Category Archives: IRS Audits and Litigation

1. The expected exchange of information between the IRS and State Department could be a real nightmare for many Americans.
2. The government has become quite adept at finding people with unreported income and offshore accounts.
3. The solution isn’t repatriating your money back to the United States; and
4. It’s probably already to late anyway since the new FATCA foreign reporting requirements have banks performing a retroactive review on many accounts.

Want to Make an Offshore Voluntary Disclosure? 
  

Contact the Tax Lawyers

of  Marini & Associates, P.A.

 

for a FREE Tax Consultation

at www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid ( 888 882-9243 begin_of_the_skype_highlighting 888 882-9243 FREE  end_of_the_skype_highlighting ). 

Anthony Parent posted that tacked into a  highway bill that has recently passed the U.S. Senate has a provision that would allow the State Department to deny passports to US taxpayers who owe delinquent tax debts to the IRS.
 
If you owe more than $50,000 to the IRS, and if this Bill is signed into law by the president, you could be denied your right to leave the United States. 

Who can be denied a passport for delinquent IRS tax debts?

The Bill, if signed into law, would have dire consequences for those with big unpaid and unresolved tax bills. The law would apply to those who (1) owe more than $50,000 to the IRS, and in addition, have been issued a (2) notice of federal tax lien, or a final notice of intent to levy. Those with smaller tax debts, and those tax debt proposed by an IRS audit and not finalized are not affected.

Does this mean if you owe money to the IRS, you can’t get a passport? Or your passport will be revoked?

No. First of all this bill is not law yet. Second, even if it become law, the bill clearly states that if you are in a repayment plan, or installment agreement with the IRS, your passport will not be denied.  The same is true even if you settle your back taxes with an Offer in Compromise, you can still get a passport.
If your case is still pending with IRS appeals with a Collection Due Process hearing, and there is no final determination letter, you can still get your Passport renewed.

Also there are exceptions for those attempting to return to the US and those who wish to leave the US for family emergencies. It is unclear who will be in charge of who will be determining what a family emergency is.


But what about those in Currently Non-Collectible status?

There it is a little tricky. Currently Non-Collectible status is when the IRS agrees the taxpayer is in a hardship and agrees not demand any money, aside from holding on to tax refunds (there is an additional requirement is that a taxpayer not run up any new tax debts).  But believe it or not, there is actually no statute that authorizes Currently Non-Collectible or “hardship” status.

Known as Code 530 to IRS insiders, “CNC status” is authorized by IRS policy statement 5-71 as referenced in the Internal Revenue Manual 5.16.1.1.  This bill makes no reference to those in CNC.

Probably not lose your passport for FBAR penalties?

FBAR penalties are penalties the IRS imposing for failure to properly report foreign bank accounts. So can you lose you passport for unpaid FBAR penalties? Probably not.

First, the bill is written rather vaguely. It says a “tax.” Well, FBAR penalties aren’t really a tax and this is why it makes a difference. The basis for the imposition of taxes comes from Title 26 of the US tax code. The basis for the implementation of FBAR penalties comes from Title 31, and in particular the Bank Secrecy Act.  This bill seeks to amend would amend Title 26, and not Title 31. So liabilities from Title 31 would, arguable, be exempt.

Further supporting the argument that this would not apply to outstanding FBAR penalties is the fact that the administrative remedies available to past due tax obligations are not available to FBAR penalty assessments.

Conclusion

This Bill will not impact most people who owe money to the IRS but have come up with a solution to pay or settle back taxes. But rather, only those who have not addressed their tax debts are subject to having their passports revoked.  And as far as can be determined, will not impact those who have unpaid FBAR penalties. The text of the relevant section of the Bill is here

Contact the Tax Lawyers

at Marini & Associates, P.A.

 

 

for a FREE Tax Consultation

at www.TaxAid.us or www.TaxLaw.ms

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

Source:

Anthony Parent

OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) offers a global roadmap that will allow governments to collect the tax revenue they need to serve their citizens. It also gives businesses the certainty they need to invest and grow.

Produced at the request of the G20 and introduced at the G20 Finance Ministers’ meeting in Moscow, the Action Plan identifies 15 specific actions that will give governments the domestic and international instruments to prevent corporations from paying little or no taxes. 

• Establishing international coherence of corporate income taxation
• Restoring the full effects and benefits of international standards
• Ensuring transparency while promoting increased certainty and predictability and
• From agreed policies to tax rules: the need for a swift implementation of the measures

Contact the Tax Lawyers

at Marini & Associates, P.A.

 

for a FREE Tax Consultation

at www.TaxAid.us or www.TaxLaw.ms

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

Source:

Businesslife.co

According to a recent the U.S. Government Accountability Office (GAO) report, more than 10,000 taxpayers showed signs of having avoided offshore penalties by making “Quiet Disclosures” of foreign bank accounts for tax years 2003 through 2008, a period for which the IRS has detected several hundred quiet disclosures.

The IRS stated  that they will audit Taxpayers who file amended or late return with income from Foreign Bank Accounts and in FAQ #16 they state:

"The IRS is reviewing amended returns and could select any amended return for examination. The IRS has identified, and will continue to identify, amended tax returns reporting increases in income. The IRS will closely review these returns to determine whether enforcement action is appropriate. If a return is selected for examination, the 27.5 percent offshore penalty would not be available. When criminal behavior is evident and the disclosure does not meet the requirements of a voluntary disclosure under IRM 9.5.11.9, the IRS may recommend criminal prosecution to the Department of Justice."

