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Yearly Archives: 2016

Federal Agents & Prosecutors Now Gearing Up to Utilize “Panama Papers” in Their Prosecutions of Mossack Fonseca's Employees!

August 9, 2016

On June 25, 2016 we posted Federal Agents & Prosecutors Gearing Up to Utilize "Panama Papers" in Their Prosecutions where we discussed that Federal agents and prosecutors are "chomping at the bit" to exploit the Panama Papers and launch prosecutions, a senior federal law enforcement official told NBC News, but want to be sure that the way the huge data dump about offshore money was obtained doesn't jeopardize their cases.
 
The official, who is familiar with ongoing discussions about the document trove, said agents from every three-letter agency are lining up to crunch the data to bolster existing cases and build new ones against organized crime syndicates, drug cartels, foreign corrupt regimes and even suspected Hezbollah terror cells in Latin America and possibly the U.S. That includes the FBI, the IRS and other Treasury agents, the Drug Enforcement Administration (DEA) and the Department of Homeland Security (DHS).
Now U.S. federal prosecutors have launched a criminal investigation into whether individuals at Mossack Fonseca & Co., the law firm at the center of the “Panama Papers” scandal, knowingly helped its clients launder money or evade taxes, according to people familiar with the matter.

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A spokeswoman for Mossack Fonseca directed all inquiries to the firm’s website, which says the firm “has never been accused or charged in connection with criminal wrongdoing.”

The investigation, led by the Manhattan U.S. attorney’s office and the Justice Department’s main office in Washington, is focused on whether individuals within Mossack Fonseca worked with clients to knowingly facilitate criminal activity, according to people familiar with the matter. Prosecutors are considering charges that could include conspiracies to launder money, evade taxes, and hide bribes to foreign officials, the people said.

The Investigation is Focused on a Handful of
Lower-Level Mossack Fonseca Employees,
but Prosecutors plan to Expand Their Scope,
people familiar with the matter said.
The Investigation is Still in Early Stages!

To bring any charges, U.S. prosecutors would have to prove that Mossack Fonseca’s lawyers knew they were helping clients conduct illegal activities or were willfully blind.

Prosecutors also will have to ensure that the evidence they use from the Panama Papers isn’t protected by attorney-client privilege.

In our April 25, 2016 post entitled DoJ Launches Criminal Investigation of Hundreds of US Taxpayers Named in Panama Papers Leak!we discussed that Mossack Fonseca Company Services is currently attempting to fight a subpoena brought in the U.S. District Court for the District of Nevada seeking information on at least 123 companies that it created.

In 2015, a federal judge in Nevada ruled that Mossack Fonseca was subject to the U.S. court’s jurisdiction due to the existence of M.F. Corporate Services in Nevada, which the judge said was a Las Vegas-based “alter ego” for the firm.

As we further discussed in our June 25, 2016 post Nevada & Wyoming Asked to Provide Information on Entities Linked to the “Panama Papers” Senate Finance Committee Ranking Member Ron Wyden (D-OR) has asked the Nevada Secretary of State to provide specific information on over 1,000 Nevada business entities that have been linked to the so-called “Panama Papers” scandal. Nevada's law allows it to demand a list of beneficial owners of any entity registered in Nevada and suspected of illegal activities. Senator Wyden has also requested that the Wyoming Secretary of State provide specific information on the 24 Wyoming business entities that are linked to the scandal.

Lets just say that this is not an ideal time to be a Mossack Fonseca client with undeclared offshore income and is now it is also not a good time for Mossack Fonseca employees who may have been involved with or willfully blind to tax evasion, money laundering or other unlawful acts.

  Do You Have Undeclared Income From An Entity
Formed By Mossack Fonseca ?

  
Do You Have Undeclared Accounts

With Any of the Following Foreign Banks?
 
