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Yearly Archives: 2023

Citing High Court Decision US District Court Lowers FBAR Penalty

July 12, 2023

According to Law360, Florida woman owes far less than the roughly $246,000 in penalties she initially faced for failing to report her foreign bank accounts due to the outcome of a recent U.S. Supreme Court case, a federal judge ruled in U.S. v. Hadley, case number 8:21-cv-01357, in the U.S. District Court for the Middle District of Florida.

In an order, Magistrate Judge Amanda Arnold Sansone granted a request Sali Hadley and the federal government made a day earlier to amend a previous district court decision by instead holding her liable for $24,500.

She and the government had said they agreed to the reduced penalty in light of the February ruling by the Supreme Court that effectively capped at $10,000 per year the penalty for nonwillfully failing to file reports of foreign bank and financial accounts.

The earlier decision by the district court in Florida, which ordered Hadley to pay the larger penalty for FBARs she nonwillfully failed to file in 2011 and 2012, was delivered before the high court ruling.

An appeal followed that saw the Eleventh Circuit order the Florida court to review Hadley's case.

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

IRS Criminal Investigation Division Investigating the Misuse of Malta Pension Plans

July 5, 2023


The Malta Pension Plan is a tax-favorable pension plan that has been used by U.S. taxpayers in Malta. The plan allows for significant tax savings, as gains on assets contributed to the plan are not subject to tax in Malta or in the U.S. However, the IRS and Treasury have taken the position that the Malta Pension Plan is abusive and that it was not intended by the Treaty drafters.

In July 2021, the IRS added the Malta Pension Plan to its “Dirty Dozen” list of abusive tax schemes. In December 2021, Treasury published a Competent Authority Arrangement (CAA) that severely narrowed the definition of what qualifies as a pension and thus the overall tax benefits possible under the Treaty.

More recently, in early June 2023, the Treasury Department proposed regulations that would designate Malta Pension Plan arrangements as “listed transactions.” If the regulations are finalized, Malta Pension Plan arrangements will be subject to the same additional scrutiny applicable to all listed transactions, including certain disclosure requirements, increased penalty exposure, and record-keeping requirements for material advisors.

In A Significant Development Last Week, IRS Criminal Investigation (IRS-CI) Special Agents Began Visiting
Taxpayers And Advisors Who Have Participated In,
Or Advised On, Malta Pension Plans.

IRS-CI agents are issuing summons to parties to produce documents for a nationally coordinated investigation. The involvement of IRS-CI makes clear that the IRS believes that at least some Malta Pension Plan arrangements may be the product of criminal or fraudulent conduct.

We advise clients that there is no obligation to speak with an IRS-CI Special Agent and that anything disclosed to the IRS can be used in a criminal or civil case against them. If you have received an interview request from IRS CI, you should speak with an experienced tax counsel who can advise you on your rights and obligations in responding to an IRS inquiry.

Taxpayers Who Have Maltese Pension Plans Should 
Carefully Review The Underlying Legal Requirements 
And Consult Independent, Competent Advisors

Before Claiming Any Purported Tax Benefits.


Taxpayers who have already claimed the purported tax benefits of one of these four transactions on a tax return should consider taking corrective steps, such as filing an amended return and seeking independent advice. 


Where appropriate, the IRS will challenge the purported tax benefits from the transactions on this list, and the IRS may assert accuracy-related penalties ranging from 20% to 40%, or a civil fraud penalty of 75% of any underpayment of tax.

 

The IRS remains committed to having a strong, visible, robust tax enforcement presence to support voluntary compliance. To combat the evolving variety of these potentially abusive transactions, the IRS created the Office of Promoter Investigations (OPI) to coordinate service-wide enforcement activities and focus on participants and the promoters of abusive tax avoidance transactions. 

The IRS has a variety of means to find potentially abusive transactions, including examinations, promoter investigations, whistleblower claims, data analytics and reviewing marketing materials.

Have a Maltese Pension Plan 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)

Read more at: Tax Times blog

Jury Finds That Oregon Taxpayers Failure To File FBAR Wasn’t Willful!

