Category Archives: criminal tax law

According to Law360, the U.S. Supreme Court declined on January 8, 2024 to review the Internal Revenue Service's rejection of a partnership's $35.5 million tax loss, letting stand a Ninth Circuit ruling that the partnership never properly filed its delinquent tax return at a service center.

The justices denied an August petition by Seaview Trading LLC to review the circuit court's 10-1 finding that Seaview never filed a return for 2001 because the partnership didn't file it at an IRS service center.

Seaview argued in its petition that the Ninth Circuit's March ruling incorrectly allowed the IRS to bypass a three-year statute of limitations and reject Seaview's loss in 2010. The government has only three years to issue a partnership adjustment, but the clock doesn't start ticking until a return is considered filed, a designation the Ninth Circuit misconstrued, Seaview said, when it ruled that Seaview's repeated submissions directly to IRS agents starting in 2004 didn't count.

If the Ninth Circuit's decision were allowed to stand, Seaview told the justices, the ruling "would produce Kafkaesque madness throughout the tax system" by allowing the IRS to pursue taxpayers "no matter how many times taxpayers hand their returns to IRS agents at the IRS' direction."

Seaview Gave Copies Of Its Partnership Return For 2001 To
An IRS Agent In 2005 And An IRS Lawyer In 2007 Does Not Constitute "Filing" A Return, The Government Argued.

Those transmissions failed to comply with the regulation specifying that partnership returns must be filed at an IRS service center, Treasury Regulation Section 1.6031(1)-1(a)(1), the government said.

The government also rejected Seaview's claim that the appellate ruling bucked years of IRS advice to taxpayers that delinquent returns should be filed with the IRS agent who requests the return. The IRS has never endorsed the view that partnerships are not required to file their taxes at service centers, even if they are filed late, the government said. Seaview based its argument for Supreme Court review on a misreading of agency guidance documents, the government said.

Even the top of the IRS' webpage on late-filed returns instructs filers to "file your past due return the same way and to the same location where you would file an on-time return," the government said.

PRACTICE TIP: When representing a taxpayer who is being audited for an unfiled tax year, file the late return with the service center first and then provide the Revenue Agent with a copy of the same.

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Previously agreed upon cuts from the IRS' Inflation Reduction Act (PL 117-169) funds across fiscal years 2024 and 2025 would be front-loaded in 2024, as part of a bipartisan, bicameral agreement between congressional lawmakers reached over the weekend that sets a spending topline for fiscal 2024 appropriations.

Congress is tasked with taking action before a January 19 partial government shutdown deadline, and a February 2 full shutdown deadline. Agencies impacted by the earlier date include the departments of Agriculture, Transportation, Energy, Veterans Affairs, and Health and Human Services.

According to a January 7 letter from House Speaker Mike Johnson (R-LA), refers to debt ceiling negotiations between Republicans, Democrats, and the Biden administration. 

Last summer, Biden and then-Speaker Mike McCarthy struck a hand-shake deal to redirect portions of the once-$80 billion appropriation to the IRS under the Inflation Reduction Act beyond the $1.4 billion rescinded by the Fiscal Responsibility Act. The plan was to trim another $10 billion out of the enforcement bucket in fiscal 2024, and again an additional $10 billion the next year.

Under The Latest Agreement From The Hill, The
Fiscal 2025 $10 Billion Would Be Accelerated, Meaning
All $20 Billion Would Be Clawed Back This Year!

$6.1 billion would also be cut from the Biden administration's "continued COVID-era slush funds," the letter read, but Johnson acknowledged the final spending levels "will not satisfy everyone," nor will the cuts go as far "as many of us would like."

All of Those Aspirational Objectives to Guarantee Fairness in The Tax System Through Enforcement Are ALL GONE as a Result of this 2nd Debt Limit Bill!

Vice President for Federal Tax Policy Chuck Marr took issue with the proposal, also commenting on X in a thread that "[c]utting IRS funding is a bad idea overall."

"The IRS funding reduces wealthy tax cheating and raises revenue," said Marr. "We're already seeing great results. And remember: cutting IRS funding does not save money. It loses money. Lots of it. Congress should protect IRS funding to improve customer service and ensure wealthy taxpayers and corporations pay the taxes they legally owe, i.e. deliver what honest taxpayers deserve."

The White House, however, gave its stamp of approval to the deal, which the president said "moves us one step closer to preventing a needless government shutdown and protecting important national priorities."

