Category Archives: criminal tax law

According Law360, Although Internal Revenue Service investigations into people failing to file foreign bank and financial account reports fell sharply during the COVID-19 pandemic, enforcement remains a priority because it's an easy source of revenue, government and private practitioners told Law360.

The number of such examinations closed also declined, from 2,652 to 1,495, while penalties collected dropped from $77.5 million to $46.6 million. The statistics were published in the agency's annual progress report on FBAR cases, required under the USA Patriot Act of 2001. 

The IRS press office said the declines are a direct result of the coronavirus pandemic. The agency's People First Initiative, conducted from April 1 to July 15, 2020, suspended all in-person contacts and some compliance actions, and even after the initiative expired the IRS did not resume its rate of investigations, the agency said.

Two years into the pandemic, the IRS says it expects investigations to rise. As a goal, it will prioritize FBAR awareness to help filers and practitioners comply with FBAR recordkeeping requirements, it said. While the agency did not specify the steps it would take or set specific goals, it told Law360 it would rely on traditional, web-based and social media communications.

COVID Basically Sidelined IRS Enforcement Efforts Across The 

Board," David W. Klasing, A Solo Practitioner, Told Law360. 

"A lot of IRS officers were marginally effective people to start with," he said. "When you pull them out of the office and put them at home, ineffectiveness went to nonperformance."

While the IRS may be conducting fewer investigations, it appears to be hoping for a big payoff from the ones it is pursuing.

The IRS will go after FBAR cases where it thinks there are potential willful violations, and also has started pursuing criminal investigations against people making false, nonwillful statements, he said.

The IRS still investigates taxpayers for failing to file, but the agency has prioritized other areas of tax evasion such as cryptocurrencies, said Andrew Gordon, president of the Gordon Law Group.

The IRS annual report showed examination rates varied widely from 2012 to 2019, from a high of 8,420 in 2014 to a low of 2,807 in 2018. Civil FBAR examinations, penalties levied and penalties collected also rose and fell during the same period. Despite the ups and downs, the number of FBAR filings rose steadily each year from 807,040 in 2012 to 1.4 million in 2020.

The IRS' emphasis on the need to file FBARs, particularly after 2010, is one reason filings increased, Crouch said.

"I give the IRS a lot of credit for improving communication," he said.

Still, a significant number of taxpayers remain unaware of the filing requirement and there is much progress that the agency still needs to make to increase the number of FBAR filings, said Holland & Knight LLP partner Chad Vanderhoef.

"The unfortunate reality is that many taxpayers facing FBAR penalties did not know of the filing requirement," he said. "And the fact that many return preparers similarly lacked awareness exacerbated the problem."

But FBAR Enforcement Remains A Strong Priority

For The IRS, Practitioners Said.

The government continues to collect data through enhanced information sharing efforts and other methods, such as John Doe summonses and cooperation from parties entering into nonprosecution agreements, Vanderhoef told Law360. The information will trigger investigations into offshore accounts, he said.

Do You Have Undeclared Offshore Income?

 

Want to Know if the OVDP Program is Right for You? 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

According to Procedurally Taxing, in Evert v. Commissioner, T.C. Memo 2022-48, the Tax Court addressed a statute of limitations defense raised by petitioner.  Petitioner had signed a Form 872 consenting to the extension of the statute of limitations on assessment; however, she argued that she did so under duress which invalidated the consent.  

The Court found that the consent was valid and, therefore, the notice of deficiency was timely issued.  While duress arises regularly in the joint return context, it also comes into play regularly in the consent context and particularly with unrepresented taxpayers.

The IRS selected Ms. Evert’s 2015 and 2016 returns for exam.  She disagreed with the results of the examination and filed an administrative appeal upon receipt of the 30 day letter. 

The court provided a paragraph of explanation of the Appeals Officer’s (AO) background.  Because the actions of the AO stood at the heart of the case, the background material assists in understanding the case.  He was former military, former SSA hearing officer, former attorney in private practice and former FBI agent before joining Appeals.  His background became important because his credibility was important in deciding whether he exerted undue pressure on Ms. Evert to sign the extension form.

