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N.Y. Precious Metals Brokerage Operator Found Guilty of Tax Evasion

October 5, 2018

According to the DoJ, a federal jury sitting in Brooklyn, New York, convicted a former Brooklyn resident today of tax evasion and aiding and assisting in the preparation of false tax returns.
 
According to court documents and evidence presented at trial, in 2010 and 2011, Christopher Wolf operated Rothchild & Associates LLC, in Brooklyn, New York. Rothchild was in the business of selling precious metals to investors over the telephone. 
 
Wolf earned commissions from Rothchild, but took steps to conceal this income by directing that it be paid to shell corporations he created, so that Rothchild would not have to issue form 1099 for these commissions. 
 
Wolf then caused the filing of false individual and corporate income tax returns that underreported his commission income and claimed phony expense deductions.  Wolf’s fraudulent conduct resulted in a tax loss of approximately $240,000.
 
Wolf faces a statutory maximum sentence of 5 years in prison for tax evasion and 3 years in prison for aiding and assisting the preparation or presentation of a false tax return.  Wolf also faces a three-year period of supervised release, restitution and monetary penalties.
 
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IRS Releases Notice 2018-78 Providing Additional Guidance on Code Sec. 965 Transition Tax

October 3, 2018

The notice of proposed rulemaking providing rules under section 965 published in the Federal Register on August 9, 2018, provided, among other things, for a basis election to be made by United States shareholders in certain circumstances. The guidance impacts proposed regulations issued in August 2018.
 Under the guidance:

  1. U.S. shareholders are allowed an extended time to make the basis adjustment election under the reduction rules of Code Sec. 965(b). This Notice 2018-78 announces that the due date for the basis election that would otherwise be required to be made before the final regulations are published will be extended to 90 days after the publication of the final regulations. Further, elections made in the interim will be revocable.
  2. A more taxpayer favorable rule will be included in the final regulations for determining the aggregate foreign cash position of a U.S. shareholder that is a member of a consolidated group. The determination of the aggregate foreign cash position of a United States shareholder that is a member of a consolidated group, which were inconsistent with the more taxpayer-favorable rule announced in Notice 2018-07. and
  3. U.S. shareholders affected by Hurricane Florence are provided an extended period to file election statements and transfer agreements. This Notice 2018-78 provides a postponement for taxpayers affected by Hurricane Florence to make elections, and file transfer agreements, related to section 965. 
Extension of Time to Make Basis Adjustment Election

The proposed regulations generally provide that a U.S. shareholder’s basis in its stock or property of the deferred foreign corporation (DFIC) is increased by the amount of the U.S. shareholder’s Code Sec. 965(a) inclusion amount with respect to the DFIC. The amount that would otherwise be included under subpart F may be reduced under Code Sec. 965(b) if the taxpayer is a U.S. shareholder with respect to at least one DFIC and one E&P deficit foreign corporation. In general, no adjustments to the basis of stock or property are made to take into account the reduction of the Code Sec. 965(a) earnings amount under the reduction rules. A taxpayer may, however, elect to make relevant basis adjustments as a result of the reduction rules in certain circumstances.

 

Requiring taxpayers to make binding basis elections before the proposed regulations are finalized was deemed too onerous for taxpayers. As a result, the basis election must be made by no later than 90 days after the publication of the final Code Sec. 965 regulations in the Federal Register. The basis election will be irrevocable after that date.

Prior to this extension, taxpayers were required to make the basis election for the U.S. shareholder’s return for the first tax year that includes the last day of the last tax year of a DFIC or E&P deficit foreign corporation that begins before January 1, 2018. If the due date occurred before September 10, 2018, the due date was October 9, 2018.

Consolidated Group Rules
The final regulation will provide that all members of a consolidated group who are U.S. shareholders of one or more specified foreign corporations are treated as a single U.S. shareholder for certain purposes, including rules for disregarding certain assets in determining the aggregate foreign cash position and the Code Sec. 965(c) deduction. The proposed regulations specifically exclude these rules in applying the single taxpayer rule.

The modification is necessary to prevent the overstatement of the aggregate foreign cash position and is consistent with prior guidance in Notice 2018-7, I.R.B. 2018-4, 317.