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According to DoJ, a Swiss national pleaded guilty on December 21, 2023 to conspiring to defraud the United States for his role in a scheme to help high-net-worth U.S. taxpayers conceal their income and assets in offshore accounts.

According to court documents and statements made in court, Rolf Schnellmann was the former head of Allied Finance Trust AG, a ZuJanuary come in andrich-based financial services company and a subsidiary of the Allied Finance Group in Liechtenstein. Rolf Schnellmann, Daniel Wälchli and Zurich, Switzerland-based Allied Finance Trust AG were indicted in 2020 for conspiracy to defraud the US.

From approximately 2008 to 2014, Schnellmann and his co-conspirators defrauded the IRS by concealing income and assets of high-net-worth U.S. taxpayer-clients in undeclared bank accounts at Privatbank IHAG Zurich AG (IHAG), a Swiss private bank. 

Schnellmann And His Co-Conspirators Devised And Implemented A Scheme Dubbed The “Singapore Solution” To Fraudulently Conceal The Bank Accounts Of The U.S. Taxpayer-Clients, Their Assets And Their Income From U.S. Authorities.

As part of the scheme, Schnellmann and his co-conspirators conspired to transfer more than $60 million from the U.S. taxpayer-clients’ undeclared IHAG bank accounts through a series of nominee accounts in Hong Kong and other locations before returning the funds to newly opened accounts at IHAG in the name of a Singapore-based asset-management firm that a co-conspirator helped establish. The U.S. taxpayer-clients paid large fees to IHAG and others to help them conceal their funds and assets and evade taxes. 

Schnellmann Was Indicted For Helping 3 U.S.
Taxpayer-Clients Conceal More Than $60 Million Offshore.

Schnellmann was arrested in August in Italy and extradited to the United States. He is scheduled to be sentenced on July 19, 2024, and faces a maximum penalty of five (5) years in prison, as well as a period of supervised release, restitution and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Read more at: Tax Times blog

According to Daily Tax Report the IRS has rescinded some criminal summonses from its crackdown on Malta pension plans, raising questions about whether the agency is backing off or retooling its aggressive campaign targeting the offshore tax schemes.

Three Attorneys Interviewed By Bloomberg Tax Said More Than 30 Of Their Clients Had Received A Withdrawal Letter Last Week.

The IRS declined to comment.  It’s not clear whether the withdrawal letters represent a revision to the investigation’s focus into the potentially abusive schemes. If so, it would be a striking reversal after the agency sent out hundreds of summonses in June to wealthy Americans sheltering assets in Malta and their advisors. A letter announcing the rescinded summons, obtained by Bloomberg Tax, states that 

The brief letter, dated Dec. 4, specifies the agency hasn’t used any information or records collected by IRS Criminal Investigation, adding physical records will be returned and “any electronic responsive records have been destroyed.” The letter, signed by IRS Criminal Investigation special agent Brian Visalli, gives no rationale or legal basis for the agency’s decision, but advises taxpayers to retain any records responsive to the summons “as you may receive subsequent legal process for those records.”

Former IRS commissioner Charles Rettig said any adjustment to the criminal probe wouldn’t affect the current pattern of civil audits. “Withdrawing the Summons’ does not translate, at least not yet, into walking away from civilly examining the transaction,” he said in an emailed message.

Bryan Skarlatos, a partner in the New York office of Kostelanetz, characterized the action as “a recognition that the summonses were improperly issued” and a decision to “focus the criminal investigation more narrowly while allowing many of the civil audits to proceed.”

Tom Cullinan, a shareholder in the Atlanta office of Chamberlain Hrdlicka, suspects Criminal Investigation concluded it wouldn’t be able to demonstrate criminal fraud because the tax controversies boil down to technical interpretations of a treaty.

Ventry, the California law professor, said IRS shouldn’t back down if it has reasonable evidence of fraudulent conduct and to the extent the agency’s information demands might have been “over-inclusive,” the IRS could and should issue a narrower batch of summonses targeting the individuals and the conduct of greatest concern. 

Taxpayers who have already claimed the purported tax benefits of one of these four transactions on a tax return should consider taking corrective steps, such as filing an amended return and seeking independent advice. 

Where appropriate, the IRS will challenge the purported tax benefits from the transactions on this list, and the IRS may assert accuracy-related penalties ranging from 20% to 40%, or a civil fraud penalty of 75% of any underpayment of tax. 

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