The AO reached out to petitioner to schedule a conference and to gather information she might provide in support of her case.  She was somewhat slow in providing information.  Her case ended up on a report in Appeals showing cases in which the statute of limitations on assessment would expire in nine months and the AO decided that obtaining a statute extension would best serve this case. (For most Examination cases, there must be at least 365 days remaining on the statute of limitations when a case is received by Appeals (FAQ #12).

So, the AO wanted closure or more time on the statute of limitations and Ms. Evert wanted more time to respond to the request for information.  Each side needed something but the IRS had what some might consider the upper hand since it could issue the notice of deficiency if its comfort level dipped too low.  To gain more time to work with Appeals, Ms. Evert signed the consent form.  Did the pressure to do so exceed the normal pressures that exist in this situation?  That’s what the Court has to decide.

The burden to show that the AO obtained the consent by duress falls on Ms. Evert.  The Court quoted from an old Board of Tax Appeals case, Diescher v. Commissioner, 18 B.T.A 353, 358 (1929) to define duress.

In Diescher the Court found that the taxpayer signed the waiver under uress because the IRS threatened to impose the fraud penalty if he did not sign.  The Tax Court has also held on numerous occasions that simply advising a taxpayer that an assessment will occur without a consent to extend does not rise to the level of duress.

Here, the court found that petitioner failed to meet her burden.  The AO simply informed her that he would close her case without a consent holding open the statute.  In finding this the Court accepted the testimony of the AO as credible and found petitioner’s testimony about statements made by the AO too vague to overcome the AO’s credible testimony about his actions.  The Court distinguished Diescher because it found no evidence that the request to sign the consent was coupled with a threat of the imposition of a penalty of the taxpayer withheld consent.

Cases challenging agreements whether the consent to extend or some other type of agreement put a relatively heavy burden on the taxpayer seeking to show the signing resulted from some wrongdoing on the part of the IRS. 

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog

According to Law360, a Japanese businessman and legal resident of the U.S. owes almost $11.6 million in penalties and fees for failing to report dozens of bank accounts he maintained in Japan for over a decade, the U.S. told a Hawaii federal court.

Osamu Kurotaki willfully failed to file Reports of Foreign Bank and Financial Accounts from 2011 to 2013, the government said Thursday in a counterclaim to a February complaint filed by Kurotaki. He also failed to report income he had earned from his overseas companies, according to the government.

He Received Notices From His Tax Preparer That There Were Penalties For Failing To Report, According To The Government.

 He Also Ignored An "FBAR Client Letter" From His Preparer Informing Him Of The Requirement And Inviting Him To Discuss Any Questions About It.

Kurotaki never disclosed his accounts to his tax preparer, the government claimed. Instead, he signed and returned a tax form to his preparer omitting a page that asked for his foreign account information, according to the government.

He eventually filed delinquent FBARs for 2011 and 2012 but failed to include all his accounts, the government said. He timely filed a 2013 form but it, too, failed to list all his accounts, according to the government.

People are typically obliged to disclose foreign accounts if their balances exceed $10,000 by using FBARs, which are filed annually and are due in April. Compliance penalties are steeper for willful violations than nonwillful violations.

Do You Have Undeclared Offshore Income?

 

Want to Know if the OVDP Program is Right for You? 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com 

or Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

According to Procedurally Taxing, Keith Fogg observed during the ABA Tax Section Meeting that the panel offered a couple slides about Appeals inventory that might be of value to readers interested in what’s happening in Appeals. 

The first slide presented shows the cases coming into Appeals over the past three years.  The slide shows a sharp dip as a result of the pandemic.  Exam cases accounted for two thirds of the drop in case receipts between FY 2019 and FY 2020.  It’s not surprising given the sharp drop off in exam activity.  Because exam cases constitute such a large percentage of Appeals receipts, this area of drop has a bigger impact even though almost all types of receipts dropped. 

The second slide shows staffing as well as receipts and closures over the last three years.  Here, cycle time provides the most eye-catching number.  Cycle time on cases more than doubled between FY 2018 and FY 2021.  This gives a real view of the impact of the pandemic on operations.

The panel talked about the challenges of working from home.  Many Appeals employees were working from home before the pandemic and had the capability to do so, unlike employees in many IRS functions, but the pandemic broke information supply chains making case processing much more difficult in some instances. 

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog