Monthly Archives: June 2021

According to DoJ, federal district court in Cincinnati, Ohio, sentenced an Atlanta, Georgia, man to 57 months in prison for tax evasion. This sentence included an enhancement for failing to report income from drug trafficking. 

According to court documents and statements made in court:

• From at least 2011 to 2016, Darryl Brown earned at least $1 million. 
• To evade paying taxes on this income, Brown did not file returns. 
• He created nominee businesses, opened bank accounts and lines of credit in the names of those businesses, and then used the accounts to pay for his luxury lifestyle. 
• This included extravagant overseas trips, Rolex and Cartier watches, and luxury clothing and vehicles. 

• Brown further used cash to purchase money orders in structured amounts to avoid triggering reporting requirements to the Department of Treasury and the IRS. Brown then used the money orders to pay off the balances on his nominee accounts. 
• In total, Brown caused a tax loss of more than $250,000. 

U.S. District Judge Timothy S. Black in the Southern District of Ohio also ordered Brown to serve three (3) years of supervised release and pay restitution to the IRS in the amount of $377,240. 

Have a Criminal Tax Problem?

Read more at: Tax Times blog

A district court in U.S. v. Goldsmith, (DC CA 5/25/2021) has found several reasons for holding that a U.S. holder of a foreign bank account was liable for a willfully not filing FBARs, including the fact that he opened the account as a numbered account, instituted a "hold mail" order on the account, and divested the account of U.S. securities when the foreign bank said otherwise it would disclose the account to the IRS.

Mr. Goldsmith was the owner of a Swiss bank account that, for the years in question, contained more than $10,000. Although his accountant asked him each year if he held a foreign account, the bank informed him of potential U.S. reporting requirements, there was other evidence that he knew he should have filed FBARs, Mr. Goldsmith did not file FBARs. 

• The IRS imposed a civil penalty for his willful violation of the FBAR rules.
• Mr. Goldsmith appealed to district court.
• The district court agreed with the IRS that Goldsmith's failure to file FBARs was willful.

The district court first reviewed various cases that discussed what a willful violation is and concluded that a willful violation may be found where the violation results from conduct qualifying as either (1) knowing and intentional or (2) reckless, including due to willful blindness. 

The court said that willful intent may be proven by circumstantial evidence and reasonable inferences drawn from the facts; it came to these conclusions because it said that direct proof of the taxpayer's intent is rarely available.

The district court said that Mr. Goldsmith's violation was willful because of the following facts:

1. Upon the death of Mr. Goldsmith's mother, Mr. Goldsmith inherited both the Swiss bank account and an interest in commercial property. Mr. Goldsmith disclosed the commercial property interest to his accountant but not the bank account despite the accountant explicitly asking him if he had a foreign account.

2. He set up the account, after his mother's death, specifically as a numbered account, in that his name was not associated with the account.

3. In 2000, the Swiss bank asked Mr. Goldsmith to sign a form, as part of an IRS program, which referenced "new U.S. withholding tax and reporting obligations" and gave Mr. Goldsmith a choice between disclosing his account to the IRS or divesting all of his U.S. securities. Mr. Goldsmith chose to divest the account of all U.S. securities rather than disclose the account to the IRS.

4. In addition to avoiding U.S. securities, Mr. Goldsmith also paid a regular fee to the Swiss bank to institute a "hold mail" order, or in other words, for the bank not to send him any mail in the U.S.

 The court pointed out that many other courts have interpreted a "hold mail" request of foreign bank qualifies as evidence of intent to conceal a foreign account from the U.S. government.

Do You Have Undeclared Offshore Income?

 

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 contact us at:

www.TaxAid.com or www.OVDPLaw.com 

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

Read more at: Tax Times blog

According to accountingTODAY, private wealth clients, hedge fund managers and cryptocurrency traders fleeing to Puerto Rico for its huge tax breaks and to escape President Joe Biden’s proposed capital gains tax increases are now the focus of a sweeping Internal Revenue Service review.

The country’s tax collector quietly launched a coordinated campaign in late January to examine individuals who took advantage, starting in 2012, of tax incentives designed to lure high net-worth individuals and corporations to Puerto Rico. More than 4,000 mainland U.S. residents and firms have moved to the territory between 2012 and 2019, revealing potentially hundreds of millions of dollars in lost tax revenue to the U.S. government, according to an IRS report delivered to Congress.

