Monthly Archives: July 2022

The Treasury Department has begun dismantling the United States' tax treaty with Hungary, whose government recently blocked the European Union from finalizing details of an international agreement to set a 15% global minimum tax on the biggest multinational corporations.

In a statement July 8, the department cited Hungary's lowering of its domestic corporate income tax rate to 9.9%, less than half of the 21% U.S. rate, as cause for severing the bilateral tax treaty, which took effect in 1979.

A Treasury spokesperson told reporters the treaty's benefits were no longer mutual. "There is a substantial loss in potential revenue to the United States, and very little return on investment by U.S. businesses in Hungary," they said.

The timing of the treaty termination suggests President Joe Biden's administration is seeking to pressure Viktor Orbán, Hungary's prime minister, to implement the 15% global minimum tax brokered by the Organization for Economic Cooperation Development. The deal, reached in October, has been signed by about 140 countries and territories.

Without mentioning Hungary's move in mid-June to block an EU directive on establishing the minimum tax, the Treasury spokesperson said the country had "made America's long-standing concerns about the 1979 tax treaty worse." 

While the EU generally requires decisions with legal force to be approved by all 27 member states, officials who have championed the bloc's participation in the tax have said they remain steadfast, with or without a Hungarian presence.

Hungary nearly halved its corporate tax rate to 9.9%, lowest in the EU, from 19% in 2010. 

Not stated it that the U.S. Treasury Department believes that the Existing Treaty has been exploited, (No Limitations on Benefit Provision, in the Hungary Treaty) particularly in the case of interest, by Hungarian finance corporations ultimately owned by persons from third countries that either are not covered by an income tax treaty with the U.S. or covered by a treaty that did not eliminate source-country withholding tax on interest. 

Treaty benefits enjoyed by individual taxpayers would no longer be available if the treaty is terminated.  As a result, benefits of lower tax rates on certain income (e.g., interest, dividends), exclusion for certain employment income, as well as relief from double taxation would expire with the termination. This could give rise to double taxation without relief for individual taxpayers and higher international assignment costs for mobility programs. 

Effective Date of Termination 

Article 26 of the Tax Treaty provides for a six-month advance notice for termination. After the notice, which occurred in July of 2022, withholding taxes apply to amounts paid or credited on or after the first day of the next January following the expiration of the six-month period. Accordingly, payments made on or after January 1, 2024 will be subject to 30% withholding.

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Read more at: Tax Times blog

According to Law360, Roger Stone and his wife have agreed to owing more than $2 million to the IRS to settle a suit alleging the associate of former President Donald Trump, hid income from the U.S., they told a Florida federal court on July 15, 2022.

In a filing, Stone and the federal government asked the court to approve a settlement under which the political associate and his spouse, Nydia Stone, would agree to an income tax liability exceeding $1.6 million. Roger Stone also would be separately liable for more than $450,000 in taxes, according to the proposed settlement.

The Government Has Contended That The Couple
Used A Business Entity To Hide Their Income,

Improperly Receive Payments Paid To Roger Stone
Personally And Pay For Personal Expenses.

Meanwhile, Stone has claimed that the government is pursuing its case against him and Nydia Stone despite good-faith efforts to keep up with tax installment payments and their transparency with the agency concerning their assets and liabilities.

The government's suit, filed in April 2021, claimed Stone and his wife relied on a trust and Drake Ventures LLC to evade Internal Revenue Service collection efforts and to fund their lavish lifestyle. 

The Couple Entered Into An Agreement With The Government To Pay Their Taxes In Monthly Installments Of Almost $20,000 But Defaulted On That Agreement In March 2019, According To Court Documents.

While the Stones admitted that they owe outstanding taxes for 2007 through 2011, they've alleged that the suit wouldn't have been filed if it weren't for the individual at its center. Stone said his ability to keep up with those installment payments was impeded by an investigation by then-Special Counsel Robert Mueller into Russian election interference, which he contends "nearly bankrupted" him.

The proposed settlement filed Friday said that the trust's assets, including an interest it holds in the couple's condo, can be used to pay off Nydia Stone's taxes, and that liens on their properties remain enforceable, according to the filing. The deal, if approved, would also resolve the government's claims that they improperly used Drake Ventures' cash to buy the condo, the filing said.

Read more at: Tax Times blog

The IRS intends to have 4,200 employees in its Criminal Investigation division by 2029, marking an increase of more than one-third from current levels and extending a post-pandemic hiring spree, the division's chief told a recent tax conference.

With the ranks of the Criminal Division (CI) now totaling about 3,100 employees, Chief Jim Lee said he expects it will take five to seven years to reach the staffing goal. He spoke July 15 at a conference sponsored by the University of San Diego School of Law and the firm RJS Law.

CI currently employs about 2,100 agents, along with 1,000 or so personnel in investigative analysis, information technology, and administrative jobs, according to Lee.

He said CI in fiscal year 2020 had about 330 personnel, which was a net gain of 140, with the following year bringing in some 350 new employees whose hiring represented a net gain of 70.

The CI chief also told the conference that his division analyzed 1,350 terabytes of data during fiscal year 2021, adding that, for perspective, 10 terabytes equals the printed collection in the Library of Congress.

In touting CI's success investigating and prosecuting fraud tied to the pandemic, Lee said the division has had a "100% conviction rate" since the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, PL 116-136) was enacted two years ago. 

Agents have identified nearly $2 billion in COVID-related fraud, netting 300 indictments in 700 cases opened, he said.

Read more at: Tax Times blog

According to the DoJ, New York couple and their adult son were sentenced to prison on July 13, 2022 for conspiring to defraud the United States and for tax evasion.

In November 2021, John Zourdos, his wife Helen Zourdos and their son Dimitrios Zourdos, all of Rome, were each convicted by a federal jury of conspiracy to defraud the United States, tax evasion and helping to file false corporate tax returns. 

U.S. District Court Judge David N. Hurd sentenced: 

According to evidence presented at trial and other court documents, John, Helen and  Dimitrios operated three Dippin Donuts coffee and donut shops with locations in Rome and New Hartford. 

From 2012 To 2017, The Defendants Concealed From
The IRS Approximately $4.5 Million In Cash Sales.

Wow - That's Allot of Dough!

During that period, they evaded more than $2 million in individual and corporate taxes by, among other things, depositing cash directly into their personal bank accounts instead of into business bank accounts, providing incomplete information to their accountants, causing their accountants to file false individual and corporate tax returns with the IRS, and funding personal expenditures directly with undeposited and unreported cash. 

They used unreported income to fund a lavish lifestyle that included multiple luxury vehicles, expensive watches, investment accounts and real estate. They also paid some employees “off the books” cash wages for overtime hours, and paid other employees entirely in “off the books” cash.

In addition to the terms of imprisonment, Judge Hurd ordered each defendant to serve three years of supervised release and to pay more than $2 million in restitution to the United States.

Read more at: Tax Times blog