However, many have been wondering whether the IRS will pursue examinations of "Quiet Disclosures" of taxpayers residing in the United States in some manner.

Now these Taxpayer's have their answer: on June 11, 2013, the U.S. government filed a Complaint to collect multiple civil FBAR penalties in the amount of $3,488,609.33 previously assessed against Carl R. Zwerner of Coral Gables, Florida for his alleged failure to timely report his financial interest in  a foreign bank account, as required by 31 U.S.C. § 5314 and its implementing regulations. See United States v. Carl R. Zwerner, Case # 1:13-cv-22082-CMA (SD Florida, June 11, 2013).

According to the Complaint, from 2004 through 2007, Mr. Zwerner, a U.S. citizen, had a financial
interest in an account at ABN AMRO Bank in Switzerland (hereinafter, “the Swiss bank account”). The Complaint alleges that the balance of the Swiss bank account from 2004-2007 was at all times greater than $10,000 and that, as such, on or before June 30, 2005, 2006, 2007, and 2008, Mr. Zwerner was required to file an FBAR reporting his financial interest in the Swiss bank account for each year from 2004, 2005, 2006, and 2007, respectively. However, the Complaint also asserts that prior to October 2008, Mr. Zwerner had never reported his financial interest in the Swiss bank account on an FBAR, nor had he reported income he earned from that account on his federal income tax returns.

The Complaint in Zwerner further alleges that on or about October 13, 2008, Mr. Zwerner filed a delinquent FBAR reporting his financial interest in the Swiss bank account during 2007, along with an amended income tax return for 2007; on or about March 27, 2009, Mr. Zwerner filed amended income tax returns and delinquent FBARs for 2004, 2005, and 2006. The basis of the Complaint is that Mr. Zwerner’s alleged failure to timely report his financial interest in the Swiss bank account for 2004-2007 was willful. Apparently, Mr. Zwerner did not hold the Swiss bank account in his own name. The Complaint alleges that from 2004 to 2006 he held the account in the name of any entity called the Bond Foundation and that, in January 2007, he transferred the account to an entity called the Livella Foundation. However, the Complaint asserts that at all times, however, Mr. Zwerner was the beneficial owner of the account.

According to the Complaint, Mr. Zwerner’s original tax returns for 2004 to 2007 did not report any income earned from the Swiss bank account; that the first time he reported such income was when he amended those returns; and that Mr. Zwerner represented on Schedule B of his original tax returns for those years that he did not have an interest in a foreign financial account. The Complaint asserts that Mr. Zwerner “expressly represented to the accountant who prepared his original tax returns for 2006 and 2007 that he had no interest in or signature authority over a financial account in a foreign country.” Further, it asserts that in a “letter dated August 9, 2010, Mr. Zwerner admitted to the IRS that he was aware that he should have reported both the existence of the account and the income he earned from it.”

The government carries the burden of proving willfulness into the courtroom. Taxpayers should carefully review the recent court decisions in United States v. Williams, No. 10-2230 (4th Cir. 2012) and United States v. McBride, No. 2:09-cv-00378 (D. Utah 2012) on the issue of determining “willfulness” for assertion of the more significant “willful” FBAR penalties (of up to 50% of the account balance, per year). Although the underlying facts in each case were not the best, the courts might not lightly view those with considerable financial resources who fail to inquire about their potential reporting requirements associated with various interests in foreign financial accounts. The Internal Revenue Manual suggests that “willfulness may be attributed to a person who has made a conscious effort to avoid learning about the FBAR reporting and recordkeeping requirements.” However, the willfulness determination should be based on the actual facts and the context in which statements are made (or not) rather than assertions in a legal pleading.

The Complaint alleges that due to Mr. Zwerner’s willful failure to file FBARs reporting his financial interest in the Swiss bank account during 2004-2007, a delegate of the Secretary of the Treasury of the United States assessed penalties against him under 31 U.S.C. § 5321(a)(5) in the amount of 50% of the balance of his account at the time of the violations for each year, as follows: (a) 2004 – $723,762, assessed on June 21, 2011; (b) 2005 – $745,209, assessed on August 10, 2011; (c) 2006 – $772,838, assessed on August 10, 2011; and (d) 2007 – $845,527 assessed on August 10, 2011. According to the Complaint: (a) on June 21, 2011, a delegate of the Secretary of the Treasury of the United States gave notice of the penalty assessment for 2004 to Mr. Zwerner and made demand for payment thereof; (b) on September 8, 2011, a delegate of the Secretary of the Treasury of the United States gave notice of the penalty assessments for 2005-2007 to Mr. Zwerner and made demand for payment thereof; (c) despite the notices and demands for payment, Mr. Zwerner did not pay the penalties assessed against him. As of June 6, 2013, the Complaint alleges that Mr. Zwerner owes the United States $3,488,609.33 in penalties assessed under 31 U.S.C. § 5321, including interest and other additional amounts which accrued and continue to accrue as provided by law.

The Excessive Fines Clause of the Eighth Amendment and relevant Supreme Court case law support a conclusion to the effect that a civil penalty or forfeiture is unconstitutional if the penalty or forfeiture is at least in part “punishment” and such punishment is grossly disproportionate to the conduct which the penalty is designed to punish. The touchstone of the constitutional inquiry under the Excessive Fines Clause is the principle of proportionality – the amount of the penalty must bear some relationship to the gravity of the offense that it is designed to punish.

 

Sources:

Forbes

Isaac Brock Society