Monday, February 27, 2012

Estate Responsible for Penalties For Decedent's Failure to Report Foreign Trust

The Internal Revenue Service Office of Chief Counsel, in a chief counsel advice memorandum released Feb. 24, said an estate is responsible for Section 6677 penalties for failure to file information returns regarding foreign trusts for tax years ending prior to the decedent's death.

The estate is responsible for “initial” penalties asserted against the decedent where Forms 3250, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and 3250-A, Annual Information Return of Foreign Trust With a U.S. Owner, were not timely filed with respect to a foreign grantor trust established by the decedent, the office said in CCA201208028

FATCA Clears Way for Mexican Authorities to Investigate U.S. Accounts

The Mexican Tax Administration Service (SAT) can access information on thousands of U.S. bank accounts held by Mexican citizens “automatically” under a new collaboration with the IRS.

The agreement is part of a reciprocity mechanism between the U.S. and Mexican tax systems stemming from the Foreign Account Tax Compliance Act (FATCA), through which IRS can access information on U.S. citizens holding taxable bank accounts or financial assets in Mexico.

FATCA also applies to foreign financial assets or offshore accounts held by U.S. citizens around the world.

As SAT authorities have increased information-sharing with IRS, the IRS is doing the same for SAT, according to leading accountants in Mexico City.

“This comes as a reciprocity response from the U.S. to allow the SAT to look into large bank accounts held by Mexicans in the U.S. to ensure they are paying the correct tax, or the tax they claim to be paying,” said Carlos Martinez, PricewaterhouseCoopers LLP senior accountant in Mexico City.

Collaborating on banking information should help lower Mexico's tax evasion rate, which currently stands at 23.3% or 316 billion pesos ($24.5 billion) a year—equivalent to 2.62 per cent of its GDP.

In the past, Mexican tax officials interested in a particular individual's account had to ask IRS to provide it with information—a process that sometimes took significant time.

This is in line with what the SAT is already doing for IRS, observers said.

Martinez said SAT is interested in catching big Mexican tax evaders holding millions of U.S. dollars in accounts across the border.

Under Mexican law, citizens holding U.S. accounts must pay tax on interest and foreign exchange gains.

Depending on the amount to be taxed, the rate is gradual, capped at 30%.

While Mexicans can pay some tax under special double-tax agreements in the U.S. or in other countries, most must be paid in Mexico, Roja noted.

Also, under Mexican law, Mexican businessmen operating businesses abroad must report their earnings to SAT.

Roja said the newly strengthened collaboration between IRS and SAT will give the latter a lot more flexibility in policing Mexicans who flout their tax obligations.


Friday, February 24, 2012

IRS determines sourcing of credit card interest and ATM fees received from outside the U.S.

In Chief Counsel Advice (CCA), IRS has determined the sourcing of credit card interest and fees received by a financial services firm from U.S. citizen and resident alien customers living outside the U.S. and from ATM fees earned by the firm in connection with customer transactions made on third-party ATMs located outside the U.S.

The CCA concluded that the interest and OID income that Taxpayer received from Customers generally should be treated as foreign source income. However, interest and OID income that Taxpayer received from the following groups of Customers should be treated as U.S source income:

·        alien individuals (other than lawful permanent residents) who are treated as U.S. residents under the substantial presence test or first-year election in Code Sec. 7701(b).

·        U.S. citizens and lawful permanent residents who would be treated as U.S. residents under the substantial presence test in Code Sec. 7701(b). While noting that there is a question as to how interest should be sourced if it is paid by a lawful permanent resident who lives outside of the U.S. at the time of payment, the CCA concludes (by analogy to the rules for U.S. citizens) that sourcing of interest payments by such individual should be based on the individual's place of physical residence, determined under the substantial presence test at the time of the interest payment.

·        dual resident taxpayers who make an election under Reg. § 301.7701(b)-7 to be treated as nonresident aliens but who meet the substantial presence test in Code Sec. 7701(b). That is, the CCA concludes that for purposes of Code Sec. 861(a)(1), a dual resident taxpayer's election to be treated as a nonresident alien should be disregarded.