 
 
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
at: www.TaxAid.com or www.TaxLaw.ms
or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888) 882-9243

Sources:

The Wall Street Journal

The Guardian

Read more at: Tax Times blog

New IRS PATH Act Changes For ITIN Applicantion

August 8, 2016

Notice 2016-48 explains how the IRS will implement the changes to the Individual Taxpayer Identification Number (ITIN) program resulting from the enactment of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).


The basic process for applying for an ITIN will not change as a result of the PATH Act. Individuals apply for an ITIN by submitting Form W-7, Application for IRS Individual Taxpayer Identification Number, (Form W-7SP for the Spanish language version).
 
Most taxpayers must submit their Form W-7 with the tax return for which the ITIN is needed. Both domestic and foreign applicants may submit their Form W-7, tax return, and the required documentation by mail to the ITIN Operation Unit in Austin, Texas. Original documents or certified copies of documents from the issuing agency are the only acceptable documentation, except for a few very limited exceptions.

Under the PATH Act, in-person applications may be submitted to an employee of the IRS authorized to review and accept applications or to a Community-Based Certified Acceptance AAgent approved by the IRS.
 
Individuals who apply in person, other than dependents, will receive their documentation back once the in-person application is completed.
 
  • Currently, all IRS employees authorized to review and accept applications are located in the United States.
  • The IRS is reviewing the new law and considering how to implement the new provision for community-based certified acceptance agents.
  • Until further guidance is issued, all applicants may continue to submit their application package (i.e., Form W-7 and supporting documentation) to CAAs for review under existing procedures (see https://www.irs.gov/individuals/acceptance-agent-program).
  • Applicants may also submit their application packet in person at an IRS Taxpayer Assistance Center. Not all locations provide this service and many do so only by appointment.
  • Taxpayers should first check www.IRS.gov /uac/tac-locations-where-n-person-document-verification-is-provided to find a location that has employees authorized to review and accept applications, and if applicable, make an appointment before visiting.
  • See the Instructions for Form W-7 and https://www.irs.gov/individuals/additional-itin-information for more detailed information regarding the application process for an ITIN.

CERTAIN ITINs WILL NEED TO BE RENEWED BEGINNING IN 2017
For ITINs issued before 2013, the PATH Act provides that ITINs will no longer be in effect according to the following schedule, unless the ITIN has already expired due to nonuse for three consecutive years as described above: 


  • ITINs issued before 2008 will remain in effect until January 1, 2017.  
  • ITINs issued in 2008 will remain in effect until January 1, 2018.  
  • ITINs issued in 2009 or 2010 will remain in effect until January 1, 2019.  
  • ITINs issued in 2011 or 2012 will remain in effect until January 1, 2020.

 

WHAT MAY HAPPEN IF AN ITIN IS NOT RENEWED
 
Once renewed, an ITIN will remain in effect unless it is not used on a tax return for three consecutive years. The issuance date of a renewed ITIN is the date the ITIN was originally issued, not the renewal date. Some individuals may not be aware that their ITIN has expired or that they must renew an expired ITIN. Returns filed by these individuals will be accepted by the IRS; however, there may be a delay in processing these returns, and certain credits, such as the Child Tax Credit and the American Opportunity Tax Credit, may not be allowed unless the ITIN is renewed. This could result in a reduced refund or additional penalties and interest. The IRS will notify these filers about the delay and any reduction in refunds and credits claimed and will inform them about the need to file Form W-7 to renew their ITIN.
 
USE OF AN ITIN SOLELY ON AN INFORMATION RETURN
 
An individual whose expired ITIN is used only on information returns filed and furnished by third parties, such as Forms 1099, is not required to renew the ITIN. ITINs may continue to be used for information return purposes regardless of whether they have expired for individual income tax return filing purposes. If the individual is later required to file a tax return, however, the individual’s ITIN will have to be renewed at that time. Additionally, the third parties who file and furnish information returns with an expired payee ITIN will not be subject to information return penalties under sections 6721 or 6722 solely because the ITIN is expired.

