Category Archives: criminal tax law

According to IR-2021-64 issued on March 25, 2021, the Joint Chiefs of Global Tax Enforcement (J5) brought together investigators, cryptocurrency experts and data scientists in a coordinated push to track down individuals and organizations perpetrating tax crimes around the world this week.

The event, known as 'The Challenge,' includes experts from each country with the mission of optimizing data from a variety of open and investigative sources available to each country, including offshore account information. 

Using various analytical tools, members of each country were put into teams and tasked with generating leads and finding tax offenders using cryptocurrency based on the new data available to them through The Challenge. Working within existing treaties, real data sets from each country were brought to the challenge to make connections where current individual efforts would take years to make those same connections.

"While a great deal of preparation goes into these events, the Challenges are by no means a rehearsal for us," said Jim Lee, Chief, IRS Criminal Investigation. 

"As Evidenced From The Last Couple of Years, These Challenges Result In Real Enforcement Actions Taken By The J5.

They serve as an opportunity to continue to share information and further develop leads, but they also jumpstart investigations. I expect we will see results from this Challenge in the months and years to come."

This year the challenge focused on Financial Technology (FINtech) companies. FINtech companies invent new and innovative financial solutions, mainly making use of the digital opportunities the internet offers. 

Many FINtech companies develop and market new financial products and payment possibilities like cryptocurrency, payment processing platforms like PayPal, crowdfunding loans, and insurance. 

With These Products, FINtech Companies Are Competing With Large Traditional Financial Institutes Like Banks and
Insurance Companies and Profits
In The Billions Of Dollars Are Not Unheard Of.

"In a fast-changing digital world, the J5 also must adjust and change," said Niels Obbink, General Director of FIOD. "During this challenge, experts have worked hard to focus on the legal opportunities countries have to start J5 investigations aimed at FINtech companies."

Many FINtech companies have adopted compliance regulations and are partnering with governments and law enforcement in prohibiting financial crime. 

However, Due To The Online Nature Of The Products, The Novelty And The Lack Of Regulation And Compliance In Some Areas, The FINtech Industry Can Be Used By Tax Avoiders And Money Launderers To Commit Crimes.

All FINtech companies have one attribute in common: they trade in intangible online assets and services. Because of that intangible nature, they can trade from anywhere in the world, only limited by the availability of the Internet. Government regulation on cryptocurrency and financial services have led to the need for FINtech companies having a physical presence in particular countries or areas.

This year's Challenge followed a virtual February meeting of all five J5 Chiefs where each country reiterated their dedication to the alliance and expressed excitement about the operational results to come. In early March, the Chief Executive Officer and an associate of Sky Global were indicted on charges that they participated in a criminal enterprise that facilitated the transnational importation and distribution of narcotics through the sale and service of encrypted communications devices. Earlier this week, a ten-count indictment was returned by a federal grand jury in Brooklyn charging Jason Peltz with securities fraud, money laundering, tax evasion and a variety of other offenses. Both cases were worked under the umbrella of the J5.

The J5 includes the Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), the Dutch Fiscal Information and Investigation Service (FIOD), Her Majesty's Revenue and Customs (HMRC) from the UK and the Internal Revenue Service Criminal Investigation Division (IRS-CI) from the US. Please visit the J5 webpage for more information about the J5.

Taxpayers should check whether it is still possible to correct the tax return or
 file a Voluntary Disclosure in order to avoid any criminal proceedings and penalties,
as well as administrative costs.

Read more at: Tax Times blog

 We previously posted All That You Wanted to Know About Form 706NA - Part I, where we discussed that in the area of estate tax compliance, many of us have prepared Form 706’s, the estate tax return for US citizens and domiciliaries.  To be sure, this form is quite voluminous and can take a while to fill out but there are very few mysteries beyond schedule E; what percentage of an asset might be includable in an estate, the value of an annuity, what debts and expenses are deductible, the calculation of the marital deduction, and the generation-skipping tax computation. The Form 706NA, however, preparation of the tax return for the estate of the nonresident alien owning property in the United States, can present a more daunting task.  

Based on our estate counsel Robert Blumenfeld's 32 years of experience as a senior attorney at the International office of the IRS, some of the strange and exotic problems that he discovered upon while auditing roughly 1,500 estate tax returns and preparing about 300 of the same in the last few years.
 

After we get through the information about the decedent himself, we reach an area of the return, Part III, General Information. Most of it is pretty obvious but… The first area of major concern may be whether the decedent died intestate. Many people who have assets in several countries have country specific wills, for instance one for the United States and one for say Canada, England etc. If the decedent did die testate, one should always include the US will. If there are other wills, go through them carefully before you submit them to the IRS because they make contain data which would create questions or problems with the IRS. In the alternative, many folks have a Universal Will which covers the disposition of assets in all countries. Because of the difference of rules from country to country, such a universal will may create problems with assets passing to a surviving spouse or a charity. 

