Yearly Archives: 2018

When the IRS announced that it was ending the program, it noted that taxpayers “who still wish to come forward have time to do so.” It has been widely assumed that this meant that taxpayers had until September 2018 to take full advantage of the program if they so choose.

Now according to Law360 that is no longer true. Until recently, taxpayers could confirm their eligibility for the program before providing the IRS evidence of potential criminal violations and, per the IRS announcement, such taxpayers had until the end of August to do so. Now, due to processing delays of up to three months for requests already made, the deadline for taxpayers to confirm their eligibility has already passed. Without some extension of the September deadline by the IRS, a taxpayer can only attempt to enter the program blind, risking exposing criminal activity to the IRS without receiving immunity in return.

In order to be eligible to participate in OVDP and receive the benefits of immunity and reduced penalties, taxpayers must not be already under IRS investigation, audit or exam, and their undisclosed foreign assets must not have already been disclosed to the IRS by their respective financial institutions. As taxpayers are not always aware if they are under investigation or audit, the IRS has allowed taxpayers to obtain pre-clearance letters that confirm their eligibility for the program. While it is not necessary to participate in OVDP, these letters are an important first step in participating in the program. They are not, however, an application to the OVDP program.

Every participant should try and receive a pre-clearance letter before applying. In an OVDP application, taxpayers must provide the IRS a roadmap of their potentially criminal activity. They must reveal where all the proverbial bodies are buried. The pre-clearance process gives taxpayers the peace of mind that when they give the IRS this roadmap they will not, assuming they are otherwise accepted into the program, face criminal prosecution. If they do not obtain the pre-clearance letter, having submitted the information only to find out they are ineligible, they have not only revealed their potentially criminal activity to a government already investigating them, but just handed over a trove of incriminating materials.

Prior to the announcement of OVDP's termination on September 28, 2018, a taxpayer typically received a pre-clearance letter about 2-3 weeks after requesting it. When the IRS announced it was closing the program, it updated its FAQs to indicate that participants should expect the process to take 30 days.

As one can imagine, news of the program's imminent shutdown has caused a large number of taxpayers to begin the process of obtaining pre-clearance letters, a development that appears to have caught the IRS off guard. Agents handling such requests have been telling potential applicants that the process is so delayed that they should not expect to receive a pre-clearance letter for two to three months.

While not saying it directly, if taxpayers want to proceed with a voluntary disclosure under OVDP, they may do so without the protections afforded by a pre-clearance letter. They must run the risk of providing the government every piece of information necessary to prove criminal charges against them only to find out that the government is already investigating them.

This issue is entirely fixable by the IRS. They could, for example, extend the deadline for applicants in light of these delays. They could allow taxpayers to file their OVDP applications within a certain period of time after receiving the pre-clearance letter so long as the request for a pre-clearance letter was filed before the Sept. 28, 2018, deadline.

It is unlikely the IRS will extend these deadlines or take any other measures to fix these delays. The IRS’ rationale for ending the program was that by this point, taxpayers “have had several years to come into compliance with U.S. tax laws under the OVDP Program.  In other words, the IRS is unlikely to sympathize with taxpayers who have waited until now to proceed with a disclosure.

Every OVDP applicant is different and each must decide for himself or herself whether to take the risk of filing an application without a pre-clearance letter. At its core, the OVDP program provides certainty. Participants know that they will not face criminal liability for their past actions. They pay reduced penalties, taxes and interest and are able to move forward with their lives unencumbered by their IRS tax issues. Now, however, in hopes of obtaining that certainty, taxpayers must assume some additional risk.

Some potential OVDP participants will choose to proceed with the disclosure because to them the potential benefit of future certainty outweighs the risk of potential ineligibility. To others, the fear of showing the government all the skeletons in their closest without assurances they will receive the benefits of immunity will prove too much for them.

Each taxpayer should consult with an Experience Tax Attorney, to advise them regarding their choices for addressing their previously undisclosed foreign income, who can inform them of the risks and benefits of each path forward.

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.OVDPLaw.com or

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

According to Law360, Swiss bank Zürcher Kantonalbank has agreed to pay $98.5 million after admitting to helping U.S. clients dodge taxes by letting them stash money in undeclared accounts that used code names and shell companies, Manhattan federal prosecutors announced on August 13, 2018.

ZKB will hand over the amount as part of a deferred prosecution agreement, which the bank reached after admitting to helping U.S. clients collectively avoid paying more than $39 million in U.S. taxes between 2002 and 2013, according to prosecutors. The bank would have been given more credit for cooperating with the government if it hadn’t dissuaded two indicted employees from reaching out to the U.S. Attorney’s Office, prosecutors said.

Those two bankers, Stephan Fellmann and Christof Reist, were originally indicted on felony charges and pled guilty to misdemeanor charges on August 13, 2018.

“The Substantial Financial Penalties Imposed on the Bank, and the Two Bankers’ Pleas, Should Make Clear That Helping US Taxpayers to Be Tax Evaders Will Not Be Tolerated,” Manhattan U.S. Attorney Geoffrey S. Berman said in a statement. 

If ZKB abides by the agreement, which includes a requirement to turn over information about the U.S. client accounts, the government said it will defer prosecution on the information for three years and then seek to dismiss the charges.

According to the prosecutors’ statement, ZKB helped U.S. clients dodge taxes by opening and maintaining undeclared accounts, including by allowing the clients to be identified by a code word instead of by name. The bank also allowed U.S. clients to maintain accounts held in the names of non-U.S. entities, some of which were sham structures existing solely to hide offshore assets, prosecutors said.

At ZKB’s “high-water mark” in 2008, the bank held approximately $794 million in assets relating to undeclared accounts held by U.S. clients, according to the statement.

ZKB’s external asset manager desk “treated UBS’ decision to stop accepting U.S. taxpayer-clients as a business opportunity, and actively sought to increase its U.S. taxpayer-client base,” according to the prosecutors’ statement.

In December 2012, three ZKB bankers: Fellmann, Reist and Otto Hüppi, were charged in a New York federal court with conspiracy to defraud the U.S. and the IRS for their role in ZKB’s conduct, according to prosecutors.

Fellmann, whose name is spelled “Fellman” in the case name and Reist are scheduled to be sentenced Nov. 30 and face up to one year in prison. Hüppi remains at large.

The case is USA v. Fellman et al., case number 1:12-cr-00962, in the U.S. District Court for the Southern District of New York.

Have Undeclared Income from an Offshore Account?
 

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.OVDPLaw.com or

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

 



 

The new deduction, referred to as the Section 199A deduction or the deduction for qualified business income, was created by the Tax Cuts and Jobs Act. The deduction is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year.

The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the lesser of 20 percent of their qualified business income plus 20 percent of their qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.

Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited. Those limitations are fully described in the proposed regulations.

Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.

In addition, Notice 2018-64, also issued on August 8, 2018, provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction.

Taxpayers may rely on the rules in these proposed regulations until final regulations are published in the Federal Register.

 

 

We Can Advise on How These Tax Cuts Can Benefit You!

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

 

for a FREE Tax Consultation Contact us at:

www.TaxAid.com or www.OVDPLaw.com or

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

On July 24, 2018 we posted IRS Cost-Sharing Regulations Revived By Appeals Court where we discussed that the Ninth Circuit reversed a decision by the U.S. Tax Court that invalidated an Internal Revenue Service cost-sharing regulation in a dispute with an Intel Corp. subsidiary, saying the revenue agency did not exceed its authority in promulgating the rule.  In a 2-1 decision, the appeals court said the IRS is entitled to deference and was justified in issuing the rule under the Administrative Procedure Act, despite comments from the public that opposed the regulation.

The Tax Court had sided with Altera Corp., an Intel subsidiary, in the case in July 2015 after finding that the IRS had ignored significant evidence and public comments while issuing its rule requiring cost-sharing agreements between related parties to include the costs of stock-based compensation.

Now according to Law360 on August 7, 2018 the Ninth Circuit withdrew its July 24 decision against Intel Corp. subsidiary Altera, letting stand a U.S. Tax Court decision invalidating IRS regulations that require employee stock option expenses to be shared with foreign subsidiaries in cost-sharing arrangements.

The now-withdrawn Ninth Circuit opinion that went against Altera Corp., an Intel Corp. subsidiary, represented a rare win for the Internal Revenue Service in a transfer pricing case.

The ruling was also unusual in that one of the judges voting with the majority, Stephen Reinhardt, had died in March, months before the opinion was issued.

The now-withdrawn ruling said Judge Reinhardt had “fully participated” in the case and “formally concurred in the majority opinion” before his death.

The one-sentence order withdrawing the ruling stated that the majority and dissenting opinions “are hereby withdrawn to allow time for the reconstituted panel to confer on this appeal.”

The case is Altera Corp. and Subsidiaries v. Commissioner of Internal Revenue, case numbers 16-70496 and 16-70497, in the U.S. Court of Appeals for the Ninth Circuit.

Have a IRS Tax Problem? 

 

  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com or

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