty of $10,000 whenever an individual or company is late in filing an information return disclosing their interest in a foreign corporation, regardless of whether there is any associated underreported of income or tax deficiencies.

U.S. persons including businesses with at least a 10 percent interest in a foreign corporation or who are officers of a foreign corporation in which any U.S. person owns or acquires a 10 percent interest are required to file a Form 5471 with their tax return to disclose their ownership.

The IRS has begun to automatically applying the $10,000 penalty for each Form 5471 and Forms 5472 that was filed after the due date. 

There are ways to defend against these automatic assessments and request penalty abatement. There are four defenses that you should consider when assess the penalty for filing an international information return after the due date.

  1. Follow the Delinquent Information Return Procedure - First, the taxpayer can file through the Service's procedures for delinquent international information returns. This procedure is appropriate for taxpayers who can establish reasonable cause for their failure to file or whose failure to file has caused no or nominal tax non-compliance. This procedure cannot be used, however, if the taxpayer is already under audit or investigation or has otherwise been contacted by the Service about the delinquent information returns. Under this procedure, the taxpayer files the delinquent returns with a statement of the facts establishing reasonable cause for the failure to file. In the "Frequently Asked Questions" section, the Service explains that taxpayers with tax noncompliance can use this procedure, but that the Service may impose penalties if it does not accept the taxpayer's reasonable cause explanation.
  2. Ask for a First-Time Offender Abatement (FTA) - Generally, an FTA can provide penalty relief if the taxpayer has not previously been required to file a return or has no prior penalties (except the estimated tax penalty) for the preceding three years with respect to the same IRS  File (IRM § With respect to a Form 5472 late-filing penalty, the IRM provides for an FTA if an FTA was applied to the taxpayer's related Form 1120 late-filing penalty or no penalty was assessed on the related Form 1120 (IRM §
  3. Reasonable Cause Defense - Under Section 6038 of the tax code, which lays out the information reporting requirements for individuals and businesses with an interest in foreign corporations and the penalties for delinquent filing, penalties may be abated if a reasonable cause exists for the failure to file. However, neither the statute nor the applicable regulations define a reasonable cause standard for the abatement. Treasury Regulations Section 301.6651-1(c) provide a definition of what constitutes reasonable cause for failure to file corporate income tax returns and says that "if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time, then the delay is due to reasonable cause." and
  4. Statute of Limitations - Though a $10,000 penalty may discourage some from filing in international information return after the deadline, there is a greater exposure to not late filing and information return and that is that the statute of limitations for tax returns which is generally three years does not apply for returns that are missing the information reports and the statute remains open indefinitely. Under the indefinite statute of limitations, not only can the IRS make adjustments to items related to the international information returns, but they also can examine any other area on the tax return.

Has  Your Company  Been Assessed an
Automatic $10,000 Penalty for a Late Form 5471 or 5472?

Contact the Tax Lawyers at 
Marini & Associates, P.A.
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243)


Read more at: Tax Times blog

New IRS Procedure to Allow Request For Return of Property or Funds in Specific Structuring Cases

We previously posted on November 10, 2014, IRS Seizure of Assets Using Anti-Structuring Laws where we discussed thatthere were reported a series of cases in which the IRS has seized money from innocent Americans based on purported violations of so-called “anti-structuring” laws, which make it a crime to deposit less than $10,000 cash in the bank in order to evade bank reporting requirements.
Now the Internal Revenue Service has established a special procedure for people whose assets were involved in structuring to request a return of their forfeited property or funds. The new process follows a change of IRS policy on structuring cases in October 2014 and ongoing discussions with members of Congress.

The IRS will begin mailing letters this week to potentially eligible property owners to participate in this initiative.  Since 2014, the IRS has already considered a number of petitions from property owners.  The new mailing is being taken to ensure that eligible property owners in this category are aware of this option.

Background on Structuring
The special procedure to request a return of funds or property applies to a specific category of property owners whose assets were forfeited because they were involved in “legal source” structuring, in which their regular cash transactions fell below the $10,000 reporting threshold established under the Bank Secrecy Act.

The October 2014 policy change meant the IRS would no longer pursue the seizure and forfeiture of funds associated solely with “legal source” structuring, unless there are exceptional circumstances justifying the seizure and forfeiture.  The 2014 policy change -- and the new special procedure -- does not affect funds involving "illegal source" structuring violations, including those cases where structuring activity is indicative of serious crimes ranging from tax and money laundering violations to drug dealing.

Details on Who May Be Eligible to Participate
The IRS will be mailing letters to those property owners it has identified as potentially having an interest in assets that were forfeited because they were involved in structuring violations prior to the change in the IRS policy.  Property owners who participate in this process to seek a return of their funds or property must qualify by establishing that the underlying funds came from a legal source and there is no evidence the requesting party engaged in structuring to conceal other criminal activity.

In those "legal source" structuring cases which were “administrative” and did not involve a formal judicial proceeding, the IRS has authority in appropriate cases to remit funds directly to the affected property owner.  In judicial cases involving "legal source" structuring, the IRS can make recommendations in appropriate cases to the Department of Justice, but the Department of Justice has final authority on any decision to be made.

The IRS is considering certain cases dating back to Oct. 1, 2009 and certain property owners should receive a letter from the IRS this month. If property owners are in this category and do not receive a letter, the IRS encourages them to contact the IRS at [email protected] to get more information.

“The IRS recognizes that seizure and forfeiture are powerful law enforcement tools, and must be administered in a fair and appropriate manner,” IRS Commissioner John Koskinen told the House Ways and Means Committee on May 25, 2016. “We understand we have a duty not only to uphold the law, but to protect the rights of individuals as well.  We look forward to working with property owners who come forward, and we will continue working to ensure that we handle all cases with fairness and respect for taxpayer rights in every instance.”

Have a Tax Problem?  

Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).


Read more at: Tax Times blog