Wednesday, January 28, 2015

OVDP Program Open Indefinitely For Taxpayers Hiding Money or Income Offshore!

The Internal Revenue Service today January 28, 2015, said in its news release (IR-2015-09), that avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

"The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen.   

“Taxpayers are best served by coming in voluntarily and getting their taxes and filing
requirements in order.”

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009:

  1. there have been more than 50,000 disclosures and we have collected more than $7 billion from this initiative alone.  
  2. The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. 
  3. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.
The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs.   

Even though the IRS has faced several years of Budget Reductions, the IRS continues to pursue cases in all parts of the  world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.

Through the years, offshore accounts have been used to lure taxpayers into scams and schemes.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

 The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, 
as well as the banks and bankers 
suspected of helping clients hide their assets overseas. 

The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.
Have Un-Reported Income From an Offshore Bank?
Want to Know if the OVDP Program is Right for You?

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Wednesday, January 14, 2015

Taxpayer Advocate Delivers Annual Report to Congress and Cites Offshore Voluntary Disclosure Program Inequities.

National Taxpayer Advocate Nina E. Olson today released her 2014 annual report to Congress, which expresses concern that taxpayers this year are likely to receive the worst levels of taxpayer service since at least 2001 when the IRS implemented its current performance measures.  The report recommends that Congress enact a principles-based Taxpayer Bill of Rights, adopt additional safeguards to make those rights meaningful, and provide sufficient funding to make the “Right to Quality Service” a reality.

In the preface to the report, Olson emphasizes four points:

  • “First, the budget environment of the last five years has brought about a devastating erosion of taxpayer service, harming taxpayers individually and collectively;
  • “Second, the lack of effective administrative and congressional oversight, in conjunction with the failure to pass taxpayer rights legislation, has eroded taxpayer protections enacted 16 or more years ago;
  • “Third, the combined effect of these trends is reshaping U.S. tax administration in ways that are not positive for future tax compliance or for public trust in the fairness of the tax system; and
  • “Fourth, this downward slide can be addressed if Congress makes an investment in the IRS and holds it accountable for how it applies that investment.”

The report says the combination of the IRS’s increasing workload, the erosion of public trust occasioned by the IRS’s use of “tea party” and similar terms in screening applicants for tax-exempt status, and the sharp reduction in funding have created a “perfect storm” of trouble for tax administration and therefore for taxpayers.  “Taxpayers who need help are not getting it, and tax compliance is likely to suffer over the longer term if these problems are not quickly and decisively addressed,” Olson wrote.

The report also urges Congress to enact comprehensive tax reform, pointing out that simplification would ease burdens on taxpayers and the IRS alike.


The report describes the decline in taxpayer service in detail and attributes the decline to a combination of more work and reduced resources for the IRS.

Scope of Taxpayer Service Needs.  Nearly 200 million Americans interact with the IRS each year, more than three times as many as any other federal agency.  (Individuals file nearly 150 million returns, including about 50 million joint returns.)  Because of the complexity of the tax code, large numbers of taxpayers turn to the IRS for assistance.  The IRS typically receives more than 100 million telephone calls, 10 million letters, and 5 million visits at its walk-in sites from taxpayers each year.

Decline in Taxpayer Service Levels.  IRS taxpayer service reached its high-water mark in fiscal year (FY) 2004.  In that period, the IRS answered 87% of calls from taxpayers seeking to speak with an assistor, and hold times averaged 2.5 minutes.  The IRS also responded to a wide range of tax-law questions, both on its toll-free lines and in its roughly 400 walk-in sites, prepared nearly 500,000 tax returns for taxpayers who requested help (particularly low income, elderly, and disabled taxpayers), and maintained a robust outreach and education program that touched an estimated 72 million taxpayers.

By comparison, the IRS’s diminished service expectations for FY 2015 are as follows:

  • The IRS is unlikely to answer even half the telephone calls it receives, and levels of service may average as low as 43%.
  • Taxpayers who manage to get through are expected to wait on hold for 30 minutes on average and considerably longer at peak times.
  • The IRS will answer far fewer tax-law questions than in past years.  During the upcoming filing season, it will not answer any tax-law questions except “basic” ones.  After the filing season, it will not answer any tax-law questions at all, leaving the roughly 15 million taxpayers who file later in the year unable to get answers to their questions by calling or visiting IRS offices.
  • Tax return preparation assistance has been eliminated.

