Friday, August 30, 2013

Note Held in the US Subject to FBAR Penalty Under 2011 OVDI?

We have a client in the 2011 OVDI program.

He has a note, which is physically in the United States, from a foreign obligor.

The validity of the note is recognized by the IRS (e.g market rate interest, etc.) and the interest on this note is subject to tax, as well as the borrowings to fund this new are being allowed as interest expense on the amended returns.

The Revenue Agent currently has assessed the 25% FBAR penalty on the value of this note held here in the United States.

Factually there's a distinction from other foreign investments, in that the note is physically here in the United States and the taxpayer made no attempt to hide this investment through a foreign bank account or a foreign company. (Maybe a distinction without a difference?)

Any thoughts on the validity subjecting this note, from a foreign obligor, to the 25% FBAR pursuant to the 2011 OVDI program?
 Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243)) begin_of_the_skype_highlighting

Why the IRS is Fed Up with Swiss Bankers!

Working with a Swiss lawyer and others, the US businessman father arranged for over $12 million in the undeclared accounts to be left to his surviving spouse and five of his children, including Seggerman.

As a result of the successful implementation of that plan, and to hide the undeclared funds from the IRS, Seggerman, who, together with three of his siblings, was an executor of his father’s estate, signed a tax return for his father’s estate that falsely under-reported the gross assets of the businessman father’s estate. In particular, the estate tax return fraudulently failed to report over $5 million left to the businessman father’s wife and over $7.5 million to be split among five of his children. 

In addition, the Swiss lawyer thereafter assisted Seggerman’s siblings, including Suzanne Seggerman, Yvonne Seggerman, and Edmund Seggerman, in setting up undeclared Swiss bank accounts to hold the money left to them by their father.

Seggerman assisted his brother in surreptitiously transferring funds from the brother’s Swiss account to a bank account for a foundation controlled by Seggerman, who thereafter filtered the funds to the brother in the United States, labeling the transfer as “loans.”


Manhattan U.S. Attorney Preet Bharara said: “Henry Seggerman and three of his siblings inherited and continued a family tax fraud scheme.  Now, four members of this family stand convicted of tax crimes.  
We will continue to aggressively investigate and prosecute U.S. taxpayers, and those that assist them, in evading their obligations by hiding money in secret offshore accounts.” 

Seggerman, 60, of New York, New York, and Los Angeles, California, pled guilty to one count of conspiracy to defraud the United States, one count of subscribing to a false and fraudulent estate tax return, and one count of aiding and assisting in the preparation of false tax returns for his brother. He faces a total maximum sentence of 11 years in prison 

In addition, Seggerman agreed as part of his guilty plea to make a payment of approximately $600,000 at the time of his sentencing, in partial satisfaction of the ultimate restitution obligation he faces at sentencing. 

Suzanne Seggerman, Yvonne Seggerman, and Edmund Seggerman each previously pled guilty to one count of conspiracy to defraud the United States, and two counts of subscribing to false and fraudulent tax returns. Each faces a maximum sentence of 11 years in prison.

Have Un Reported Income From a Swiss Bank?
Want to get right with the IRS?  
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243


US Attorney's Office


Thursday, August 29, 2013

BVI to comply with US FATCA!

The leader of the British Virgin Islands says the Caribbean territory
has started talks with the US Treasury to comply with a law designed to counter offshore tax evasion.

The tiny islands are one of the world’s top offshore trust jurisdictions and the incorporated registry for hundreds of thousands of companies. Premier Orlando Smith said August 20, 2013 that the territory is negotiating an intergovernmental agreement with the US to comply with the US Foreign Account Tax Compliance Act.

Smith says the islands are “not being forced or coerced” into finalizing a pact under the US law that will take effect next year.

Smith said the islands’ crucial financial services industry has been consulted and agrees with the move.

“We are of the very considered opinion that this course is the best one to adopt for the BVI,” Smith said at a press briefing on the main island of Tortola.

The Cayman Islands announced last week that it had reached agreement with the US to provide information on accounts held by US citizens under the same law.   