Individuals Have Already Started Receiving Requests For Information, According To Tax Attorneys That Advise Clients On Federal Income Tax Issues Under PR Tax Incentive Laws.

At issue are taxpayers who may have excluded income subject to U.S. tax, or failed to file and report income altogether when they moved to Puerto Rico, according to the IRS notice. The agency is also targeting those who claim to be bona fide residents of Puerto Rico but may be “erroneously reporting” U.S. income to evade taxes.

It also comes amid a wider crackdown by the Treasury Department, which recently released 
estimates showing wealthy taxpayers as a group are hiding billions of dollars in income. Treasury Secretary Janet Yellen has previously warned that if left unaddressed the tax gap could grow to $7 trillion over the next decade. Campaigns by the IRS often take years to organize, as agents begin to detect factual patterns that indicate a significant loss of revenue due to noncompliance. 

In The Case of Puerto Rico, Much of The Focus Will Be on Establishing Whether Individuals Are Truly Island Residents 

and Whether They Properly Sourced Income to Puerto Rico.

The IRS’ report to Congress calculated that more than 1,924 applicants, corporations, LLCs, partnerships and other types, had been granted tax benefits under the Exports Services Act (formerly known as Act 20) as of March 2020 based on partial information provided by Puerto Rico. Act 20 offers entities a 4% corporate rate on business income and 100% tax exemption on dividends. That provision along with the Individual Investors Act have now been consolidated into a new incentive law to attract individuals and investments to the island.

More than 2,300 individuals were also granted tax exemptions on passive income, such as dividends and capital gains, under the Individual Investors Act (formerly known as Act 22) between 2012 and 2019, according to the IRS report. Of those individuals, the IRS could identify only 25% or 647 individuals who had previously resided in California, Florida, New Jersey, New York and Texas. They paid nearly $558 million in combined federal income taxes in the five years prior to their relocation to Puerto Rico, representing a fraction of potential loss revenue to the U.S. Treasury’s coffers.

The Trend to Leave the US For Puerto Rico
Has Continued Since the Start of the Pandemic.

 Witth the number of Manhattan residents relocating to Puerto Rico growing by at least fourfold compared to the previous year, according to change of address data from the United States Postal Service.

Between March 2020 and February 2021, at least 82 requests were filed for permanent moves to Puerto Rico by New York City residents compared with only 22 the previous year. Additionally, at least another 11 Manhattan addresses temporarily forwarded their mail during the pandemic to the island. None had done so the year prior.

Many are day traders without traditional jobs that spend their wealth making trades on stocks, securities, commodities and cryptocurrencies, earning capital gains that are 100% tax-exempt. Others include investment bankers and hedge fund managers, who either manage funds or provide financial advice to clients, allowing them to earn tax-exempt carried interest.

Individuals Identified by the IRS Will Have to Prove
Their Puerto Rican Residency,
a Key Factor in Claiming the Tax Benefits.

Taxpayers Must Live on The Island For A Minimum of 183 Days Annually Every Year to Be Considered A Bona Fide Resident.

Maintaining a residency goes beyond simply leasing an apartment in popular Dorado Beach. It includes bringing your main possessions, joining local clubs, updating your voter registration status, moving with your spouse, and enrolling your children in the island’s schools.

“You should also try to minimize contact with mainland U.S.,” said Carballo-Irigoyen. “If the IRS were to audit and they look at your life, they have to be convinced this is where you live.”

Moving, even if someone has qualified for tax incentives from Puerto Rico, doesn’t necessarily make someone exempt from filing a U.S. tax return, Leeds said. Also, “it’s only Puerto Rico source income that is eligible for exemption. It’s not foreign source. It’s not U.S. source. Only Puerto Rico source.”

 Want to Become a PR Resident
and Reduce Your Taxes?

     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) 

Read more at: Tax Times blog

In a memo TAS-13-0521-0007 dated 5/17/2021, the Taxpayer Advocate Service (TAS) has announced that it is extending, through the end of the year, its guidance allowing TAS employees to receive documents by email and transmit documents via email to taxpayers and representatives with their consent, using SecureZip (a program that encrypts email attachments) or other authorized secured messaging system.

As with prior guidance, TAS employees may also accept images of signatures (scanned or photographed) and digital signatures on various IRS and TAS official documents.

Previously, the guidance was due to expire on June 30.

Have IRS Tax Problems?

     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) 

Read more at: Tax Times blog