Blog

On May 30, 2018 we posted TheUs Is Now The 2nd Largest Tax Haven And Is Scheduled To Be Blacklisted By TheEu!, where we discussed that the U.S. is the world’s second-largest tax haven, behind Switzerland and just ahead of the Cayman Islands, according to a report released May 15, 2018. 

On May 21, 2019 we posted Another IRS Summons on Behalf of a Foreign Government, where we discussed that France, Norway and now Finland have successfully petitioned the U.S. District Court to authorize IRS summonses to uncover the identities of Finnish residents using U.S.-issued payment cards in Finland. The DOJ and IRS are these mutual legal assistance treaty (MLAT) requests under various U.S. Tax Treaties at the request of foreign governments.

Now according to Times.KY, it is the US' turn to be on the defensive. Other countries are using similar tools to those America once employed to reveal un-taxed money stashed by their own citizens in the world’s largest economy. 

After the US passed FATCA 2010 that required foreign financial firms to spill the beans on American clients, more than 100 other countries signed up to the “Common Reporting Standard” (CRS), and now swap tax-relevant financial information with each other.

America, however, did not join the CRS. Instead it shares information on the foreign clients of American banks under FATCA’s reciprocal provisions. But sharing is patchy; a lot of countries get nothing. Combine that with the high level of anonymity offered by American shell companies, and it is hardly surprising that America has become the destination of choice for many tax evaders. One tax expert reckons that “over 90% of assets avoiding the CRS have been herded into the USA”.

Other countries are now finding that there are legal tools at their disposal to information on their citizens who have assets in the US.

One Is The So-Called John Doe Summons

This American provision assists tax authorities going after “a particular person or ascertainable group or class of persons” whom they suspect of financial wrongdoing, but whose identities are unknown. If approved by a court, the summons forces banks to hand over names

Until now the biggest user of such summonses in tax cases has been America, which, for instance, used the procedure in 2008 to prise open Swiss bank secrecy. 

Other countries suffering tax leakage will be looking more closely at this procedure. Any of the 90 countries with a ratified bilateral tax treaty with America can use it, though some seem unaware of the option. By contrast, America has agreed to exchange information with only 47 countries under FATCA. 

It Could Help To Break Open Not Only Dodgy Bank Accounts But Also Trusts And Insurance Policies,
Which Are Also Commonly Used To Hide Capital.

There could still be obstacles, for instance if an account is owned by an entity rather than an individual. But banks issued with a summons are required to investigate who stands behind account-holding shell companies. Due-diligence rules designed to curb money-laundering and the financing of terrorism, issued by FinCEN, a federal agency, already require banks to know the identity of such “beneficial” owners (though not all seem to do so). A shell-cracking bill picking up momentum as it passes through Congress would also help improve corporate transparency. 

So don't be surprised if more countries take the John Doe route to discover their tax resident's assets which are located in the US. 

 

 

 

Read more at: Tax Times blog

The Supreme Court on Thursday, July 9, 2020 ruled that Manhattan's chief prosecutor can obtain President Trump's business records and tax returns and President Trump is not immune from New York’s subpoena, but prosecutor will not get documents now.

The high court ruled 7-2 in favor of Manhattan District Attorney Cyrus Vance, who is conducting a criminal investigation into the president's business dealings and hush-money payments made to two women who allegedly had affairs with the president years before he was elected. Justices Clarence Thomas and Samuel Alito dissented. 

"Two hundred years ago, a great jurist of our Court established that no citizen, not even the President, is categorically above the common duty to produce evidence when called upon in a criminal proceeding. We reaffirm that principle today and hold that the President is neither absolutely immune from state criminal subpoenas seeking his private papers nor entitled to a heightened standard of need," Chief Justice John Roberts wrote for the majority.

But SCOTUS blocked Congress from getting Trump financial records. The House subpoenas for President Trump’s financial documents will remain blocked the Supreme Court said, sending a controversial case back down to the lower court for further review.

This process will begin again. The district court will get briefings. They may hear evidence. That will be appealed to the second circuit court of appeals and then the losing party can go back to the Supreme Court. All of this will take a while, so it will be awhile before prosecutors get these documents. Furthermore, as we are in July and the election takes place in November, it seems unlikely that the actual documents will be turned over to the grand jury before November.

Have a Tax 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

 

Sources:

CNN

CBS

Read more at: Tax Times blog

TIGTA found that Large Dollar Refunds Are Not Always Examined and Sent to the Joint Committee on Taxation. The Highlights of Reference Number:  2020-30-023 to the Commissioner of Internal Revenue provide that:

IMPACT ON TAXPAYERS

Pursuant to Internal Revenue Code (I.R.C.) Section (§) 6405, before the IRS can issue refunds of income, estate, and gift taxes, and certain excise taxes in excess of a statutorily prescribed amount ($2 million, or $5 million for C corporations), the IRS must provide a report to the JCT.  Taxpayers legally entitled to their refunds may be subject to audit and delays in receiving their refunds, while erroneous high dollar refund claims present a risk to tax compliance.