June 28, 2023


According to Law360, prosecutors didn't meet their burden to prove that an Oregon couple willfully failed to disclose their Iranian bank accounts for 2011 to the IRS, a jury found, handing the couple a win after a federal court previously concluded that they intentionally neglected to report other accounts.

A Jury Found That Federal Prosecutors Didn't Convincingly Prove That Ali Mahyari And Roza Malekzadeh Intentionally Failed To Disclose Their Iranian Bank Accounts For 2011
 To The Internal Revenue Service.

The Oregon federal court in U.S. v. Ali Mahyari et al., case number 3:20-cv-01887, in the U.S. District Court for the District of Oregon, had sent the issue to a jury after concluding that the couple had willfully failed to report accounts they had in Canada, as well as Iranian accounts for years other than 2011.

Mahyari and Malekzadeh became U.S. citizens in 2006 after moving from Iran, the court said in an order in January. They had been trying to transfer to the U.S. money they had made from the sale of a property in Iran when that country was hit with sanctions, which complicated their transfer efforts and meant they were leaving money back in Iran. 

The IRS eventually began investigating whether the couple properly filed Reports of Foreign Bank and Financial Accounts for 2011, 2012 and 2013, the order said. In that order, the Oregon federal court concluded the couple intentionally failed to comply with their FBAR requirements for all three years for their accounts in Canada with the Canadian Imperial Bank of Commerce.

Evidence indicates that the couple used the Canadian accounts to surreptitiously send money from Iran to the U.S., the court said in granting the U.S. summary judgment on the issue. They failed to discuss those accounts with the tax professional who prepared their returns, the order said, and they repeatedly told an IRS agent that they had already reported all their foreign accounts.

Mahyari And Malekzadeh Also Recklessly Failed To Comply With Their Reporting Requirements For Their Accounts In Iran With Eghtesad Novin Bank For 2012 And 2013, The Court Said.


That they didn't ask their attorney or the person filing their returns about their foreign bank account reporting requirements suggests that they "made a conscious effort to avoid learning about their reporting requirements," the court said.

But The Court Declined To Come To The Same Conclusion For Their Iranian Accounts For 2011, Sending The Issue To The Jury.

It's not clear that their failure to file an FBAR for that year was intentional, given that a jury could find that the couple had initially been somewhat honest with their tax professional about their holdings in Iran, the order said.

Have Undeclared Income from an Offshore Bank Account?
 
 
Been Assessed a 50% Willful FBAR Penalty?

 
 
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

Have You Been Assessed or Paid a Non-Assessable Information Penalty? – You Need to Contest After Farhy!

June 27, 2023

On April 25, 2023, we posted Is It Time To Request Refunds For Form 5471, 5472, 8938, and 3520 Late Filing Penalties? where we discussed that the U.S. Tax Court issued its opinion in Fahy v. Commissioner, 160 T.C. No. 6 (2023) where he held that the IRS was without the authority to assess the Form 5471 imposed by Internal Revenue Code Section 6038(b). The Farhy case involved the penalties for failure to timely file Forms 5471 (“Information Return of U.S. Persons With Respect to Certain Foreign Corporations”). 

Judge Marvel Disagreed And Prevented The IRS From Proceeding With The Collection Of The Penalties By Levy Because They Were Not “Assessable Penalties” Under The Code.

While this taxpayer victory may appear to be a panacea for anyone who has ever paid a penalty for the late filing (or failure to file) of a Form 5471, it may represent a real opportunity for taxpayers whose claims for a “reasonable cause” exception to the penalty for failing to timely file international information returns were summarily rejected by the IRS. 

Although the opinion doesn’t explicitly address penalties for Forms 5472 or 8938, those penalties are both imposed under the authority of Internal Revenue Code Section 6038(b). Therefore, the IRS will have similar problems with assessing penalties for those forms. 

The implications of the Farhy case are uncertain but could be far-reaching, it is potentially applicable to numerous other penalties for failure to file international information returns that the IRS has systematically assessed following the same procedures it followed in Farhy. 

If you have a Late Information Filing Penalty, under any of the following Non-Assessable IRC Sections:


You need to consider contesting and/or requesting a refund.

Want To Request Refunds For Form 5471, 5472,
8938, & 3520 Late Filing Penalties?

     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

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