The Internal Revenue Service today announced important changes to help taxpayers comply with revisions to the Individual Taxpayer Identification Number (ITIN) program made under a new law. The changes require some taxpayers to renew their ITINs beginning in October.

The new law will mean ITINs that have not been used on a federal tax return at least once in the last three years will no longer be valid for use on a tax return unless renewed by the taxpayer. In addition, ITINs issued prior to 2013 that have been used on a federal tax return in the last three years will need to be renewed starting this fall, and the IRS is putting in place a rolling renewal schedule, described below, to assist taxpayers.

If taxpayers have an expired ITIN and don’t renew before filing a tax return next year, they could face a refund delay and may be ineligible for certain tax credits, such as the Child Tax Credit and the American Opportunity Tax Credit, until the ITIN is renewed.

“The ITIN program is critical to allow millions of people to meet their tax obligations,” said IRS Commissioner John Koskinen. “The IRS will be taking steps to help taxpayers with these changes, and we’re designing this effort to minimize the burden as much as possible. We will be working with partner groups on an outreach effort to share information about these changes to ensure people understand what they need to do in advance of next year’s tax season.”

The ITIN changes are required by the Protecting Americans from Tax Hikes (PATH) Act enacted by Congress in December 2015. These provisions, along with new procedures to help taxpayers navigate these changes, are outlined in IRS Notice 2016-48, which was released today.

Who Has to Renew an ITIN

The IRS emphasizes that no action is needed by ITIN holders if they don’t need to file a tax return next year. There are two key groups of ITIN holders who may need to renew an ITIN so it will be in effect for returns filed in 2017:

  • Unused ITINs. ITINs not used on a federal income tax return in the last three years (covering 2013, 2014, or 2015) will no longer be valid to use on a tax return as of Jan. 1, 2017. ITIN holders in this group who need to file a tax return next year will need to renew their ITINs. The renewal period begins Oct. 1, 2016.
  • Expiring ITINs. ITINs issued before 2013 will begin expiring this year, and taxpayers will need to renew them on a rolling basis. The first ITINs that will expire under this schedule are those with middle digits of 78 and 79 (Example: 9XX-78-XXXX). The renewal period for these ITINs begins Oct. 1, 2016. The IRS will mail letters to this group of taxpayers starting in August to inform them of the need to renew their ITINs if they need to file a tax return and explain steps they need to take. The schedule for expiration and renewal of ITINs that do not have middle digits of 78 and 79 will be announced at a future date.

How to Renew an ITIN

Only ITIN holders who need to file a tax return need to renew their ITINs. Others do not need to take any action.  

Starting Oct. 1, 2016, ITIN holders can begin renewing ITINs that are no longer in effect because of three years of nonuse or that have a middle digit of 78 or 79.  To renew an ITIN, taxpayers must complete a Form W-7, Application for IRS Individual Taxpayer Identification Number, follow the instructions and include all information and documentation required. To reduce burden on taxpayers, the IRS will not require individuals renewing an ITIN to attach a tax return when submitting their Form W-7. Taxpayers are reminded to use the newest version of the Form W-7 available at the time of renewal which will be posted in September (Use version “Rev. 9-2016”).

There are three methods taxpayers can use to submit their W-7 application package to renew their ITIN. They can:

  • Mail their Form W-7 – along with the original identification documents or certified copies by the agency that issued them -- to the IRS address listed on the form (identification documents will be returned within 60 days),
  • Use one of the many IRS authorized Certified Acceptance Agents or Acceptance Agents around the country, or  
  • In advance, call and make an appointment at an IRS Taxpayer Assistance Center in lieu of mailing original identification documents to the IRS.

Other Steps to Help Taxpayers

To make this renewal effort easier and reduce paperwork, the IRS will be offering a family option for ITIN renewal. If any individual having an ITIN middle digit of 78 or 79 receives a renewal letter from the IRS, they can choose to renew the ITINs of all of their family members at the same time rather than doing them separately over several years. Family members include the tax filer, the spouse and any dependents claimed on their tax return.