·        Servicemembers who, under the Servicemembers Civil Relief Act (SCRA), are residents of a state or D.C. but are stationed in a U.S. territory pursuant to military orders. Under SCRA, a servicemember retains his jurisdiction of residence, which may be a State, D.C., or a U.S. territory, notwithstanding his presence in or absence from such pursuant to military orders.

·        Beginning in 2009, spouses of servicemembers who, under the Military Spouses Residency Relief Act (MSRRA), are residents of a state or D.C. but are accompanying their servicemember spouses, who are serving pursuant to military orders, to a U.S. territory. Under MSRRA, the same rules as in SCRA apply beginning in 2009 to the spouse of a servicemember if the spouse is present in or absent from any State, D.C., or any U.S. territory solely to be with the servicemember, who is serving in compliance with military orders, and both spouses retain the same residence.

The CCA concluded that it appeared that Taxpayer's income from ATM fees should be treated as U.S. source income. Taxpayer's activities with regard to processing the ATM transactions appeared to have been solely in the nature of personal services—i.e., processing Customer withdrawals of funds made on third-party ATMs. There didn't appear to be any credit risk associated with these transactions since Customers could only withdraw available funds and no overdrawals seemed to have been allowed. Accordingly, the fees were compensation for Taxpayer's processing of the transactions through use of its computers, software, and other equipment located in the U.S. Under Code Sec. 861(a)(3), compensation for labor or personal services performed in the U.S. is treated as income from sources within the U.S.

Chief Counsel Advice 201205007

New Reporitng for Foreign Investors in U.S. Partnerships

Foreign investors are now required to file a special form, Schedule P. It applies to the ownership of any U.S. partnership including a limited liability company.

Now, the 2012 Schedule P (Form 1120-F) is required by a foreign corporation’s ownership of a U.S. partnership. Schedule P also reports the distributive shares of partnership effectively connected income and the foreign corporation’s effectively connected outside tax basis in interest.

Part I is used to identify all partnership interests the foreign corporation directly owns that give rise to distributive share of income or loss that effectively connected with a trade or within the United States of the corporation.

Part II is used to the foreign corporation’s distributive share of ECI and allocable expenses with the total income and expenses reported to it on Schedule K-1 1065), Partner’s Share of Income, Deductions, Credits, etc.

Part III is used to: report the corporation’s outside its directly-held partnership that include ECI in the corporation’s distributive share is apportioned between ECI and non-ECI Regulations section 1.884-1(d)(3) determine the average value treated as asset for interest expense allocation purposes under Regulations .

Thursday, February 23, 2012

IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

WASHINGTON — Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

If you need help filing your delinquent taxes call (888) 882 9243.

Wednesday, February 22, 2012

Tax Crimes as a ‘Predicate Offense' for Money Laundering?

The global body that sets standards for combating money laundering and terrorist financing said Thursday that governments should treat tax crimes as a red flag for other types of financial malfeasance, a sign that international cooperation against tax cheats is gaining momentum.

The body, the Financial Action Task Force, said it was expanding its list of “predicate offenses for money laundering” to include Serious Tax Crimes.

The changes reflect a growing movement toward international cooperation to catch tax cheats. Governments have become much less lenient on the subject since the financial crisis began four years ago, with tax havens like Switzerland coming under pressure to cooperate.

On Feb. 8, six countries, including the United States, France, Germany and Britain, announced that they would work together to fight tax evasion in the context of putting the Foreign Account Tax Compliance Act in place, a United States initiative to find hidden accounts overseas.

The focus is not on tax evasion per se, but rather on how ill-gotten gains might be put to use. Officials acknowledged that the definition of tax crimes differed from country to country and that it would be up to national officials to define and act on the information they found.

The most hotly argued topic relating to money laundering is whether laws do - or even should - relate to tax crimes.

The issues revolve around two main areas. First is whether tax offences are a predicate crime within any particular jurisdiction. Many places around the world do not raise income by income tax, for example. And so evasion of income tax cannot be a crime. The second issue that there has long been a basic principle of international law that one country does not enforce the tax laws of another.

In recent years, however, several inter-governmental bodies have sought to create a climate where tax investigations can be conducted across borders and then, by the application of laws relating to, for example, document fraud claim that the issue is not one of tax but of a simple criminal offence.

