Yearly Archives: 2021

On July 30, 2021 we posted Court Orders Fedex, CitiBank & Others to Give the IRS Panama Offshore Account Info! where we discussed that in the case of In the Matter of Tax Liabilities of John Does, case number 1:21-mc-00424-GHW, a federal judge said that he will allow the IRS to obtain from couriers and financial institutions, including FedEx and Bank of America, records of individuals who may have used Panamanian offshore service providers to hide assets, the U.S. Justice Department said on July 29, 2021.

U.S. District Judge Gregory H. Wood, of the Southern District of New York, approved Internal Revenue Service summonses to seek the information from financial institutions including Citibank, Wells Fargo Bank and couriers including FedEx Corp. and UPS Inc. 

The Summonses Request Information on Deliveries and Electronic Fund Transfers Between 

Panama Offshore Legal Services and Clients Who 
May Have Used Its Services To Create or Control

Foreign Assets To Avoid Tax Obligations, The DOJ Said.

The IRS is investigating taxpayers who may have used Panama Offshore Legal Services, which is part of a collective of related entities known as the POLS Group, to facilitate concealing income and assets from U.S. tax authorities between 2013 and 2020. The government has been seeking information from other entities, including MoneyGram Payment Systems, through a separate summonses request in Minnesota to investigate those who may have violated U.S. laws by hiding taxable income and assets.

POLS is a Panamanian law firm that advertises services including the creation of foundations and corporations as well as offshore financial accounts while promising clients "100% anonymity, privacy and confidentiality," according to the DOJ."

A U.S. person that has a financial interest in, or signature authority over, a foreign financial account must file a FinCEN Form 114 (Report of Foreign Bank and Financial Accounts, commonly referred to as an FBAR) when the aggregate value of their foreign financial accounts exceeds $10,000 at any time during the calendar year. (Instructions to FinCEN Form 114)

In addition, U.S. individuals who have a financial interest in, or signature authority over, a financial account in a foreign country or who have received a distribution from, were a grantor of, or a transferor to, a foreign trust, must report that interest on Part III, Schedule B, Form 1040. (Instructions to Schedule B (Form 1040))

To encourage U.S. taxpayers to report their offshore accounts and assets, the IRS offered several versions of an Offshore Voluntary Disclosure Program (OVDP). The OVDP allowed U.S. taxpayers to voluntarily disclose foreign accounts or entities used to evade U.S. taxes in exchange for reduced penalties. The last OVDP closed on September 28, 2018. 

The Minnesota court in this case found that the IRS satisfied the three statutory prerequisites for issuing a John Doe summons:

1. First, the IRS's investigation concerns an ascertainable group of people. (Code Sec. 7609(f)(1))
2. Second, the IRS provided information showing that there is a reasonable basis for believing that U.S. individuals using POLS's services may fail or have failed to comply with any provision of any internal revenue law. (Code Sec. 7609(f)(2))
3. Third, the information the IRS sought on those using POLS's services, including their identities, is not readily available from other sources. (Code Sec. 7609(f)(3))

The court also found that the information the IRS sought to summon was narrowly tailored to information pertaining to the failure or potential failure of the group to comply with internal revenue laws. (Code Sec. 7609(f)) 

Finally, the court noted that the IRS provided evidence that POLS accepts payments for its services via wire transfer from MoneyGram and that POLS customers are directed to make payments through MoneyGram. 

Do You Have Undeclared Offshore Income?

 

Want to Know Which
Voluntary Disclosure 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

The Internal Revenue Service retired a compliance campaign that had enabled U.S. taxpayers to voluntarily resolve returns deemed noncompliant due to past unreported foreign financial assets or a failure to file foreign-information returns.

The IRS' Large Business and International Division said on September 17, 2021 that it was ending the offshore voluntary disclosure program's Declines and Withdrawals Campaign, which the agency introduced in July 2019. It was intended to serve as a temporary follow to the more-formal OVDP, halted in late 2018.

The Campaign Had Addressed Taxpayers Who Applied
For Early Admission To The OVDP But Were Either
Denied Access To Or Pulled Out From The Program
of Their Own Accord, LB&I Noted.

The division, which oversees C corporations, subchapter S corporations under the U.S. tax code and partnerships with assets of over $10 million, had undertaken the post-OVDP campaign to help it improve decision-making on which business tax returns require scrutiny, identify potential sources of noncompliance and efficiently use resources.

Read more at: Tax Times blog

According to Law360, the U.S. Tax Court's return to in-person trial sessions this winter, will require tax practitioners to weigh their witnesses, clients, technology and expenses when deciding whether to conduct an in-person trial or request a virtual proceeding. 

On Aug. 27, the Tax Court issued Administrative Order 2021-01, which said beginning in the winter 2022 term the court will default to holding in-person trial sessions with an option to request a virtual proceeding. The order overrides a previous administrative order from 2020 that said the court would conduct only virtual proceedings because of the coronavirus pandemic.

The order presents representatives of Tax Court clients with a novel choice: whether it would be better to hold an in-person trial or to request a virtual session. When evaluating the options, tax attorneys have to think about their role not only as an advocate but also as a people manager, according to Igor S. Drabkin, a principal at Holtz Slavett & Drabkin APLC.