The IRS is also working closely with a variety of partner and outreach groups to share information about the ITIN changes and help raise awareness about the new guidelines. The IRS will be providing additional information and material to share with these groups and taxpayers in the near future.

“We encourage people who need to renew their ITINs to plan ahead and take action this fall to avoid issues when they file tax returns in early 2017,” Koskinen said.

New requirement for dependents whose passports do not have a date of entry into the U.S.

Beginning Oct. 1, 2016, the IRS will no longer accept passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from countries other than Canada or Mexico or dependents of military members overseas. Affected applicants will now be required to submit either U.S. medical records for dependents under age six or U.S. school records for dependents under age 18, along with the passport. Dependents aged 18 and over can submit a rental or bank statement or a utility bill listing the applicant’s name and U.S. address, along with their passport.  

Other information about ITINs

ITINs are for federal tax purposes only and are not intended to serve any other purpose. ITINs that are only used on information returns filed with the IRS by third parties do not need to be renewed. An ITIN does not authorize one to work in the United States or provide eligibility for Social Security benefits or the Earned Income Tax Credit. ITINs are not valid identification outside the tax system and do not establish immigration status.

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

Read more at: Tax Times blog

Required Record Doctrine Does Not Trump 5th Amendment Privilege in the Second Circuit

August 5, 2016

=LGT group

We previously posted Trouble for Offshore Bank Account Owners at Liechtensteinische Landesbank AG (LLB) where we discussed that Tax problems for offshore bank account holders in Lichtenstein date back to 2008 when information stolen from LGT Group was used by German authorities to prosecute tax fraud.
 
The fallout extended to U.S. depositors at LGT who were investigated by the IRS. One of the US depositors that got caught in this expanded IRS investigation was the defendant Steven Greenfield.
 

The Defendant-Appellant Steven Greenfield was implicated in tax evasion after a leak of documents from a Liechtenstein financial institution revealed connections to previously undisclosed, offshore bank accounts. Years after the leak, the Internal Revenue Service issued a summons for an expansive set of Greenfield’s financial and non-financial records, including those pertaining to the offshore accounts referenced in the leak. Greenfield refused to comply with the summons, and the Government sought enforcement in the Southern District of New York (Hellerstein, J.).
 
Greenfield opposed enforcement and moved to quash the summons, inter alia, on the basis that the compelled production of the documents would violate his Fifth Amendment right against self-incrimination.
 
The District Court granted enforcement for a subset of the requested documents under the foregone-conclusion doctrine set out in Fisher v. United States, 425 U.S. 391 (1976).

 

The U.S. appeals court overturned the District Court's decision and thereby made it harder for the Internal Revenue Service to get some tax records of Americans with offshore accounts, denying the agency's request for records of a U.S. client at LGT Group in Liechtenstein United States v. Greenfield.


One exception to the Fifth Amendment privilege against self-incrimination is the foregone conclusion doctrine, which holds that the government can compel the production of certain documents if the production of the documents does not amount to testimony.
 
The foregone-conclusion doctrine applies if the government knows the documents exist, knows that the taxpayer possesses or controls the documents, and knows that the documents are authentic.
 
Therefore, compliance with the summons would be a question not of testimony but of surrendering the documents.
 
With respect to the foregone-conclusion doctrine, the appeals court determined that the time when the prerequisites for the exception (existence, control, and authenticity) would have to be met was when the IRS issued its summons in 2013.
 
The appeals court found that, although some of the documents might have satisfied these tests years ago, in 2013 none of the prerequisites for the exception were met for any of the documents the IRS sought.
 
The court recognizedthat tax evasion is bad: 

"A remarkable amount of American wealth is held offshore, often in an effort to evade taxation. One recent study estimated that $1.2 trillion—some four percent of this nation’s wealth—is held offshore and that this results in an annual loss in tax revenue of $35 billion. Gabriel Zucman, The Hidden Wealth of Nations: The Scourge of Tax Havens 53 (Teresa Lavender Fagan trans., 2015). Such lost income diminishes the Treasury and exacerbates problems of inequality since, generally, only the wealthiest of individuals can take advantage of foreign tax havens." 

But it also recognized this is America and we have a Fifth Amendment:

The need to curtail tax evasion, however pressing, nevertheless cannot warrant the erosion of protections that the Constitution gives to all individuals , including those suspected of hiding assets offshore. In the present case, Steven Greenfield was implicated in tax evasion as a result of a document leak from a Liechtenstein financial institution. 

 

For example, the IRS sought Greenfield’s expired passports, and the court found that they existed, were in his control, and were authentic as of 2001. However, it found that the elements were not met in 2013, when the IRS first requested the passports, because he was unlikely to have kept expired passports for so long, and therefore it was not a foregone conclusion that the passports still existed or that the taxpayer still possessed them. Consequently, the court vacated and remanded the case to the district court, which must then grant Greenfield’s motion to squash the summonses.

The district court held that the summonses were enforceable because the foregone-conclusion exception applied. It cited an earlier case involving the same document leak, in which the court had enforced the summons because the government had “specific knowledge of the accounts and the individual who controlled the accounts” (Greenfield, slip op. at 9, citing Gendreau, No. 12-Misc-303 (S.D.N.Y. 1/22/14)). In vacating and remanding the district court’s decision, the appeals court first looked at the Fifth Amendment privilege against self-incrimination, explaining that constitutional rights are broadly construed.
 
Do You Have Undeclared Income from an Offshore 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
at: www.TaxAid.com or www.TaxLaw.ms or
Toll Free at 888-8TaxAid (888) 882-9243
Sources
Law360
Journal of Accountancy
Forbes
 
The Dallas Morning News

Read more at: Tax Times blog

IRS Warns of Summer Surge in Automated Phone Scam Calls, Requests for Fake Tax Payments Using iTunes Gift Cards

August 5, 2016

The IRS has seen an increase in “robo-calls” where scammers leave urgent callback requests through the phone telling taxpayers to call back to settle their “tax bill.” These fake calls generally claim to be the last warning before legal action is taken. Once the victim calls back, the scammers may threaten to arrest, deport or revoke the driver’s license of the victim if they don’t agree to pay.

“It used to be that most of these bogus calls would come from a live-person. Scammers are evolving and using more and more automated calls in an effort to reach the largest number of victims possible,” said IRS Commissioner John Koskinen. “Taxpayers should remain alert for this summer surge of phone scams, and watch for clear warning signs as these scammers change tactics.” 

In the latest trend, IRS impersonators are demanding payments on iTunes and other gift cards. The IRS reminds taxpayers that any request to settle a tax bill by putting money on  any form of gift card is a clear indication of a scam.

Some examples of the varied tactics seen this year are:

  • Demanding payment for a “Federal Student Tax.” See IR-2016-81.
  • Demanding immediate tax payment for taxes owed on an iTunes or other type of gift card
  • Soliciting W-2 information from payroll and human resources professionals. See IR-2016-34.
  • “Verifying” tax return information over the phone. See IR-2016-40.
  • Pretending to be from the tax preparation industry. See IR-2016-28

Since these bogus calls can take many forms and scammers are constantly changing their strategies, knowing the telltale signs is the best way to avoid becoming a victim.  
The IRS will never:

  • Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card, gift card or wire transfer.
  • Ask for credit or debit card numbers over the phone.

If you get a phone call from someone claiming to be from the IRS and asking for money and you don’t owe taxes, here’s what you should do:

  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
  • If you think you might owe taxes, contact the Tax Attorneys at Marini & Associates, PA!
 Have a Tax Problem?
 
Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at 
www.TaxAid.com or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243).

 

Read more at: Tax Times blog

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