More Work, Reduced Resources.  On the workload side, the IRS is receiving 11% more returns from individuals, 18% more returns from business entities, and 70% more telephone calls (through FY 2013) than a decade ago.  During the upcoming filing season, implementation of the Patient Protection and Affordable Care Act and the Foreign Account Tax Compliance Act are both expected to add considerable new work.

On the resources side, the IRS’s budget has been reduced by about 17% in inflation-adjusted terms just since FY 2010.  As a consequence, the IRS has already reduced its workforce by nearly 12,000 employees and projects further reductions will be needed during FY 2015.  In addition, the IRS has reduced the amount it spends on employee training since FY 2010 by 83%.  These cutbacks leave the IRS with a shrinking workforce whose employees are less equipped to do their jobs.

“Like any agency, the IRS can operate more effectively and efficiently in certain areas,” Olson wrote.  “However, we do not see any substitute for sufficient personnel if high-quality taxpayer service is to be provided.  The only way the IRS can assist the tens of millions of taxpayers seeking to speak with an IRS employee is to have enough employees to answer their calls.  The only way the IRS can timely process millions of taxpayer letters is to have enough employees to read the letters and act on them.  And the only way the IRS can meet the needs of the millions of taxpayers who visit its walk-in sites is to have enough employees to staff them.”

Olson urged Congress and the IRS to work together to ensure that taxpayer needs are met.  “We do not think it is acceptable for the government to tell millions of taxpayers who seek help each year, in essence, ‘We’re sorry.  You’re on your own,’” the report says.


Since 2007, the National Taxpayer Advocate has been recommending that Congress enact a Taxpayer Bill of Rights, a list of 10 rights based on principles and modeled on the U.S. Constitution’s Bill of Rights.  In 2013, the House passed legislation to implement this recommendation, but the Senate did not act.  In 2014, the IRS adopted the Taxpayer Bill of Rights administratively, a step Olson praised.  However, Olson continues to recommend that Congress enact the provisions by statute to assure taxpayers that the rights will become “a permanent part of our tax system.”

“Taxpayer rights are central to voluntary compliance,” the report says.  “If taxpayers believe they are being treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the system and be less likely to comply of their own volition.  By contrast, taxpayers will be more likely to comply if they have confidence in the fairness and integrity of the system.”

Noting that the principle-based rights are “only as effective as the specific statutory rights that give [them] effect,” the report recommends that Congress enact specific taxpayer rights that the Advocate has proposed in this and prior-year reports and that relate to each of the 10 conceptual rights.  Almost every issue discussed in the Advocate’s report identifies one or more of the rights in the Taxpayer Bill of Rights that the IRS can do a better job of protecting.

In the “Most Serious Problems” section, the report focuses on specific rights provided to taxpayers by the IRS Restructuring and Reform Act of 1998 (RRA 98) and describes how the IRS, for a variety of reasons, is not respecting some of the protections Congress established in that Act.  The report also notes that Congress passed taxpayer rights legislation in 1988, 1996, and 1998 but has not passed any significant taxpayer rights legislation in the last 16 years.

“The National Taxpayer Advocate believes the time is right for taxpayer rights legislation,” the report says.  “The passage of time has shown where new protections are needed.  Without providing these specific taxpayer protections, the [Taxpayer Bill of Rights] becomes merely a statement of principles, without any teeth to ensure that these fundamental rights are protected on a daily basis, and that taxpayers have remedies and the IRS is held accountable for any violations of these rights.”

The report says that funding and oversight are essential to protect taxpayer rights.  Noting that the “Right to Quality Service” and other rights can only be honored if the IRS has enough resources, the report says “[t]he IRS will be severely hampered in its ability to implement new policies, procedures, and systems for protecting taxpayer rights if it does not receive adequate funding.”

With regard to congressional oversight, the report says RRA 98 required Congress to hold joint hearings to review, among other things, the IRS’s progress in meeting its objectives and improving taxpayer service and compliance.  Each hearing was conducted by majority and minority members of the House Committees on Ways and Means, Appropriations, and Oversight and Government Reform and the Senate Committees on Finance, Appropriations, and Homeland Security and Governmental Affairs.  The report recommends these hearings be revived to identify and address problem areas, with emphasis on how the IRS is meeting the needs of particular groups of taxpayers, including individuals, small businesses, and exempt organizations, and how it is protecting taxpayer rights for all.

