Fluent in English, Spanish & Italian | 888-882-9243

call us toll free: 888-8TAXAID

Blog

Julius Baer Financial Advisers in Switzerland Accused of Scheme to Conceal $600 Million

October 13, 2011

A pair of Swiss bank financial advisers have been charged with conspiring with U.S. clients to hide more than $600 million from the Internal Revenue Service in offshore accounts, prosecutors announced Oct. 11 (United States v. Casadei, S.D.N.Y., No. 11 Crim. 866, indictment unsealed 10/11/11).

In an indictment unsealed in U.S. District Court for the Southern District of New York, client advisers Daniela Casadei and Fabio Frazzetto were accused of helping clients evade U.S. taxes by advising them to open undeclared accounts under code names or fictional names. They worked for an institution identified by prosecutors as “Swiss Bank No. 1,” which sources said is Julius Baer Group Ltd.

Casadei and Frazzetto also allegedly advised clients not to worry about U.S. law enforcement authorities because the bank no longer had offices on U.S. soil, the indictment charged. In one case, it said, Frazzetto specifically discouraged a client from making a voluntary disclosure to IRS, telling him not to “panic.” Daniela Casadei and Fabio Frazzetto conspired with more than 180 U.S. clients and others at the bank to hide at least $600 million in assets from the Internal Revenue Service, according to the indictment in federal court in New York and the person, who wasn’t authorized to speak about the matter. The indictment refers to the bank as Swiss Bank No. 1.

“The bank is one of a number of Swiss financial institutions supporting the ongoing tax negotiations between the U.S. and Switzerland and is cooperating with the U.S. government investigation,” Baer said in an e-mailed statement today.

For more information go to http://mobile.bloomberg.com/news/2011-10-11/two-swiss-bankers-accused-of-helping-u-s-clients-evade-taxes?category=%2Fleaders%2F

Read more at: Tax Times blog

IRS Program for Employers who have Misclassified Independant Contractors

October 10, 2011

Employers have a strong withholding and employment tax incentives to classify their workers as independent contractors instead of employees. Such a course avoids income tax withholdings and FICA, FUTA, and Medicare taxes and withholdings, shifting responsibility of such items to the worker. 

As such, employers may have aggressively or inappropriately classified employees as independent contractors. An IRS settlement program known as the “Voluntary Classification Settlement Program,” or VCSP, provides a semi-painless way for employers to correct their classifications and come into the fold of compliant taxpayers. A recent set of FAQs provides details on the new program. Below is a summary of the key provisions.

WHO CAN USE THE PROGRAM?

Businesses, tax-exempt organizations, and government entities.

BASIC ELIGIBILITY REQUIREMENTS

To be able to apply, the employer must:

     (1) have consistently treated the subject workers as nonemployees,

     (2) have filed all required Forms 1099 for the workers for the previous three years, and

     (3) not be under audit by IRS, or currently under audit concerning the classification of the workers by the Department of Labor or a state government agency.


EFFECT OF PROGRAM

The employer will have to pay a relatively small sum to enter the program, but will then receive absolution for its mischaracterizations for past years. More particularly, the employer  will: 

     (1) owe 10% of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year, applying the special reduced rates of Code Section 3509, and without interest or penalties being imposed on that liability, 

     (2) be safe from an employment tax audit for the worker classification of the subject workers for prior years, and 

      (3) have to agree to extend the period of limitations on assessment of employment taxes for three years for the first, second and third calendar years beginning after the date on which the taxpayer has agreed under the VCSP closing agreement to begin treating the workers as employees. 


Of course, the employer will begin classifying the subject workers as employees and paying appropriate employment and withholding taxes. 

Given the relatively small amount that is due, the program provides an excellent opportunity for taxpayers to put themselves into compliance.

In an example provided in the FAQ, an employer who paid $1,500,000 to workers in the subject tax year owed only $16,020 for the required 10% payment. 

Read more at: Tax Times blog

JK Harris to file for bankruptcy

October 10, 2011

The JK Harris company once advertised that it could resolve people's tax debts for "pennies on the dollar," but now it could be the company's creditors and disgruntled former clients who will get less than they are owed.

JK Harris & Co. plans to seek bankruptcy protection in Charleston to head off an attempt by the Texas attorney general's office to force the company into receivership, said company founder John K. Harris.

The company, a national tax-debt-resolution service based in Goose Creek, has been dogged by cash-flow problems and the cost of large settlements related to claims that it misled consumers.

The bankruptcy filing is aimed at selling the business quickly while writing off debt. The company would continue operations in the meantime.

 For more information go to http://www.postandcourier.com/news/2011/oct/07/jk-harris-to-file-for-bankruptcy

Read more at: Tax Times blog

Florida Probate & Trust Changes

October 6, 2011

On April 14, 2011 and April 29, 2011, the Florida legislature enacted several significant changes to the probate and trust code (hereinafter referred to as “legislation”). The bill was signed by the Governor on June 21, 2011. Some of the key sections of the legislation became effective on July 1, 2011 and others will become effective on October 1, 2011. In essence, the legislation creates or substantially modifies the following subject matters:

I) Intestate succession
II) Reformation of a will
III) Challenges to revocation of a will and trust
IV) Attorney-client privilege relating to fiduciaries and
V) Timing for requesting attorney’s fees in a trust matter.
We urges readers and probate and trust litigators to review the entire legislation because it contains nuances not fully addressed herein.

