Read more at: Tax Times blog
IRS Identifies Gift Tax Non-Filers Using State Property Records
November 23, 2011
As National Debts Pile Up, Tax Evaders Face Greater Scrutiny
November 21, 2011
NY Times-London- Disputes are raging from Athens to Washington about how to reduce government debt without further damaging already weak economies. But there is at least one thing on which global leaders seem to agree: cracking down on tax havens and tax evasion would help.
Tax evasion and compliance was on the agenda of the meeting of the Group of 20 countries in Cannes amid hope that the economic crisis has given policy makers new impetus to push for a coordinated attempt to hunt for some of that offshore wealth.
Assets held offshore by individuals worldwide have probably almost doubled from $11.5 trillion six years ago, according to the Tax Justice Network, a nongovernmental organization.
Efforts to go after tax evaders range from investing in technology and hiring tax officers to working with the O.E.C.D. to reach agreements governing tax havens.
Whatever steps are taken, policy makers agree that it takes international cooperation and initiatives by individual countries to reduce tax evasion.
Read more at: Tax Times blog
Willful Failure to File FBARs – What if you Really Did not Know?
November 18, 2011
BNA - Over the past three years, the U.S. government has intensified its pursuit of taxpayers who fail to pay taxes on money held in foreign bank accounts; this includes a massive increase in criminal investigations and prosecutions.
While “willfulness” is generally recognized to be a high legal standard requiring proof that the accused acted in conscious violation of a known legal duty, IRS's published guidance and filed actions suggested the IRS believed it could do more with less.
But two recent cases—an FBAR case out of the U.S. District Court for the Eastern District of Virginia and patent infringement case out of the U.S. Supreme Court—call both assumptions into significant question.
FBAR enforcement will continue to be a powerful tool for IRS. But in cases where knowledge is a contested issue, the government will have to do more than it has previously done. Cases based upon what a taxpayer should have known or could have discovered based on knowledge of a substantial risk will not satisfy the standards established by Williams and Global-Tech.
If you really did not know, you really did not know.
Read more at: Tax Times blog
IRS On Track to Issue Proposed Rules, Draft Bank Agreement Under FATCA
November 17, 2011
Internal Revenue Service is “on track” to issue proposed regulations on the Foreign Account Tax Compliance Act (FATCA) around the end of the year, a top IRS international official said Nov. 17.
IRS Large Business & International Division Deputy Commissioner (International) Michael Danilack said if the guidance does not come out by Dec. 31, he expects it will be issued shortly thereafter.
Danilack said that along with the regulations, IRS hopes to issue a draft agreement for foreign financial institutions that want to start reporting U.S.-owned accounts to U.S. tax authorities under FATCA. The law requires such reporting or banks may face a 30 percent withholding tax.
The IRS official said if the draft agreement does not come out together with the rules, it will be issued soon after that guidance is released. He said IRS is envisioning a system where banks will be able to apply online and will be immediately given an identification number. “We're in very good shape on that,” Danilack said.
In another key point, the official said he expects that there will be bilateral agreements between the United States and other countries on the implementation of FATCA.
Read more at: Tax Times blog
Although gift tax audits are historically rare, the IRS has examined hundreds of taxpayers in the last two years whom the IRS suspects made large gifts, yet failed to file the appropriate returns.
Borrowing from techniques long employed to identify noncompliant taxpayers in the income tax context, the IRS is using records obtained from third parties—namely, land records maintained in state and county offices—to root out intra-family land transfers for little or no consideration.
According to Bonaffini, in the past two years, 323 taxpayers have been audited for failure to file gift tax returns relating to gifts of real property, 217 cases were still under examination, and another 250 cases were being researched to determine whether to conduct gift tax audits. At the time, the IRS had determined that ninety-seven taxpayers had violated gift tax reporting requirements by failing to file, and just twelve cases resulted in assessment of tax and penalties.
The recent flurry of gift tax compliance activity took many in the tax community by surprise. The compliance initiative received no appreciable public attention until the recent dispute in California federal court where the District Court for the Eastern District of California, refused to enforce the IRS' John Do Summons against the California Board of Equalization (“BOE”) where it refused to voluntarily turn over this requested information. The court’s denial of the government’s petition may embolden additional states to refuse the IRS’s request for records.