Notwithstanding the debate on international issues, within any country, the question of whether tax crimes are a predicate offence for the purposes of money laundering laws is a question of the express provision of the counter-money laundering laws, or the interpretation of those laws by the Court. In most countries that have "all crimes" counter-money laundering laws, it is almost certain that tax crimes will fall within the catch-all provisions.

Tax offences fall on the border of what is and is not laundering in that the general principle that money a person lawfully receives cannot be laundered. However, the issue is, in fact, easy to understand. If a person who is liable to pay a 40% marginal rate of income tax receives $100 for work and fails to declare it, then $40 is money "stolen" from the Treasury. Therefore, he does not launder the $100, he launders the $40. It is the tax evaded that is laundered. One complication that makes this difficult to understand is that in order to retain the $40, he actually puts the whole $100 through the laundering process. He has to try to show that he received $100 legitimately, in order to evade payment of $40.

Another complication is that the $40 is said to have been "commingled" with the remaining $60 and it has tainted the otherwise clean money. Therefore under general principles of asset seizure as applied in many countries, anything that is purchased with the $60 may be subject to freezing or forfeiture

Text of FATF's recommendations is at,3746,en_32250379_32236920_49656209_1_1_1_1,00.html.

Text of a U.S. Treasury Department release on the recommendations is available at

Tuesday, February 21, 2012

The President’s 2012 Estate & Gift Revenue Proposals

The Treasury Department has just released the GeneralExplanations of the Administration's Fiscal Year 2013 Revenue Proposals (the "Greenbook"). Attached are the Greenbook proposals to modify the estate and gift tax provisions.

These proposals would: 

  • Reduce the unified estate, gift and Generation-Skipping Transfer (GST) exclusion amounts from the current $5,120,000 to $3,500,000 for estate and GST purposes and to $1,000,000 for gift tax purposes (effective 1/1/2013);
  • Increase the top tax rate for estate, gift and GST to 45% from the current 35% (effective 1/1/2013);
  • Impose a consistency in value requirement for transfer tax and income tax purposes (effective on date of enactment);
  • Modify the rules on valuation discounts available under current law by further restricting the use of discounts in family-controlled entities (effective generally for transfers after date of enactment);
  • Require a minimum 10 year term for Grantor Retained Annuity Trusts (GRATs) (effective for trusts created after enactment);
  • Limiting the duration of the GST exemption (effective generally for trusts created after date of enactment);
  • Require coordination of certain income and transfer tax rules applicable to grantor trusts (effective generally for trusts created after date of enactment); and
  • Extend the estate tax lien period for estate tax deferral provided under Section 6166.

There still is a 10 month window for estate, gift and GST planning under the existing 2012 rules discussed below.  The current rules can provide significantly better planning opportunities than  either the President's proposals discussed above or the sunset provision discussed below.

Generous new estate and gift tax provisions are available only through the end of this year:

  • Temporary two year provisions were enacted as part of the overall extension of the Bush tax cuts.
  • Most significant provision was to reunify the estate, gift and generation-skipping tax (GST) exemptions and increase those exemptions to $5,000,000 ($10,000,000 for a married couple) while reducing the top transfer tax rate to 35%.
  • The exemptions have been adjusted for inflation for 2012 to $5,120,000 ($10,240,000 for a married couple).
  • Previously, the gift tax exemption was only $1,000,000.

Transfer Tax Rules will "sunset" effective December 31, 2012:

  • This will happen automatically if Congress takes "no action" (a skill that they have honed into a fine art).
On January 1, 2013 the exemptions will revert to $1,000,000 and the top estate, gift and GST rate will go back up to 55%.

Please contact Ronald Marini or Robert Blumenfeld at (305) 374-4424 for further assistance.

Filing False Returns is a Deportable Felony - Supreme Court

The U.S. Supreme Court Feb. 21 decided that lawful permanent residents who have pled guilty to charges related to the filing of false tax returns that resulted in a loss to the government of more than $10,000 have committed aggravated felonies involving fraud or deceit and are subject to deportation (Kawashima v. Holder, U.S., No. 10-577, 2/21/12).

The 6-3 ruling affirms a decision by the U.S. Court of Appeals for the Ninth Circuit that found that, under the immigration statutes, Akio and Fusako Kawashima could be removed for filing a false corporate tax return.