Question five relates to whether the decedent owned jointly held property in the United States. If the taxpayer plans to include 100% of the value of the asset, then this question should pose no problems. Two potential problems come to light: if the decedent came from a community property jurisdiction, is one half of the value of the asset excluded by operation of law in the foreign country? If one wishes to exclude a portion of an asset from a decedent in a non-community property jurisdiction, Section 2040 of the IRC places the onus again, of proving contribution on the surviving co-tenant. This can sometimes be a very difficult task, especially if the property is been held for a substantial number of years and many records/canceled checks etc. have been destroyed over the years. 

Question six asks whether the decedent had ever been a US citizen. If the answer to the initial question is yes but at the time of death, the decedent is no longer a US citizen, it is necessary to include in the paperwork sent to the IRS some evidence that the decedent properly expatriated from the United States. Based on the timing, if this happened shortly before death, it could raise the issue of expatriation to avoid tax. Again, getting this information before preparing the return is a good way to avoiding embarrassment at  the examination.

Have a US Estate Tax Problem?

 

Estate Tax Problems Require

an Experienced Estate Tax Attorney

 

 

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).

 

Robert S. Blumenfeld  - 

 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

 

Read more at: Tax Times blog

According to DoJ, federal district court in Cincinnati, Ohio, sentenced an Atlanta, Georgia, man to 57 months in prison for tax evasion. This sentence included an enhancement for failing to report income from drug trafficking. 

According to court documents and statements made in court:

• From at least 2011 to 2016, Darryl Brown earned at least $1 million. 
• To evade paying taxes on this income, Brown did not file returns. 
• He created nominee businesses, opened bank accounts and lines of credit in the names of those businesses, and then used the accounts to pay for his luxury lifestyle. 
• This included extravagant overseas trips, Rolex and Cartier watches, and luxury clothing and vehicles. 

• Brown further used cash to purchase money orders in structured amounts to avoid triggering reporting requirements to the Department of Treasury and the IRS. Brown then used the money orders to pay off the balances on his nominee accounts. 
• In total, Brown caused a tax loss of more than $250,000. 

U.S. District Judge Timothy S. Black in the Southern District of Ohio also ordered Brown to serve three (3) years of supervised release and pay restitution to the IRS in the amount of $377,240. 

Have a Criminal Tax Problem?

Read more at: Tax Times blog

A district court in U.S. v. Goldsmith, (DC CA 5/25/2021) has found several reasons for holding that a U.S. holder of a foreign bank account was liable for a willfully not filing FBARs, including the fact that he opened the account as a numbered account, instituted a "hold mail" order on the account, and divested the account of U.S. securities when the foreign bank said otherwise it would disclose the account to the IRS.

Mr. Goldsmith was the owner of a Swiss bank account that, for the years in question, contained more than $10,000. Although his accountant asked him each year if he held a foreign account, the bank informed him of potential U.S. reporting requirements, there was other evidence that he knew he should have filed FBARs, Mr. Goldsmith did not file FBARs. 

• The IRS imposed a civil penalty for his willful violation of the FBAR rules.
• Mr. Goldsmith appealed to district court.
• The district court agreed with the IRS that Goldsmith's failure to file FBARs was willful.

The district court first reviewed various cases that discussed what a willful violation is and concluded that a willful violation may be found where the violation results from conduct qualifying as either (1) knowing and intentional or (2) reckless, including due to willful blindness. 

The court said that willful intent may be proven by circumstantial evidence and reasonable inferences drawn from the facts; it came to these conclusions because it said that direct proof of the taxpayer's intent is rarely available.

The district court said that Mr. Goldsmith's violation was willful because of the following facts:

1. Upon the death of Mr. Goldsmith's mother, Mr. Goldsmith inherited both the Swiss bank account and an interest in commercial property. Mr. Goldsmith disclosed the commercial property interest to his accountant but not the bank account despite the accountant explicitly asking him if he had a foreign account.

2. He set up the account, after his mother's death, specifically as a numbered account, in that his name was not associated with the account.

3. In 2000, the Swiss bank asked Mr. Goldsmith to sign a form, as part of an IRS program, which referenced "new U.S. withholding tax and reporting obligations" and gave Mr. Goldsmith a choice between disclosing his account to the IRS or divesting all of his U.S. securities. Mr. Goldsmith chose to divest the account of all U.S. securities rather than disclose the account to the IRS.

4. In addition to avoiding U.S. securities, Mr. Goldsmith also paid a regular fee to the Swiss bank to institute a "hold mail" order, or in other words, for the bank not to send him any mail in the U.S.

 The court pointed out that many other courts have interpreted a "hold mail" request of foreign bank qualifies as evidence of intent to conceal a foreign account from the U.S. government.

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