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1st Loss for IRS Involving Swiss Bank Accounts!

September 11, 2013

Happiness.” That is what retired auto dealer Jimmy Pflueger told reporters he felt as he left the U.S.District Court House today, just after U.S. District Judge Leslie Kobayashi found him “not guilty” on four federal tax fraud charges.

The 87-year-old retired automobile dealer - who founded the Pflueger dealerships – had been charged with filing false tax returns after the U.S. Justice Department said he hid nearly $15 million in a Swiss bank account without paying taxes on the $27.5 million sale of the Hacienda Corporate Plaza in California. The government also initially charged Pflueger with the failure to file a Report of Foreign Bank and Financial Accounts (FBAR), but dropped that charge before trial.
Pflueger’s accountant, Dennis Duban, who has already pled guilty to a related tax fraud charge and to conspiracy of aiding in the filing of a false tax return, testified Pflueger sent his money overseas to protect his assets after he was sued over the breach of his Ka Loko Dam in 2006. The breach killed 7 people and an unborn child. According to the government, Duban and Pflueger engineered the Hacienda sale to effect offshore tax evasionby transferring the proceeds from the sale to a Swiss bank account in order to prevent the proceeds from being used to pay civil claims arrising from the  2006 accident. However, Pflueger's criminal tax attorneys were successful in arguing that Pflueger was not responsible for his IRS tax problems, and that Duban was the sole mastermind of the tax fraud
Pflueger was initially indicted on tax fraud and conspiracy charges related to two separate incidents, the first of which involved a situation where Pflueger's company allegedly improperly paid for personal expenses of Pflueger's family, and the second of which involved alleged underreporting of gain from Pflueger's sale of one of his properties, known as Hacienda.
Judge Kobayashi of the District Court for the District of Hawaii held that the government failed to prove beyond a reasonable doubt that Pflueger had conspired to obstruct the IRS.
Kobayashi also agreed with Pflueger's arguments that he lacked the requisite intent for a conspiracy conviction (as well as a lack of financial wherewithal and knowledge), finding that "Pflueger relied in good faith on his company's accounting staff, and especially on Duban" in all matters related to his company's books. Kobayashi also acquitted Pflueger of the charges of filing false returns for 2004 and 2007, finding again that Pflueger lacked willfulness, and had relied in good faith on others that had committed tax fraud. 
Pflueger’s extensive defense team, made up of former law enforcement including a former IRS acting chief and the state tax director, claimed Pflueger’s signature was forged on key documents, that he was unaware of the tax fraud; and that his California accountant, Dennis Duban, took more than $2 million from him.
Pflueger’s defense attorney would not say whether Pflueger will seek to have his legal fees paid by the federal government, which could exceed $20,000 a day for the 9-day trial.
The IRS and U.S. Attorney spent three years on Pflueger’s criminal case and have a room full of thousands of documents at the federal building that were used as evidence against him.

Do You Have Tax Problems?

Don't Let Them Turn into Criminal Tax Problems!
 
Contact the Tax Litigation Lawyers of

Marini & Associates, P.A.
 
 
for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243). 
 
 
Source:

Hawaii Reporter
Dennis Brager

 

Read more at: Tax Times blog

Offshore Disclosure Beyond the FBAR!

September 10, 2013

Besides having to file FBAR reports for a US taxpayer's Interest in Foreign Accounts, US Taxpayers also have the following Reporting Requirement for their Investments in Foreign Entities:

· Form 5471 –Used to report that you are a 10% or more shareholder in a foreign corporation.
· Form 5472 –Used to report that a US corporation had a 25% foreign shareholder or engaged in reportable transactions.
· Form 8886 –Used to report any reportable transaction you participated in.
· Form 8865 –Used to report that you are a 10% partner in a foreign partnership.
· Form 926 –Used to report transfers of property to a foreign corporation, including undistributed earnings.
· Form 3520 –Used to report a foreign trust with a US owner.
· Form 8621 –Used to report a shareholder interest in a Passive Foreign Investment Company (PFIC, most foreign mutual funds) or a Qualified Electing Fund.
These forms are all information returns, meaning they do not calculate any tax but are a document that is simply for the IRS’s information. These are in addition to any tax forms an individual, business, or other entity may have to file to report income and pay tax.

These forms are among the most complex the IRS has to offer, and require meticulous record-keeping and data entry. Knowing whether a person or entity is required to file can be a difficult determination. Furthermore, the penalties for failure to file are extremely steep:

· Failure to file Form 5471 penalties: $10,000 failure to file penalty per year per person required to file.
· Failure to file Form 5472 penalties: $10,000 failure to file per year per person required to file.

· Failure to file Form 8886 penalties: minimum of $5,000 in the case of an individual, $10,000 in the case of any other entity, maximum of $10,000 for an individual and $50,000 for other entities. This rises to a maximum of $100,000 per individual and $200,000 per entities for certain listed transactions for which the form is not filed.
· Failure to file Form 8865 penalties: $10,000 failure to file penalty per year per person required to file.
· Failure to file Form 926 penalties: 10% of the property transfer, up to $100,000 although not limited if the failure to file was due to “intentional disregard.”
· Failure to file Form 3520 penalties: The greater of $10,000 or 35% of the gross value of the property transferred to a foreign trust or 35% of the gross value of distributions received from a foreign trust.
· Failure to file Form 8621: There are no direct penalties for failing to report a shareholder interest in a PFIC or Qualified Electing Fund.

If these failures to file have occurred due to reasonable cause, we have been able to help several taxpayers file previous information returns and receive penalty abatements for failure to file. This is in the case of failure to file information returns only. 
 
If you have failed to file information returns and have a tax liability due to previously unreported foreign transactions or income, you may need to participate in the Offshore Voluntary Disclosure Program in order to protect yourself from steep penalties or other consequences.

Many taxpayers have used foreign entities as a shield to help them hide assets and income from the IRS. Yet because of FATCA such techniques may no longer work and were not advisable in the first place.

Additionally, where a taxpayer fails to report certain information regarding foreign transactions, the time for assessment of any tax with respect to any tax return, event, or period to which the information relates will not expire before the date that is three years after the date on which the information is reported. IRC §6501(c)(8).

Accordingly, it appears that the additional time for assessment applies not only to items related to the failure to report but also any other item pertinent to the return in question.

The good news is those who have failed to file any of the above returns and have unreported income may also enter in to the current IRS Voluntary Disclosure Initiative.

Secret Foreign Investments Keeping You Awake at Night?

Want to get right with the IRS?

Contact the Tax Lawyers at 
Marini & Associates, P.A.
for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243). 
 
 
 
Source:
 
What ... More Reporting Requirements in Addition to the Dreaded FBAR Report? 
 

Read more at: Tax Times blog

Swiss Accounts No Longer Safe for Tax Dodgers!

September 10, 2013

Taxpayers who still believe they can hide secret Swiss bank accounts from the Internal Revenue Service are “beyond foolish,” the top U.S. tax prosecutor said as a five-year crackdown expands to new offshore havens.

The enforcement drive has forced a “remarkable” change in the ability of the U.S. to find secret accounts in Switzerland, the world’s largest offshore financial center with about $2.2 trillion of assets, said Kathryn Keneally, assistant attorney general in the Justice Department’s tax division.

“If someone had an account in Switzerland, it is beyond foolish to think that that account is going to remain secret,” said Keneally, 55. “In the last five years, we’ve seen a remarkable change in our ability to get information concerning Swiss bank accounts. It’s extraordinary. Switzerland is no longer a good place to hide assets for tax reasons.”

Keneally, in her first interview since taking the job in April 2012, said a new U.S. amnesty program for Swiss banks to disclose how they aided tax evasion puts taxpayers and offshore enablers at risk of prosecution.

Since 2009, the U.S. has prosecuted 68 U.S. taxpayers, 3 Swiss banks, and 30 bankers, lawyers, and advisers. Another 38,000 Americans moved $5.5 billion to the U.S. and avoided prosecution by saying who helped them offshore.

“Swiss bank secrecy never should have been viewed as a mechanism to commit criminal acts,” Keneally said. “I don’t believe it is the intention of Switzerland for its bank secrecy laws to be used in that manner. We are making good progress toward eliminating that use of Switzerland’s laws.”

Fourteen firms, including Credit Suisse Group AG, the second-largest Swiss bank; HSBC Holdings Plc, the largest European bank; and Julius Baer Group Ltd., Switzerland’s third- largest wealth manager, are under criminal investigation. On Aug. 29, the U.S. announced a program for other Swiss banks to avoid charges. (Swiss Banks Agree to Plan to End Past US Tax Evasion Issues!)

Taxpayers who still believe they can hide secret Swiss bank accounts from the Internal Revenue Service are “beyond foolish,” the top U.S. tax prosecutor said as a five-year crackdown expands to new offshore havens.  “We are ready, willing, able and probably eager to investigate and prosecute those banks,” she said.

With U.S. taxpayers fleeing Swiss banks, she said, the Justice Department is building cases involving other tax havens. They have taken action in cases involving the Caribbean, India, Israel, Liechtenstein and Luxembourg, she said.

“We have investigations and activities that will be coming in other parts of the world that I can’t comment on right now,” she said.

A U.S. Senate report estimated in 2008 that secret offshore accounts used to evade U.S. taxes costs the Treasury at least $100 billion annually.

“The Swiss are hemorrhaging bank records on American taxpayers. The Swiss bank voluntary disclosure program is just another way of disclosing information on American taxpayers.”