Things attorneys have to consider include "whether someone is unable or unwilling to show up [to the courtroom],'' Drabkin said, "and the cost factor is a consideration in certain cases with limited resources."

Each Case Should Be Evaluated Separately When Deciding Whether It's Worthwhile To Request A Virtual Proceeding Or To Keep It In Person, Drabkin Said.

The answer largely will depend on the complexities in the trial and the issues involved, he said. For example, an online trial is more cost-efficient because parties will not have to drive or fly to the Tax Court, which allows witnesses who live out of state or outside the country to appear before a judge without considerable expense, he said. The Tax Court holds sessions at its building in Washington, D.C., and in various courtrooms around the country.

Meanwhile, an in-person trial provides the opportunity for a taxpayer or a witness to make a personal impression upon the judge, especially in the case of a taxpayer's testimony and their personal story, Drabkin said. For example, an in-person trial may be more appropriate in a penalty case that hinges upon the taxpayer's intent or state of mind, he said.

"An in-person trial will maybe allow the taxpayer to make a better impression [and for a judge to understand] their vulnerabilities or lack of sophistication," he said.

On the other hand, if witnesses or attorneys have health concerns and holding an in-person trial would make them more vulnerable, that may weigh the scales in favor of a virtual session, Hill said. Virtual proceedings may also be better suited for arguing motions, he said.

Either party can request a virtual trial by filing a motion to proceed remotely, which can be filed after the petition is initially filed and up to 31 days before the first day of the trial session, the administrative order said.

However, it is unclear what will happen when one party wants an in-person session and the other party wants the proceeding to be remote, Garber said. The court will likely weigh the complexity of the case against any hardships such as travel costs, which could be especially important when evaluating smaller cases, he said.

A representative from the Tax Court confirmed to Law360 that each motion to proceed remotely will be determined case by case.

The motion to proceed remotely also potentially could be used to change a scheduled in-person trial to a remote trial at the last minute, since the request can be filed up to 31 days before the session. That means it could conceivably be used as a litigation tactic by either side to require the other party to cancel their travel plans and pivot to conducting the trial remotely, Hill said.

Timothy Jacobs, a tax partner at Hunton Andrews Kurth LLP, said that going forward, there's an opportunity for the Tax Court to continue using its virtual platform for the sake of efficiency and cost.

"It is an easier mechanism for pro se taxpayers and even the Tax Court itself for travel time, efficiency in terms of getting a large docket cleared and making sure there are no scheduling conflicts," he said. "Those are much easier in a Zoom world than in person." 

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

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

Read more at: Tax Times blog

The Tax Court has found in Sutherland, TC Memo 2021-110 that a wife was not entitled to equitable innocent spouse relief because she had knowledge or reason to know that the couple's tax liability would not be paid.

A court may grant innocent spouse relief under Code Sec. 6015(f) under the equitable relief rules of Rev Proc 2013-34, Sec. 4.03, 2013-43 IRB. That section lists seven factors for consideration in determining whether relief should be granted. The listed factors are: 

1. Marital status, 
2. Economic hardship, 
3. Significant benefit, 
4. Subsequent compliance with Federal tax laws, 
5. Legal obligation to pay the outstanding tax liability, 
6. Knowledge or reason to know that the tax liability would not be paid, and 
7. Mental or physical health.

Ms. Sutherland (Donna) was and still is married to Mr. Sutherland (Scott). Scott owned a business. While Donna was not an employee of the business, she helped with the bookkeeping. The business was audited, and the IRS found that it had not submitted to the IRS the payroll taxes that it was collecting from its employees. In addition, the couple failed to file income tax returns for 2005 and 2006.

The IRS brought a criminal case against Scott for failure to remit the payroll taxes. He pleaded guilty, and as part of his plea agreement he was required to submit delinquent income tax returns for several years, including 2005 and 2006.

The 2005 and 2006 returns showed tax liabilities of $19,000 and $21,000, respectively, which remain unpaid. Donna signed those returns in the courthouse cafeteria less than an hour before Scott's sentencing in 2011. She testified as to her belief that signing the returns might help Scott avoid prison time. She did not review the returns with any care before signing them.

Subsequently, Donna filed a Form 8857, Request for Innocent Spouse Relief, which the IRS denied. Donna conceded that she only qualified for innocent spouse relief under the Rev Proc 2013-34 equitable relief rules.

The Tax Court agreed with the IRS and denied Donna's request for relief. The Court found that six of the seven factors were neutral with regards to Donna. But the Court found that factor 6 (knowledge or reason to know that the tax liability would not be paid) weighed against her.

The Court said that the critical question was whether, at the time the returns were filed, Donna knew that Scott would not, or could not, pay the tax liability at that time or within a reasonable period after filing the returns. The Court said it could consider (among other things) whether Donna knew of any financial difficulties that might prevent timely payment.

Further, since she had done bookkeeping for the business, she should have known that the business was in no financial position to pay the payroll taxes.

For these reasons the Court concluded that Donna knew or should have known, when signing the returns in June 2011, that Scott would not or could not pay the tax liability at that time or within a reasonable period of time after the filing of the returns.

  
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