The report suggests that regular congressional oversight hearings on the “nuts and bolts” of tax administration would go a long way toward educating Members of Congress about the important work of the IRS including its successes and challenges, foster a shared sense of purpose in tackling the challenges, and allow Members to see more closely how funding levels and performance levels interrelate.

“The IRS will never be a beloved federal agency, because it is the face of the government’s power to tax and collect,” Olson wrote.  “But it should be a respected agency.  When there are accusations of bias or heavy-handed actions by the tax agency, these reinforce the already deep concerns the U.S. taxpayer bears toward taxes, such as concerns going back to the nation’s founding.”

“But casting the entire agency and all its employees as an out-of-control agency in response to the actions of a few, no matter how deplorable those actions may be, is harmful to taxpayers and tax compliance.  We need to recognize that the IRS and its employees play a vital role in the economic welfare of this country.  And we need to find a way to support the agency even as we hold it accountable for what is often a thankless task.”


Federal law requires the Annual Report to Congress to identify at least 20 of the “most serious problems” encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems.  Overall, this year’s report identifies 23 problems, makes dozens of recommendations for administrative change, makes 19 recommendations for legislative change, and analyzes the 10 tax issues most frequently litigated in the federal courts.

Among the “most serious problems" addressed are the following:

Lack of Clear Rationale for Taxpayer Service Resource Allocation Decisions. The National Taxpayer Advocate is concerned that the IRS does not have a rigorous methodology for making the difficult resource-allocation decisions required by today’s tight budget environment.  A recent report by the Treasury Inspector General for Tax Administration also reached this conclusion.  In response to these concerns, the IRS’s Wage & Investment Division (W&I) is collaborating with the Taxpayer Advocate Service (TAS) on the development of a ranking methodology for the major taxpayer service activities.  Its purpose is to balance cost savings the IRS can achieve by automating service delivery options against the needs of taxpayers for personal service.  Considerable progress has been made, but it is not clear whether the IRS will devote the short-term resources required to determine how it can better allocate its limited resources over the long term.  The report recommends that W&I continue to work with TAS to develop the best ranking methodology possible.

Lack of a Functional IRS Presence in Many Areas.  The report assesses the impact of the IRS’s shift from a geographic-based structure to a centralized structure organized by taxpayer segments, as directed by RRA 98.  While centralization has benefits, the report says local functional presence is also important.  The report says the attributes and needs of populations that are geographically clustered in certain regions are often neglected under the current structure.  To illustrate the IRS’s shrinking geographic footprint, the report provides staffing data that shows sharp declines in key IRS functional personnel in the state of Wyoming (as an example of a low-volume region) and in the New York City borough of Manhattan (as an example of a high-volume region), while staffing at a centralized IRS campus has increased considerably since FY 2001.  The report also points out that the IRS now has no outreach staff dedicated to small business and self-employed taxpayers in 13 states and no Appeals or Settlement Officers present in 12 states, which makes the ability to obtain local assistance or Appeals hearings challenging for taxpayers.

Potential Patient Protection and Affordable Care Act (ACA) Burdens.  The report credits the IRS with making “tremendous progress” in implementing provisions of the ACA within its jurisdiction.  However, the report points out that the IRS is “downstream” of many of the reporting processes required by the law, because it receives new information returns from exchanges through the hub maintained by the Department of Health and Human Services.  Therefore, problems may arise over which the IRS has no control.  The report describes continuing challenges the IRS faces in implementing the law, including the processing of returns reconciling Advanced Premium Tax Credits, and makes recommendations in several areas.

Offshore Voluntary Disclosure (OVD) Program Inequities.  The report describes the evolution of the OVD program and the disproportionate penalties it says were often imposed, particularly with respect to unrepresented taxpayers.  The IRS changed the streamlined program in 2014 in ways that allow many taxpayers to pay lower penalties.  However, the new rules do not allow taxpayers who already had entered into closing agreements with the IRS at higher penalty rates to amend those agreements.  Therefore, taxpayers who are the most deserving of leniency because they were the first to acknowledge they had failed to comply with foreign account reporting requirements ultimately are paying substantially greater penalties than taxpayers who waited until later to acknowledge their noncompliance.  Among other things, the report recommends that the IRS revisit this decision.