“The elements of willfully making and subscribing a false corporate tax return, in violation of 26 U.S.C. § 7206(1), and of aiding and assisting in the preparation of a false tax return, in violation of 26 U.S.C. §7206(2), establish that those crimes are deportable offenses because they necessarily entail deceit,” wrote Justice Clarence Thomas for the court's majority.

In her dissent, Justice Ruth Bader Ginsburg argued that aliens should not be subject to deportation under Sections 7206(1) and (2) because the Immigration and Nationality Act singles out tax evasion—and no other tax crimes—as an aggravated felony for deportation purposes.

Thursday, February 16, 2012

State of Florida aggressively targets Delinquent Taxpayers!

Traditionally delinquent taxpayers were sent a tax notice with a 60-day deadline, then they would receive a second or third notice but there is a much shorter response window today.

Penalties are also much harsher. Under the new rules, delinquent taxpayers are sent a tax notice with a 60-day deadline. 

If The Florida Department Of Revenue Does Not Receive Payment Within The 60 Days, A Warrant Is Filed And
The Taxpayer's Bank Account Is Frozen.

If you  or any of your clients receive a tax notice, please contact us immediately and one of our experienced Tax Litigation Attorneys will review your options for resolving your Florida Tax Problem.
Have as FDOR Tax Problem?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

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

Wednesday, February 15, 2012

Adminstration's Budget includes Tax Increases on Firms That Move Jobs, Profits Overseas

The Obama administration called for higher taxes Feb. 13 on corporations that shift jobs and profits overseas, while offering help to companies that keep business in the United States, in the it's fiscal year 2013 budget.

The administration called for U.S. taxes on excessive profits from the offshore use of transferred intangibles.

The plan also called for a credit against income tax equal to 20 percent of the expenses paid or incurred in connection with “insourcing” a U.S. trade or business. Deductions for expenses paid or incurred in connection with “outsourcing” a U.S. trade or business would be disallowed.

Also in the Green Book, the administration proposed disallowing the deduction for domestic production activities for oil and other fossil fuel production.

In a fact sheet, the administration said that in addition to stopping transfer pricing abuses, the budget would delay the deduction for the interest expense attributable to overseas investment.

Obama Calls for Taxing Dividends to at Ordinary Income Tax Rates for Top Earners

The Obama budget also calls for the top tax rate for qualified dividends would be taxed at individual income tax rates of up to 43.4 percent for taxpayers earning more than $200,000 per year under President Obama's budget proposal for fiscal year 2013 released Feb. 13.

The Obama administration has previously supported tying the dividends tax rate to capital gains, which the administration still believes should be taxed at a top rate of 20 percent.
A senior Treasury Department official said the budget called for “tough choices” and said dividends have traditionally been taxed at ordinary income tax rates, so the proposal would simply return policy to where it had been for most of the 20th century.

The Obama budget also calls for capping income tax deductions for individuals at the value of the 28 percent tax rate. The official said there would be no exceptions, including deductions to charitable organizations.

Treasury said the budget proposal does not offer a detailed look at either corporate or individual income tax reform ideas, but the president believes any of the proposed changes would be an improvement to current policy. An eagerly awaited framework for corporate tax reform is expected to be released by Treasury “around the end of the month,” the senior official said.

Res judicata prevented a taxpayer's innocent spouse claim

The Tax Court has held that the doctrine of res judicata prevented a taxpayer from relitigating a claim for innocent spouse relief. It also held that the taxpayer did not meet the conditions for overcoming res judicata under Code Sec. 6015(g)(2). (Eugene Koprowski, (2012) 138 TC No. 5)

Background. Each spouse is jointly and severally liable for the tax, interest, and penalties (other than the civil fraud penalty) arising from a joint return. However, Code Sec. 6015 provides relief from joint and several liability under certain conditions. In general, a joint filer may obtain relief: (1) under Code Sec. 6015(b) where the taxpayer did not have actual or constructive knowledge of the understatement of tax on a return; (2) under Code Sec. 6015(c), if no longer married to the other joint filer, the taxpayer may limit liability to his or her allocable portion of any deficiency; or (3) under Code Sec. 6015(f), if ineligible for relief under Code Sec. 6015(b) or Code Sec. 6015(c), where, in view of all the facts and circumstances, it would be inequitable to hold the joint filer liable.
In general, res judicata requires that when a court of competent jurisdiction enters a final judgment on the merits of a cause of action, the parties to the action are bound by that decision as to all matters that were or could have been litigated and decided in the proceeding. (Commissioner v. Sunnen, (S Ct 1948) 36 AFTR 611)