Hurricane Florence Extension
Taxpayers who have been affected by Hurricane Florence are granted an extension to make Code Sec. 965 elections and file transfer agreements, required to be filed under the proposed regulations. Affected taxpayers with election statements or transfer agreements due on or after September 7, 2018, and before January 31, 2019, are granted additional time to file until January 31, 2019.
Taxpayers should mark “Hurricane Florence” on the top of the election statement or transfer agreement. If a transfer agreement is filed, the affected taxpayer must be noted.

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Understanding the New IRS Tax Transcript

September 28, 2018

On August 23, 2018 we posted IRS to Introduce New Tax Transcript as of 9/23/18!  where we discussed that the IRS announced in IR-2018-171 that it is moving to better protect taxpayer data, in a new format for individual tax transcripts that will redact personally identifiable information from the Form 1040 series. 

This new transcript replaces the previous format and will be the default format available via Get Transcript Online, Get Transcript by Mail or the Transcript Delivery System for tax professionals as of September 23. Financial entries will remain visible, which will give taxpayers and third-parties the data they need for tax preparation or income verification.

The IRS is now published a fact sheet and FAQsto help you better understand the new IRS tax transcripts.

Here is a sample: New Tax Transcript (PDF)

Because the taxpayer’s SSN no longer can be used as a tracking number for third-party requesters, the IRS is creating a Customer File Number that third parties may use as an identifying number. The Customer File Number created by third party on Form 4506-T/T-EZ, Request for Transcript of Tax Return, will populate on the transcript, allowing a redacted transcript to be matched to a taxpayer.  

Have a Tax Problem?
 
 
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Marini & Associates, P.A. 
 
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or Toll Free at 888-8TaxAid (888 882-9243). 



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The IRS Still Does Not Make Effective Use Of Currency Transaction Reports

September 26, 2018

The Treasury Inspector General For Tax Administration (TIGTA) issued on September 21, 2018 a Report Reference Number:  2018-30-076 to the Commissioner of Internal Revenue concluding that the Internal Revenue Service Still Does Not Make Effective Use of Currency Transaction Reports.

Highlights of Reference Number:  2018-30-076  to the Commissioner of Internal Revenue.
IMPACT ON TAXPAYERS
The Currency and Foreign Transactions Reporting Act of 1970, referred to as the Bank Secrecy Act, requires U.S. financial institutions to assist U.S. Government agencies by filing reports concerning currency transactions.  One such report is known as the Currency Transaction Report (CTR), which financial institutions are required to file with the Financial Crimes Enforcement Network for currency transactions that exceed $10,000 or multiple currency transactions that aggregate more than $10,000 in a single day.
 
WHY TIGTA DID THE AUDIT
Congress believed that the reports required by the Bank Secrecy Act, including the CTRs, would be useful for numerous purposes, including tax compliance purposes.  TIGTA previously recommended that the IRS make greater use of CTR data to pursue potential nonfilers and underreporters, and the IRS agreed to the recommendation.  This audit was initiated to determine how effectively the IRS uses CTR information to select and examine taxpayers.
 
WHAT TIGTA FOUND

The IRS still makes no systemic use of CTR data in examinations.  Although IRS management agreed with TIGTA’s recommendation in a September 2010 report and cited steps taken to develop examination referrals from the CTRs, the IRS is still not systemically using the CTRs to identify and pursue potentially noncompliant individuals. It is also not effectively tracking information referrals from Bank Secrecy Act examiners to the Examination function.  Finally, some examiners are not documenting that they are considering available CTR information in their audits.

 

During the fieldwork for this review, TIGTA also found that CTR data stored in the Integrated Data Retrieval System incorrectly aggregated CTR amounts for multiple individuals and showed the same CTRs total dollar amount for these individuals.  We have initiated a follow-up audit to determine the extent and potential causes of this issue.

 
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS:
 
  1. Establish formalized procedures for processing Bank Secrecy Act Program referrals and begin tracking the time required to send referrals to the Field Exam Support Team, and
  2. Clarify formal Internal Revenue Manual procedures to assist examiners in their consideration of CTR data in examinations.  
IRS management agreed with the recommendations and plans to take corrective actions.
 
Have an IRS 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
 

 
 
 
 
 

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