Do Have Un-Reported Income From an Offshore Bank?
Secret Foreign Investments Keeping You Awake at Night? 
Want to get right with the IRS?
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact US at or
or Toll Free at 888-8TaxAid (888 882-9243).




Swiss Banks Agree to Plan to End Past US Tax Evasion Issues!

Swiss banks are ready to pay hefty fines for sheltering United States tax fugitives under the terms of a new deal given the green light by the Swiss government on Wednesday.
While official details will not be concluded until the US signs the agreement, both the cabinet and the Swiss Bankers Association (SBA) said the deal should finally settle past misdemeanors to the satisfaction of all parties without breaking Swiss law.

“The signing of the joint statement should enable Swiss banks to resolve the tax dispute with the United States,” the government said in a short statement.

The SBA hailed the agreement as the “final step towards a solution”, adding that “the protection of employees [threatened with criminal prosecution in the US] can now be afforded to the best possible extent.”

The agreement between the Swiss government and banks sidesteps the need for parliamentary approval, a crucial point given the rejection by both houses of parliament in June of the so-called Lex USA deal that promised to find an earlier solution.

According to the US Justice Department, the total penalties expected to be levied against banks under the agreement will amount to hundreds of millions and possible over a billion dollars.

According to the Swiss newspaper Tages-Anzeiger and a journalists' conference call with a senior US Justice Department official, banks will pay fines of between 20% and 50% of the assets they helped clients hide from the US tax authorities under the agreement.

Penalties will increase for accounts opened after 2009, when the bank UBS reached a $780 million prosecution agreement with the US for having assisted tax evaders.

The deal will mainly affect around 100 banks that are under suspicion, but not investigation, by the US Department of Justice, several media outlets reported.

However, the handful of banks (around 14) currently under active investigation by US authorities will not be eligible for the deal. Those banks had been authorised by the Swiss government last year to hand over details of their US business activities to the US authorities, including names of employees.
While this may be the end for Swiss Banks & Swiss Bankers; it is only just begun for their US Depositors! 

Have Un Reported Income From a Swiss Bank?

Want to get right with the IRS?  

Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243) 

Swiss Federal Council

Wednesday, August 28, 2013

U.S. Turns Up The Pressure On Swiss Banks!

Thousands of Swiss bank workers have seen their data handed over to justice authorities in the United States and are now living with a considerable amount of uncertainty.
Two years ago the US Department of Justice (DOJ) started investigating about ten Swiss banks suspected of helping thousands of wealthy Americans illegally evade taxes.
The DOJ demanded that Swiss banks supply it with all the data of controversial transactions, including the names of employees who dealt with clients subject to US tax laws and lists of American clients who have moved assets out of their accounts to another bank (Leavers Lists). 
The Swiss Banks - US Tax Time Line: 
  • 2009: Switzerland’s biggest bank UBS agrees to turn over more than 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.
  • July 2011: The second-biggest bank, Credit Suisse, comes under criminal investigation by US. The bank later makes a provision for a potential fine of CHF295 million.
  • February 2012: US justice department indicts Wegelin, Switzerland's oldest private bank, on charges that it enabled wealthy Americans to evade taxes on at least $1.2 billion hidden in offshore accounts.
  • June 2012: US treasury department reaches a tentative agreement with Switzerland to help banks comply with US tax evasion regulations.
  • June 2012: Bank Julius Baer hands 2,500 employee names to US authorities in a bid to free itself from the tax probe, according to lawyers.
  • August 2012: Global bank HSBC hands over details of current and former employees to the US authorities.
  • November 2012: Private bank Pictet confirms it is also under investigation by the US.
  • December 2012: Two bankers and one former employee of the Z├╝rcher Kantonalbank charged by US, accused of helping US clients avoid taxes.
  • January 2013: Wegelin private bank shuts its doors, following a guilty plea to charges of helping wealthy Americans evade taxes through secret accounts. It agrees to pay nearly $58 million in fines on top of $16.3 million in forfeitures already obtained by the authorities.
  • May 2013: Swiss government presents bill to parliament that would let Swiss banks hand over internal information to US to avoid threatened criminal charges – though the banks still face fines likely to total billions of dollars.The bill aims to save the banks from heavier punishment in the United States for helping wealthy tax cheats, by sidestepping its secrecy laws to let bankers disclose data to US prosecutors.
  • June 2013: Parliament rejects the so-called Lex USA bill, telling the government to make the decision.
  • July 3, 2013: The government announces a new data transfer framework for banks. Finance Minister Eveline Widmer-Schlumpf presents a “plan B”, under which banks which cooperated with the United States authorities would be deemed not to have violated Article 271 of the penal code, which forbids collaboration with foreign authorities.
The uncertainty felt by bank workers certainly didn’t ease after the Swiss parliament’s rejection in June of the “Lex USA”, a deal the Swiss cabinet hoped would fix the legal conditions for handing over data and solve the tax evasion dispute between the two countries.