However, Code Sec. 6015(g)(2) provides an exception to this general rule. Under that section, determinations made in a final court decision in any prior proceeding for the same tax period are conclusive, except with respect to the spouse's qualification for relief under the innocent spouse election or the separate liability election or a request for equitable relief, if that relief wasn't an issue in the prior proceeding. But the exception in the preceding sentence won't apply if the court determines that the spouse participated meaningfully in the prior proceeding.
Res judicata bars suit. The Tax Court observed that four conditions must be met to preclude relitigation of a claim under the doctrine of res judicata:

(1) the parties in each action must be identical (or at least be in privity);

(2) a court of competent jurisdiction must have rendered the first judgment;

(3) the prior action must have resulted in a final judgment on the merits; and

(4) the same cause of action or claim must be involved in both suits.

The Court found that those four conditions were met in this case:

(1) In the deficiency case, Mr. Koprowski was a petitioner, and IRS was the respondent. In the current case, Mr. Koprowski was again the petitioner, and IRS was again the respondent. Thus, the parties are identical.

(2) In the deficiency case the Koprowskis filed their deficiency suit in the only court authorized under Code Sec. 6213(a) to hear such suits—i.e, the Tax Court. Clearly the Tax Court had jurisdiction in the prior case.

(3) The deficiency case concluded with the entry of a decision by the Court on Nov. 9, 2009, pursuant to the stipulation of the parties. That decision was a final judgment on the merits of the Koprowskis' 2006 joint and several liability.

(4) In the current case Mr. Koprowski sought innocent spouse relief from the very liability—i.e., the 2006 joint income tax liability—as to which the Court in the deficiency case determined that he was jointly and severally liable. The claims were thus identical.

Since these four condition were met, res judicata barred relitigation of Mr. Koprowski claim, absent some exception to its application.
Mr. Koprowski argued that res judicata does not arise from a small case under Code Sec. 7463. The Court rejected this argument because Code Sec. 7463(b) provides that a decision entered in a small tax case proceeding may not be reviewed in any other court.

No help from Code Sec. 6015(g)(2). Under Code Sec. 6015(g)(2), an innocent spouse claimant can sometimes overcome res judicata, if the claimant can meet two conditions. He must show (1) that his innocent spouse claim was not an issue in the prior proceeding and (2) that he did not participate meaningfully in the prior proceeding.
The Tax Court found that he did not meet either condition. His innocent spouse claim was explicitly put at issue in the prior proceeding by the Koprowskis. This alone prevented Code Sec. 6015(g)(2) from overcoming res judicata. Even if he had not explicitly raised innocent spouse relief in the prior proceeding, he meaningfully participated in the deficiency case. This, too, prevented Code Sec. 6015(g)(2) from allowing his case to move forward.

Administration's Proposed New Tax on Family Trusts.

Each 90 years, trusts will pay the new 45 percent estate tax.  The tax is on the value of its assets.   Trust funded before this law is passed are exempt. You need to move fast.

The Administration hasissued a 200-page report with new tax laws including this law. While many new loopholes and tax breaks are included, estate planners must work quickly to rescue their clients.  

This law is effective for every trust funded at the date of enactment.

Wednesday, February 8, 2012

Treasury, IRS Issue Proposed Regulations for FATCA Implementation

WASHINGTON — The Treasury Department and the Internal Revenue Service today issued proposed regulations for the next major phase of implementing the Foreign Account Tax Compliance Act (FATCA).

Enacted by Congress in 2010, the law targets non-compliance by U.S. taxpayers using foreign accounts.

The regulations lay out a step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents.

“FATCA strengthens U.S. efforts to combat offshore noncompliance. In doing so, we understand it creates a significant undertaking for financial institutions." said IRS Commissioner Doug Shulman. "Today's proposed regulations reflect our commitment to take into account the implementation challenges of affected financial institutions while allowing for a smooth and timely roll-out of the law."

