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Despite pouring nearly $380 million into a new tax enforcement initiative, the U.S. government took “limited or no action’’ in its campaign to battle secretive offshore holdings used to dodge taxes, according to a new report by a federal watchdog.

The Treasury Inspector General for Tax Administration (TIGTA) report paints a bleak picture of the agency’s ability to enforce a landmark Obama-era law meant to reign in shady offshore holdings by collecting information on foreign accounts directly from banks and other financial institutions.

Instead of ushering in a new era of tough scrutiny on offshore hideaways, the report says the new law produced a mountain of error-laden paperwork that the Internal Revenue Service (IRS) is struggling to validate, while some of the most important aspects of the agency’s responsibilities under the law have languished.

Known as the Foreign Account Tax Compliance Act, or FATCA, the offshore tax law was passed by Congress in 2010 in response to the proliferation of secret offshore activity. The law requires foreign financial institutions to identify their American clients and turn information regarding those clients over to the IRS. The IRS hoped U.S. taxpayers hiding money abroad would declare their assets for fear of being ratted out by their agents.

And, after the law’s original passage, the rate of Americans renouncing their citizenship, and thus no longer subject to FATCA’s tax provisions, accelerated after the law’s passage, according to Bloomberg News. But such extremes measures may have been unnecessary.

Responding to the TIGTA’s report, the IRS said that the roadmap was “not intended to be a comprehensive compliance plan” and that the planning document “could not envision future policy changes.” The IRS said the “report leaves the reader with the incorrect impression that FATCA is not being enforced.”

Despite this, the IRS did agree to adopt four of the report’s six recommendations for improving its FATCA enforcement. Central to the law is the enforcement of a 30 percent withholding tax that Americans must often pay on income flowing into a foreign account. The report’s authors claimed the IRS hadn’t used the new law in a single enforcement action on the withholding tax until they provided to the agency with feedback. 
 

 

The law’s proper implementation rests on the IRS receiving accurate information from the financial institutions that provide details on foreign accounts. Yet, the report states that the related paperwork the IRS has received is rife with faulty taxpayer identification numbers. Among TIGTA’s recommendations that the IRS agreed to adopt is a pledge to address errors in paperwork.

In recent years, large staffing cuts have plagued the IRS’s efforts to collect taxes it is owed. In an interview with ICIJ in December, John Koskinen, the recently-departed commissioner of the IRS said:  

“The Cuts in the IRS Budget Have Ramifications... I’m Concerned That the Resource Constraints Make Us Less Effective and Ultimately People Are Going to Worry about Whether the Tax System Is Fair.”

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Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

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The tax authorities of the UK, US, Australia, Canada and Netherlands have set up a joint committee to improve international enforcement against tax crime and money laundering. The first meeting of the so-called J5 Group (Joint Chiefs of Global Tax Enforcement) was held during July 2018 where plans where developed to detect cyber criminals and enablers of offshore tax crime. The threat of virtual currencies to tax administrations is a particular priority. 
The Joint Chiefs of Global Tax Enforcement (known as the J5) are committed to combatting transnational tax crime through increased enforcement collaboration. The J% will work together to gather information, share intelligence, conduct operations and build the capacity of tax crime enforcement officials.

The J5 is comprised of:

1. The Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO),
2. The Canada Revenue Agency (CRA),
3. The Fiscale Inlichtingen- en Opsporingsdienst (FIOD),
4. HM Revenue & Customs (HMRC), and
5. Internal Revenue Service Criminal Investigation (IRS-CI).

The J5 is convinced that offshore structures and financial instruments, where used to commit tax crime and money laundering, are detrimental to the economic, fiscal, and social interests of our countries. We will work together to investigate those who enable transnational  tax crime and money laundering and those who benefit from it. We will also collaborate internationally to reduce the growing threat to tax administrations posed by cryptocurrencies and cybercrime and to make the most of data and technology.

What the J5 Does

To actively bring about change, the J5 will:

• Develop shared strategies to gather information and intelligence that will strengthen operational cooperation in matters of mutual interest, and target those who seek to commit transnational tax crime,  cybercrime and launder the proceeds of crime
   
• Drive strategies and procedures to conduct joint investigations and disrupt the activity of those who commit transnational tax crime, cybercrime, and also those who enable and assist money laundering
   
• Collaborate on effective communications that reinforce that J5 is working together  to tackle transnational tax crime, cybercrime and money laundering. 

Results The outcome of this active collaboration will see the J5: Enhance existing investigation and intelligence programs Identify significant targets for new investigations Improve the tactical intelligence threat picture now and into the future Lead the wider community in developing its strategic understanding of the methods, weaknesses and risks from offshore tax crime and cybercrime Raise international awareness that the J5 is working together to reduce transnational tax crime, cybercrime and money laundering, and create uncertainty for those who seek to commit such offenses. The J5 was formed in response to the OECD’s call to action for countries to do more to tackle the enablers of tax crime. The J5 works collaboratively with the OECD and other countries and organizations where appropriate.    Have Undeclared Income from an Offshore Account?   Want to Know if the OVDP Program is Right for You? Program Ends September 28th!     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   

A district court has approved IRS's levy on taxpayers' principal residence, noting that:

1) IRS established that there were no reasonable alternatives for collection;
2) IRS's determination that the taxpayers were ineligible for an offer in compromise was correct; and 3) taxpayers' pending installment agreements didn't prohibit the levy.

(Gower, (DC FL 7/10/2018) 122 AFTR 2d ¶ 2018-5033).