At the beginning of July, Finance Minister Eveline Widmer-Schlumpf presented a “plan B”, under which the cabinet agreed to give banks special permission to cooperate with the United States authorities, paving the way for financial institutions to share data in a bid to avoid criminal charges for allegedly helping tax dodgers.
It seems that Swiss banks blacklisted by the US Department of Justice would be barred from making dollar payments via New York or London clearing accounts, effectively destroying their international business; so non compliance with US authorities in Not an Option. 
With many Swiss banks under U.S. investigation for helping American clients dodge taxes, roughly a Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank; the government is anxious to secure an agreement that satisfies U.S. demands for data to help catch the tax cheats but also wants to preserve at least some elements of its cherished tradition of banking secrecy, which has long been a key part of the Alpine nation's allure for depositors.
dozen banks including
It remains to be seen how the United States will react to "plan B".

UBS, Switzerland's biggest bank, has said it could see client money outflows of 12 billion Swiss francs ($13 billion) in Europe as a result of a crackdown on tax evasion there, while rival Credit Suisse said clients in western Europe could withdraw up to $37 billion in the next few years.

The sector is unsure how much an eventual settlement with the United States will cost them, but total fines are likely to run into billions of dollars.

In the meantime, up to 100 others of Switzerland's 300 or so banks are suspected of having tax evaders among their clients. They have no clear guidance on what data they will need to send.
Have Un Reported Income From a Swiss Bank?

Want to get right with the IRS?
Contact the Tax Lawyers at
Marini & Associates, P.A.

for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).



Tuesday, August 27, 2013

Foreign Tax Credit Compliance Tips!

The foreign tax credit laws are complex. 

Below are some quick summaries of the more complex areas of the law long with links to web pages on IRS.GOV with additional helpful resources.
Foreign Sourced Qualified Dividends  
If a taxpayer receives foreign sourced qualified dividends and/or capital gains (including long-term capital gains, unrecaptured section 1250 gain, and/or section 1231 gains) that are taxed in the U.S. at a reduced tax rate, the taxpayer must adjust the foreign source income that is reported on Form 1116, line 1a.  Otherwise, the allowable foreign tax credit may be significantly overstated which can trigger a substantial underpayment penalty.

Interest Expense
Interest expense must be apportioned between U.S. and foreign source income using an asset method.  See Publication 514 for more information on the asset methods.

Other Compliance Issues
  • Charitable contributions are not apportioned against foreign source income.
  • The amount of foreign tax that qualifies is not necessarily the amount of tax withheld by the foreign country. If you are entitled to a reduced rate of foreign tax based on an income tax treaty between the U.S. and a foreign country, only that reduced tax qualifies for the credit. 
  • If a foreign tax redetermination occurs, a redetermination of your US tax liability is required in most situations. You must file a Form 1040X or Form 1120X. Failure to notify the IRS of a foreign tax redetermination can result in a failure to notify penalty.
Need Foreign Tax Credit Advise?

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

for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid ( 888 882-9243 ).
For more details about the topics above, go to:  Foreign Tax Credit Compliance Tips.