The proposed regulations implement FATCA’s obligations in stages to minimize burdens and costs consistent with achieving the statute’s compliance objectives. The rules and implementation schedule are also adjusted to allow time for resolving local law limitations to which some FFIs may be subject.

FATCA was enacted in 2010 by Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires FFIs to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

In order to avoid being withheld upon under FATCA, a participating FFI will have to enter into an agreement with the IRS to:

  • Identify U.S. accounts,
  • Report certain information to the IRS regarding U.S. accounts,
  • Verify its compliance with its obligations pursuant to the agreement, and
  • Ensure that a 30-percent tax on certain payments of U.S. source income is withheld when paid to non-participating FFIs and account holders who are unwilling to provide the required information.

Registration will take place through an online system which will become available by Jan. 1, 2013. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.

Treasury and IRS will continue to work closely with businesses and foreign governments to implement FATCA effectively. Updates and further information on FATCA can be found by visiting the FATCA page on this website.

Written or electronic comments must be received by April 30, 2012. Requests to speak and outlines of topics to be discussed at the public hearing scheduled for May 15, 2012, at 10 a.m. must be received by May 1, 2012.

The Tresury and European Governments Agree to Pursue Framework for Implementing FATCA

The Treasury Department has reached an agreement with the governments of France, Germany, Italy, Spain, and the United Kingdom for designing a framework to implement the information reporting and withholding provisions by foreign financial institutions under the Foreign Account Tax Compliance Act (FATCA).

According to Treasury's news release, the governments expressed their “mutual intent to pursue a government-to-government framework for implementing FATCA—an important step toward addressing legal impediments to financial institutions' ability to comply with the regulations.”

The news release and joint statement were issued in conjunction with Internal Revenue Service proposed regulations (REG-121647-10) related to information reporting and withholding provisions by foreign financial institutions.

Monday, February 6, 2012


In litigation, the work-product doctrine and the attorney-client privilege protect materials and communications from discovery by an adversary in litigation. The work-product doctrine excludes from discovery materials prepared in anticipation of litigation because discovery of such materials would hamper the orderly prosecution and defense of legal claims in adversary proceedings.

The attorney-client privilege extends to communication between a taxpayer and a “federally authorized tax practitioner” with respect to tax advice, to the extent the communication would be privileged if it were between a taxpayer and an attorney. 

Many tax penalties will not apply if the taxpayer had reasonable cause for its tax position. At times, reliance on the advice of counsel in adopting a tax position constitutes reasonable cause.
The reliance on counsel defense has saved many a taxpayer from penalties. It is unknown if the taxpayer in this case knew that by using that defense it would be forfeiting the above evidence protections – perhaps the benefits of the defense outweighed the negatives relating to the disclosure of the subject items and thus was intentional.

Just a reminder to litigating taxpayers that a reliance on counsel “reasonable cause” defense may result in a waiver of protections otherwise available under the work-product doctrine and the attorney-client privilege.

(See Rubin's comment regarding SALEM FINANCIAL, INC v. U.S., 109 AFTR 2d 2012-XXXX, (Ct Fed Cl 01/18/2012)).

How will the IRS find out? Perhaps Whistlebolower?

Internal Revenue Service Whistleblower Office Director Stephen Whitlock told practitioners that the number of claims on which IRS is paying awards has grown dramatically in his five years in the office, and is likely to keep on growing.

The IRS Whistleblower Office has received 3,500 submissions since the beginning of fiscal year 2011, with approximately 115 awards paid out to individuals who provided information that resulted in the collection of taxes, interest, or penalties from a noncompliant taxpayer.

About 10 percent of the total 350,000 claims IRS has received in the last 15 months resulted in awards of $2 million or more.

For more on the Whistleblower Office or its Director Stephen Whitlock go to:,,id=167542,00.html

Friday, February 3, 2012

Denmark Urges Agreement on EU Savings Tax Changes to Get FATCA Deal With U.S.

EUROPOLITICS BRUSSELS—Denmark urged European Union member states to promptly resolve differences over proposals to revise the EU Savings Tax directive as a way to bridge differences with the U.S. Treasury Department over compliance with the Foreign Account Tax Compliance Act (FATCA).