I. Intestate Succession

When a decedent dies without a will, the assets are distributed according to the laws of intestacy. Currently, the intestate share of a surviving spouse where all of the decedent’s descendants are also descendants of the surviving spouse is the first $60,000.00 and half of the remaining estate.
Effective October 1, 2011, the legislation amends Florida Statute § 732.102(2) so that the intestate share of a surviving spouse of a decedent where all of the decedent’s descendants are also descendants of the surviving spouse (or if there are no descendants) is the entire estate.
The legislation also creates Florida Statute § 732.102(4) to provide that if the surviving spouse has descendants that are also the decedent’s descendants and has descendants not related to the decedent, the surviving spouse’s intestate share is half of the estate.

II. Reformation of a Will

 

Reformation of a testamentary document is an effective, yet often times overlooked, probate litigator’s technique to reform a document to conform to the settlor’s intent. Since 1998, Florida case law permitted reformation of a trust instrument to correct a mistake. See In re Estate of Robinson, 720 So. 2d 540 (Fla. 4th DCA 1998). In 2007, the Florida legislature codified and expanded common law to permit reformation to correct a trust to cure a mistake as well as reformation of a trust to achieve a settlor’s tax objectives. See Fla.Stats. §§ 736.0415 and 736.0416.

Effective July 1, 2011, the legislation created Florida Statutes §§ 732.615 and 732.616. These statutes mirror the above-referenced trust code statutes to permit reformation of a will to correct a mistake and to modify a will to achieve a testator’s tax objectives.

The mistake statute, Florida Statute § 732.615, allows an interested person to seek reformation of the terms of a will to conform to the testator’s intent, and provides a burden of proof of clear and convincing evidence. The statute even permits reformation that is completely inconsistent with the apparent terms of the will. 

The tax modification statute, Florida Statute § 732.616, permits an interested person to seek reformation of the terms of a will to achieve a testator’s tax objectives in a manner that is not contrary to the testator’s “probable intent.”
These statutes are significant because reformation of an unambiguous will was previously never permitted by case law or statute. In addition, the legislation creates Florida Statute § 732.1061 which requires that in actions under reformation of a will to correct a mistake and modification of a will to achieve tax objectives, the court must award attorney’s fees and costs to the prevailing party. The statute also gives the court discretion in awarding and allocating fees using the concept of equity. 

III. Challenges to Revocation of a Will and Trust 

Florida law provides that a will or trust is void if procured by fraud, duress, mistake or undue influence. A testator or settlor may revoke a will or trust by writing or act.
Until the legislation, there was no mechanism to challenge a revocation of a will or trust by physical act based upon fraud, duress, mistake or undue influence. The legislation amends Florida Statutes §§ 732.5165 and 736.0406 to provide that revocation of a will or trust is void if procured by undue influence, fraud, duress or mistake. A challenge to the revocation of a testamentary document cannot take place until the instrument becomes irrevocable or at the settlor’s demise. 

IV. Attorney-client Privilege relating to Fiduciaries

Florida law provides that communication between an attorney and the client is confidential if it is not intended to be disclosed to third parties. The legislation clarifies and expands existing law so that communication between a fiduciary client and the attorney is confidential and privileged. See Fla. Stat. § 90.5021.
The legislation also amends Florida Statutes §§ 733.212(2)(b) and 736.0813 which create new reporting requirements for personal representatives and trustees. The reporting requirement compels personal representatives and trustees to provide notice to the beneficiaries that an attorney- client privilege exists between the fiduciary and the attorney employed by the fiduciary. See Fla. Stats. §§ 733.212(2)(b) and 736.0813.

V. Timing for Requesting Attorney’s Fees in a Trust Matter

The Florida Trust Code provides that trust proceedings are governed by the Florida Rules of Civil Procedure. In civil litigation, Florida Rule of Civil Procedure 1.525 is commonly used which requires a party to serve a motion seeking fees or costs within 30 days after the filing of a judgment. By amending Florida Statute § 736.0201(1), the legislation clarifies and confirms that Florida Rule of Civil Procedure 1.525 applies to all judicial proceedings concerning trusts. 

The legislation also creates Florida Statute § 736.0201(6) which states that Florida Rule of Civil Procedure 1.525 applies to all judicial proceedings concerning trusts, but provides the following two exceptions:
a. A trustee’s payment of compensation or reimbursement of costs to persons employed by the trustee from assets of the trust and
b.  Determination by the court directing from what part of the trust fees or costs shall be paid, unless the determination is made under s. 736.1004 in an action for breach of fiduciary duty or challenging the exercise of, or failure to exercise, a trustee’s powers.

Read more at: Tax Times blog

Live Help