Other References
Foreign Tax Credit
What Foreign Taxes Qualify For The Foreign Tax Credit?
Foreign Tax Credit - How to Figure the Credit
Foreign Tax Credit – Special Issues
Foreign Tax Credit - Choosing To Take Credit or Deduction

Things to Consider when "Opting Out" of the Offshore Voluntary Disclosure Program (OVDP)?

1.      Things May Get Better.   According to a report from the Taxpayer Advocate, as of September 29, 2012 the average FBAR  (Foreign Bank Account Report) penalty imposed in the 2009 Offshore Voluntary Disclosure Program (OVDP)  opt-out cases is $15,737. That figure may be misleading because not all of the 2009 opt-out cases have been closed and it seems likely that it is the larger, more difficult ones that are still open. Those opt-outs have a potential to skew the averages higher. Still the Taxpayer Advocate reported that there have been NO criminal tax prosecutions of taxpayers who have opted out.  


2.      Things May Get Worse.  The same report from the Taxpayer Advocate stated that a small number of the opt-out cases accounted for the bulk of the FBAR penalties that were imposed. Moreover, the IRS’ FAQs warn that taxpayers who opt-out may face a “full scope “tax audit of the tax returns will be initiated.  It also warns that if issues are found which were not disclosed previously those issues may be the subject of review by Criminal Investigation. 


3.      The Right to Appeal.  There is no right to appeal within the OVDP. In fact, favorable decisions of revenue agents, and their managers are often reversed by so-called technical advisors. These technical advisors do not interface directly with taxpayers or their tax attorneys, and so it is impossible to negotiate with them.
Once the opt-out decision is made, however, the taxpayer is given the right to appeal a decision to impose FBAR penalties to the IRS Appeals Division. The IRS Appeals Division is a semi-independent portion of the IRS whose stated mission is to “resolve tax controversies on a basis which is fair and impartial to the IRS and the taxpayer.  One of the advantages of the IRS Appeals Division is that the Appeals Officers are permitted to settle a case based upon the “hazards of litigation.” This allows Appeals Officers the flexibility to settle an FBAR case based upon all of the facts, and circumstances, and based upon a percentage of the amount of the potential FBAR penalty.

4.      The IRS Needs the Approval of a Federal District Court Judge to Assess the FBAR Penalty. The IRS has the ability to assess an FBAR penalty without judicial review. However, unlike with a tax deficiency the IRS may not use its administrative powers to file tax liens, or tax levies. Instead it must file suit in federal district court in order to obtain a judgment. 
In the district court the burden of proof is on the IRS to show that the taxpayer willfully, that is intentionally, failed to file an FBAR.  So far the IRS has filed only a handful of such lawsuits.  

To date the lawsuits have involved fairly egregious situations so it is not surprising that the IRS has prevailed.  Whether the IRS will bring lawsuits against taxpayers where the facts are not so clear remains to be seen.  Generally speaking , however, the IRS is averse to losing cases which might set a bad precedent; so it may be a long time before the IRS is willing to even consider bringing all but the strongest of cases.  

However a pair of 2012 federal court decisions have raised the prospect of broadening the definition of willfulness in the failure to file foreign bank and financial account (FBAR) reporting forms. The cases on willful failure to file FBAR disclosure forms—U.S. v. Williams and U.S. v. McBride—look to “willful blindness” to find a knowing failure to file, or a conscious effort to turn a blind eye. 
With their emphasis on the preponderance of the evidence, the cases also suggest that willfulness can be found on grounds beyond whether the taxpayer had “checked the box” on disclosure on a tax return, the panelists said. Factors can pile up, with some clients, it can add up to willful failure.  

Where do they do their banking? Where do they receive their statements? Why does someone travel to Switzerland? Was it the skiing? Or was it the secrecy environment?” 

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.

5.      Every Situation is Different. The IRS itself admits in FAQ 51 that in some cases an opt out election is the “preferred approach.” It is only after a complete review of all of the facts by a qualified tax litigator that a decision can be made if an opt-out is the right approach.


Thinking of "Opting Out"?


Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax Consultation Contact US at

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






Taxpayer Advocate


Dennis Brager