As the current holder of the EU presidency, Denmark stated at a special meeting of EU member state officials that the United States has expressed a willingness to agree to a “government to government” solution on complying with FATCA, instead of having EU financial institutions provide the required information.

FATCA, which will enter into force on 1 January 2013 (certain implementing arrangements have nevertheless been postponed to 2014 and 2015), will impose full transparency obligations on European financial institutions with respect to deposits and assets held by all persons obliged to file returns with the US tax administration. Financial penalties will be imposed on banks that fail to play by the rules.

“It is urgent to work out a solution with the United States on the many problems the FATCA will cause for European financial institutions,” particularly in terms of administrative overload, writes Copenhagen.

The EU has already started negotiations with Washington. In this context, it is trying to convince the United States to be more flexible by playing on the “broad similarity” of aims between the FATCA and EU legislation on savings taxation – combating tax evasion – and ways of achieving them.

However, “the American authorities responded that the scope of the existing savings taxation directive is more limited than the FATCA’s scope,” writes Copenhagen. “So it is clear that early agreement on its extension would considerably help us obtain satisfying results in discussions with the United States.”

Stay tuned as the World works out its tax transparency issues!

Swiss Bank Wegelin Indicted for Hiding $1.2 Billion From IRS

Wegelin & Co., the oldest Swiss bank, was indicted Feb. 2 for conspiring with U.S. taxpayers to hide more than $1.2 billion in secret accounts from the Internal Revenue Service, the Justice Department announced in unsealing the grand jury indictment from a federal court in Manhattan (United States v. Wegelin,S.D.N.Y., No. 81 12 Cr. 02 (JSR), indictment 2/2/12).

Seizing more than $16 million from Wegelin's bank account in the United States under civil forfeiture laws, DOJ said Wegelin had been charged in the U.S. District Court for the Southern District of New York with participating in a conspiracy with three client advisors who have already been charged.

Although Wegelin has no banks in the U.S., it is accused of using a UBS AG account to carry out the conspiracy, which involved opening and servicing dozens of undeclared accounts for U.S. taxpayers to capture clients who were fleeing UBS after news broke that IRS was investigating that Swiss bank.

According to the indictment, Wegelin told various U.S. taxpayer-clients that their undeclared accounts would not be disclosed to U.S. authorities because the bank had a long tradition of secrecy and that the lack of offices in the United States made the company less vulnerable to U.S. authorities.

Thursday, February 2, 2012

Federal Court Orders Iowa Man and Eight Companies to Pay Employment Taxes

Watts Trucking Service, Inc., and Other Corporations Allegedly Owe Over $30 Million.

A federal court has ordered James Watts and eight corporations to begin paying employment taxes to the United States on a timely basis, the Justice Department announced today. According to the government complaint in the case, Watts, of Bettendorf, Iowa, is the president of Watts Trucking Service, Inc., an Iowa corporation, of which the other seven corporations are subsidiaries. The complaint alleges that the companies fail to pay over to the Internal Revenue Service (IRS) all of their employment and unemployment taxes, including the income and social security taxes withheld from their employees’ wages.

Chief Judge James E. Gritzner of the U.S. District Court for the Southern District of Iowa entered the preliminary injunction order, which requires Watts and the companies to comply with federal employment tax filing, deposit, and payment requirements, and to certify to the government that they have done so.The injunction also prohibits the defendants from closing a waste-handling business and reopening it under a new name without the written consent of the government.

According to the complaint, Watts has formed and controlled at least 23 different business entities over the past two decades, most of which have accrued delinquent tax liabilities.The complaint states that the defendant corporations, along with 15 inactive entities, owe the government over $30 million in federal employment and unemployment taxes.

The preliminary injunction will remain in effect while the case proceeds to final judgment. Violation of an injunction can result in civil and criminal sanctions, including fines and imprisonment.

Wednesday, February 1, 2012

Swiss Turn Over Encrypted Bank Data to U.S. Prosecutors

Three UBS Clients Accused of Hiding Offshore Money From IRS

Bloomberg - Three ex-UBS AG (UBSN) clients, including two who ran venture capital firms, were indicted on charges of hiding millions of dollars in assets from U.S. tax authorities through the use of secret offshore accounts.