Yearly Archives: 2023

According to Law360, the Internal Revenue Service will no longer reduce the penalty for taxpayers who non-willfully fail to file Reports of Foreign Bank and Financial Accounts, according to an agency memorandum. 

The IRS has eliminated mitigation provisions for calculating non-willful FBAR penalties following the U.S. Supreme Court's judgment earlier this year in Bittner v. U.S limiting those fines to $10,000 for each year an FBAR isn't properly filed instead of $10,000 for each account undisclosed, according to the memo, published Tuesday and dated July 6.

The memo sets the nonwillful FBAR penalty at $10,000 but notes that the IRS' internal guidance for calculating willful FBAR penalties is unaffected by the change stating:

"While the Court’s holding pertained only to the calculation of penalties for non-willful reporting violations, the Court noted: 

The statute then adds an even more specific rule for a subclass of willful violations-those that involve “a failure to report the existence of an account or any identifying information required to be provided with respect to an account.” In cases like that, the law authorizes the Secretary to impose a maximum penalty of either $100,000 or 50% of the “balance in the account at time of the violation”-whichever is greater. So here, at last, the law does tailor penalties to accounts.” 

Penalties for willful reporting violations apply per-account and guidance in IRM 4.26.16 regarding the calculation of penalties for willful reporting violations remains unchanged. The Court’s decision does not address FBAR recordkeeping violations"

“Violation” for purposes of 31 USC 5321(a)(5) is not defined in the statute. The IRS has historically interpreted “violation” to mean the failure to report a given account properly. The Supreme Court, however, held that the failure to file a legally compliant FBAR constitutes a single violation, regardless of the number of unreported or improperly reported accounts."  

We personally don't see how the penalty for willful failure to file an FBAR, which Statutorily allows for penalty of up to 50% of the "balance in the account at the time of the violation, can be used as an analogy for non-willful penalty which is per year and does not Statutorily provide for $10,000 penalty per account. 

We Think That Taxpayers Should Challenge Subsequent
Non-willful Penalties, Based On This Memo, As It's Not Statutorily Supported by the Nonwillful Penalty
Provisions of 31 USC 5321(a)(5)!

This decision is also inconsistent as it comes at a time that the US is currently dropping many of its lawsuits for non-willful penalties based upon number of accounts - see: 

• Yes Yet Another FBAR Penalty Being Dropped Based Upon Bittner 
• Another In a Series of Taxpayer FBAR Penalty Being Reduced Based on Bittner

Have an FBAR Penalty Problem?  

 

 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

Read more at: Tax Times blog

The U.S. dropped a lawsuit that sought $835,000 in penalties against a Texas customs broker for failing to report his Mexican bank accounts, with the government saying a U.S. Supreme Court ruling has reduced the bill to $80,000, which the broker has paid.

Miguel E. Mireles, a U.S. citizen originally from Mexico, has already satisfied the reduced bill for his failure to report his Mexican bank accounts for tax years 2006 through 2013 through a $90,000 balance he has with the Internal Revenue Service, the U.S. said in its agreement with Mireles. Mireles agreed not to seek a refund for any remaining balance, which stems from $208,000 in payments he has made on three different penalty liabilities.

The Supreme Court in February restricted how much the IRS could fine a taxpayer for nonwillful failure to file Reports of Foreign Bank and Financial Accounts, or FBARs. The Bank Secrecy Act's $10,000 maximum penalty for nonwillful reporting applies per form and not per bank account, the justices said in their opinion in Bittner v. U.S. 

The IRS had originally calculated FBAR penalties against Mireles for $90,000 to $110,000 per year for the eight-year period during which he failed to report his accounts, according to the agreement. Under the new Bittner standard, those penalties were reduced to $10,000 per year.

Since 1995, Mireles has run a company that provides "customs brokerage services, processed foreign trade operations and border trade services for goods transferred between the United States and Mexico and vice versa," the government said in its 2021 complaint seeking to enforce the penalties.

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

Read more at: Tax Times blog

According to Law360, in an order on June 30, 2023, U.S. Magistrate Judge Joseph C. Spero said Payward Ventures Inc., which does business as Kraken, has to hand over information to the Internal Revenue Service on customers who conducted transactions of at least $20,000 in any year from 2016 through 2020. That information includes names, dates of birth, addresses and phone numbers, according to the order, which said such information could aid the agency in its probe of the tax compliance of cryptocurrency holders.

The federal judge narrowed an IRS summons for customer information from cryptocurrency platform Kraken and also has to furnish transactional ledgers spanning the same period, the order said. 

But Judge Spero found that some of the agency's five requests, including its request for a customer questionnaire that included information on wealth sources and employment, were overly broad under the factors for such IRS summons outlined by the U.S. Supreme Court in U.S. v. Powell. 

The federal government filed a petition in February seeking to force Kraken to comply with the summons, which had been approved by the court in May 2021. The summons had sought documents on the identities of Kraken customers and their transactions of at least $20,000 in the aggregate, including names, taxpayer identification numbers and addresses, as well as transaction information, like details on the purchases and sales of cryptocurrency and on account funding, according to filings. 

The IRS has been probing the tax compliance of cryptocurrency holders. It sent 10,000 letters to holders in 2019 as part of its investigation into potential reporting errors or omissions by digital currency owners on their tax returns. The agency had issued a summons seeking customer information to cryptocurrency exchange Coinbase, but the agency has had a challenging time identifying Coinbase account holders and still doesn't know the identities of about 750 account holders largely due to missing taxpayer identification numbers, an IRS agent said in a declaration.

Have an Unreported Crypto Income?  

 

 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

Read more at: Tax Times blog

The IRS has updated IRS Publication 1586 - Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs. The publication was last updated in July 2022.

The objectives of the publication are to: 

1. Provide general information needed to avoid penalties for information return documents that are filed with missing or incorrect taxpayer identification numbers (TINs);
2. Describe the actions that must be taken or should have been taken to solicit (request) a TIN; and
3. Explain the requirements for establishing reasonable cause.

To support that the failure to include a correct TIN was due to reasonable cause and not willful neglect, filers must establish that they "acted in a responsible manner" both before and after the failure occurred and that: (a) there were significant mitigating factors (for example, an established history of filing information returns with correct TINs), or (b) the failure was due to events beyond the filer's control (for example, actions of the payee or any other person).

"Acting in a responsible manner" (except as otherwise stated in the publication) generally involves making an initial solicitation (request) for the payee's name and TIN and, if required, an annual solicitation.

The penalty amounts in the publication have been updated to reflect annual inflation adjustments. Penalties may be assessed for information returns that are: (i) filed with a missing/incorrect TIN (or other incorrect information), (ii) filed late, (iii) filed on paper when electronic filing is required (incorrect media), (iv) filed in an incorrect format, or (v) any combination of the above.

The publication notes that final regulations were promulgated providing an automatic extension for minimum essential coverage providers to furnish individual statements about such coverage and also provide an alternate method for furnishing those statements when the individual shared responsibility payment is zero.

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

Read more at: Tax Times blog