The Justice Department and IRS are pursuing taxpayers and bankers who set up secret accounts after the UBS deferred-prosecution deal was announced in February 2009. The new program outlines escalating penalties after that time for banks that seek to avoid prosecution.

Keneally wouldn’t discuss the pace of the 14 criminal investigations, including that of Credit
Suisse. In July 2011, the bank said it was a target of a criminal probe over former cross-border private-banking services for U.S. customers.

Six days later, seven current and former Credit Suisse bankers were indicted on a charge of conspiring to help U.S. clients evade taxes through secret accounts. That case is led by prosecutors in Alexandria, Virginia.

Like other U.S. attorney’s offices around the U.S., they are probing banks or individuals in the offshore crackdown with help from the Justice Department’s tax division.

Several indictments in offshore tax cases have relied on taxpayers who gave information about their bankers through the IRS voluntary disclosure program. The agency built a database tying together common details about banks, bankers, advisers, and how they set up secret offshore accounts.

The first gift of the voluntary disclosure program is that we have over 38,000 people who were not in compliance who are now in compliance,” Keneally said. “Apart from that, this program has been able to bring in just a wealth of information so that we can see patterns, we can identify banks, we can identify potential witnesses.” Prosecutors also are relying on whistle-blowers and cooperators, although Keneally wouldn’t discuss them.

A native New Yorker who returns from Washington to Manhattan on weekends, Keneally oversees 360 Lawyers, including 90 Prosecutors. The rest do civil enforcement or appellate work.

One taxpayer who tried to enter the voluntary disclosure program and failed was Mary Estelle Curran, a 79-year-old widow who pleaded guilty to tax evasion. Curran, a former UBS client, had more than $43 million in Swiss accounts, making her the largest individual case in the offshore crackdown.

She paid a $21.6 million penalty as well as back taxes, and she faced as long as 37 months in prison when she was sentenced in April by U.S. District Judge Kenneth Ryskamp in West Palm Beach, Florida.

Have Un Reported Income From a Swiss Bank?
 
Want to get right with the IRS?  
 

 
Contact the Tax Lawyers at
Marini & Associates, P.A.
  
for a FREE Tax Consultation Contact US at
www.TaxAid.us or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243)

 

 

 
 
 Source:

Bloomberg News

Read more at: Tax Times blog

TIGTA – Correspondence Audit Selection Process Could Be Strengthened To Include Audit of Prior Year Returns!

September 10, 2013

TIGTA evaluated a statistical sample of 102 of 7,470 single-year correspondence audits of individual tax returns closed between April 1, 2010, and March 31, 2011, in which each of the taxpayers involved agreed that they understated their tax liabilities by at least $4,000. 
 
Similar tax issues also existed for the prior and/or subsequent years tax returns filed by 43 of the 102 taxpayers.  
 
IRS records showed that:
  • 32 of the 43 taxpayers’ prior and/or subsequent year tax returns were not audited.

  • For 16 audits, the taxpayers agreed they owed  approximately $4,100 to $7,550 in additional taxes after the IRS determined they were not entitled to Earned Income and other credits taken on their tax returns.  The 16 audits were initiated through the Revenue Protection Strategy process.
 
  • For 12 audits, the taxpayers agreed they owed approximately $4,100 to $14,400 in additional taxes after the IRS determined they overstated itemized deductions on their tax returns.  The 12 audits were initiated as a result of the correspondence return classification process. 
 
  • For four audits, the taxpayers agreed they owed approximately $4,450 to $5,850 in additional taxes after the IRS determined they overstated business expenses on their tax returns.  The four audits were initiated as a result of the correspondence return classification process. 
Had the prior and/or subsequent tax returns for these 32 taxpayers been audited for similar tax issues, we estimate the potential additional tax, penalty, and interest assessments would range from $2,343 to $18,874—totaling $189,422. 
 
When the sample results are projected to the population of 7,470 audits closed between April 1, 2010, and March 31, 2011, we estimate that 2,344 taxpayers may have avoided additional tax, penalty, and interest assessments of $13.9 million.
 
TIGTA Recommended that the Director of Campus Compliance Services, SB/SE Division, should develop and implement procedures in the IRM that instruct how current year correspondence audit results are to be used in deciding whether the prior and/or subsequent year tax returns warrant an audit.  Furthermore, to ensure that the instructions are properly followed; the procedures should include instructions for monitoring how well current year correspondence audit results are used in deciding to audit prior and/or subsequent year tax returns.
 
Being Audited By the IRS?


Contact the Tax Lawyers at

Marini & Associates, P.A.
  
for a FREE Tax Consultation Contact US at
www.TaxAid.us or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243)) begin_of_the_skype_highlighting
 
 
 
 
Source:
 
TIGTA
 
 

Read more at: Tax Times blog

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