WHY TIGTA DID THE AUDIT

This audit was initiated to assess the effectiveness of the IRS’s efforts to examine returns with refunds in excess of $2 million ($5 million for C corporations) and report to the Joint Committee on Taxation (JCT) on such refunds.

WHAT TIGTA FOUND

TIGTA identified 1,664 tax modules that exceed the refund dollar criteria, but were not referred to or selected for examination because Treasury Regulation § 301.6402-4 and IRS procedures limit the tax returns that are subject to JCT review.  The IRS does not examine all of these returns even though they exceed the statutory dollar criteria of $2 million and $5 million.

Additionally, the IRS is not always in compliance with I.R.C. § 6405.  The existing procedures for identifying potential JCT cases and forwarding such cases to the Examination functions are not always being followed.  TIGTA identified 74 tax modules with amended and net operating loss carryback returns that were not properly referred to the Examination functions; therefore, they were not examined or sent to the JCT as legally required.

Even when a return is appropriately sent to the Examination functions as a potential JCT case, not all cases are sent to the JCT when required.  Some of the various situations TIGTA identified included:

·   11 instances in which the case was properly referred to the Examination functions, but the classifier accepted the return as filed; therefore, it was not examined or sent to the JCT.

·   28 tax modules meeting JCT review criteria that were not examined; therefore, they were not sent to the JCT for review even though they were properly referred to the Examination functions and properly selected for examination by the classifiers.

·   47 tax modules meeting JCT review criteria that were examined, but the revenue agent failed to refer the case to the IRS’s Joint Committee Review team at the conclusion of the examination; therefore, the case was not sent to the JCT for review.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS:  assess the compliance risk of the large-dollar original return refund claims that exceed I.R.C. § 6405 dollar criteria that are not required to be examined and are not subject to the JCT review process due to Treasury Regulation § 301.6402-4(a), relative to other tax returns, and allocate examination resources accordingly; take corrective actions to ensure that the refunds that were not sent to the JCT for review as required are subject to the JCT review process; and assign oversight responsibilities to a specific group or function for the overall JCT process to ensure that cases are sent to the JCT, when required, and procedures are being followed.

The IRS agreed to three of our four recommendations, and plans to take corrective actions such as coordinating with the JCT to determine the appropriate approach for the returns that were not sent to the JCT as legally required, and strengthening the controls over the process for identifying and submitting returns to the JCT.

 

Read more at: Tax Times blog

The IRS in IR-2020-142 reminds taxpayers who took advantage of the People First Initiative tax relief and did not make previously owed tax payments between March 25 to July 15, that they need to restart their payments.

As the IRS continues to reopen its operations across the country, taxpayers who were in payment agreements and skipped any payments from March 25 and July 15 should start paying again to avoid penalties and possible default on their agreements.

“Through the People First Initiative, we have endeavored to provide unprecedented relief to help those who owed federal taxes and allow them extra time,”
said IRS Commissioner Chuck Rettig. 

“As we resume a phased-in approach to our normal operations, we are sympathetic to the many Americans still suffering COVID-related hardships and stand ready to continue offering help to those who need it.”

Here’s what taxpayers should do to resume their payment agreements to the IRS, including Installment Agreements, Offers in Compromise, and Private Debt Collection program payments:

Installment Agreements
Taxpayers who suspended their installment agreement payments between April 1 and July 15, 2020, will need to resume their payments by their first monthly payment due date after July 15. Taxpayers should be aware that the IRS didn’t default their agreement, but interest did accrue, and the balance remained.

Taxpayers who had their bank suspend direct debit payments should contact the bank immediately to ensure their first monthly payment due date occurring on or after July 15, 2020 is sent to avoid penalties.

If a taxpayer can’t meet their current installment agreement terms due to a COVID related hardship, they can revise the agreement.

Offer in Compromise
Pending Offers: If the IRS is currently reviewing a taxpayer's submitted offer but hasn’t accepted it yet, the taxpayer should resume their required payments starting July 15, 2020. The IRS will amend the taxpayer's offer to allow them to pay any skipped payments at the end of the offer period, if the offer is accepted.

Already Accepted Offers: If a taxpayer has an Offer in Compromise agreement, and the taxpayer was unable to make the payments on their accepted offer because of a COVID-19 hardship, the taxpayer should resume payments and make up the missed payments by July 15, 2020. If the taxpayer is unable to make up the missed payments, they can contact the number on the IRS notice to discuss their situation.

Private Debt Collection
The IRS did not forward new delinquent accounts to Private Collection Agencies (PCAs) from April 1 through July 15, 2020, and PCA interaction with taxpayers was limited to inbound telephone calls unless requested by a taxpayer in a voicemail or correspondence.

Taxpayers who had their PCA payments on hold should resume payments by July 15. The IRS encourages taxpayers to work with their assigned PCA to establish a new payment arrangement or restructure an existing one based on their current situation.

Taxpayers Who Owe But Can’t Pay
The IRS reminds taxpayers who are experiencing a hardship or who have questions about their payments to call the customer service number provided on their notice but be mindful that wait times could be long.

Read more at: Tax Times blog