Absence of Studies to Determine Whether Existing Penalties Promote Voluntary Compliance.  The number of provisions in the Internal Revenue Code that either authorize or require the IRS to impose penalties has ballooned from 14 in 1955 to over 170 today.  More than 20 years ago, Congress recommended that the IRS “develop better information concerning the administration and effects of penalties” to ensure they promote voluntary compliance.  The IRS Office of Service-wide Penalties (OSP) is, according to the report, “an office of six analysts buried three levels below the Small Business/Self-Employed Division Commissioner [that] cites insufficient resources, insufficient staffing, employees with the wrong skillsets, and a lack of access to penalty-related data as barriers to conducting penalty research.”  In light of the large number of penalty provisions in the tax code, the large number of taxpayers against whom penalties are imposed, and the significant amount of some penalties, the report recommends that the IRS ensure the OSP has sufficient resources and support to conduct and publish appropriate studies.

New TAS Research Studies. Volume 2 of the report contains three new research studies, including an important study on the needs of low income taxpayers.  The Advocate’s office commissioned a survey of more than 1,100 low income individuals to better understand their circumstances and service needs, particularly in relation to Low Income Taxpayer Clinics but also more generally.  The survey findings show that technology use varied across incomes, education levels, and age groups.  The survey found that some groups of taxpayers are less likely to utilize technology than others, which suggests that reductions in telephone and walk-in services will affect those taxpayers disproportionately.

The findings also suggest that low income taxpayers are more vulnerable and more likely than the population at large to be taken advantage of by unskilled or unscrupulous tax return preparers.  More than 15% of those relying on a preparer said they either did not receive a copy of their return or the preparer did not sign the return.  Put differently, for nearly one in six low income taxpayers who used preparers, the preparers did not follow the basic statutory requirements established for commercial tax return preparation.

Go to for more information about this report, including an Executive Summary and downloadable graphics about features from the report.

Have A Tax Problem?

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

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

Monday, January 12, 2015

IRS Launches International Data Exchange Service

The Internal Revenue Service announced in IR-2015-01 the opening of the International Data Exchange Service (IDES) for enrollment.  

Financial institutions and host country tax authorities will use IDES to securely send their information reports on financial accounts held by U.S. persons to the IRS under the Foreign Account Tax Compliance Act (FATCA) or pursuant to the terms of an intergovernmental agreement (IGA), as applicable.
  • More than 145,000 financial institutions have registered through the IRS FATCA Registration System.  
  • The U.S. has more than 110 IGAs, either signed or agreed in substance. Financial institutions and host country tax authorities will use IDES to provide the IRS information reports on financial accounts held by U.S. persons.
“The opening of the International Data Exchange Service is a milestone in the implementation of FATCA,” said IRS Commissioner John Koskinen. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system.”
Where a jurisdiction has a reciprocal IGA and the jurisdiction has the necessary safeguards and infrastructure in place, the IRS will also use IDES to provide similar information to the host country tax authority on accounts in U.S. financial institutions held by the jurisdiction’s residents.
Using IDES, a web application, the sender encrypts the data and IDES encrypts the transmission pathway to protect data transfers. Encryption at both the file and transmission level safeguards sensitive tax information.
Host country tax authorities in Model 2 IGA jurisdictions and financial institutions are encouraged to begin the enrollment process well in advance of their reporting deadline. To begin transmitting information in IDES, a financial institution or tax authority will need to first obtain a digital certificate. Digital certificates bind digital information to physical identities and provide data integrity. IDES stores each user’s public key and related digital certificate. All IDES enrollees (including host country tax authorities) must obtain a proper digital certificate in order to enroll; there is a list of approved Certificate Authorities available on

For host country tax authorities in Model 1 IGA jurisdictions, the IRS will directly notify them to let them know when it is time to enroll. Financial institutions will initiate enrollment online on their own; in order to enroll, the financial institution will need to have registered as a participating financial institution through the IRS FATCA Registration System and have a global intermediary identification number (GIIN) that appears on the IRS FATCA FFI list. The online address for IDES enrollment can be found here. IDES runs on all major browsers, including Chrome, Internet Explorer, Safari, and Firefox and will support application-to-application exchanges through the SFTP transmission protocol enabling a wide variety of users to interact with IDES without building additional infrastructure to support transmission.
  • Further information on IDES can be found here.  
  • The IDES User Guide with instructions for enrolling and using the IDES can be found here
  • The IRS has posted Frequently Asked Questions about FATCA and IDES on and will continue to update the FAQs as questions are received. 
  • In addition, there is a comments link on to submit questions specifically on IDES and another for other FATCA-related questions.

Have A Tax Problem?

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Wednesday, January 7, 2015

Tax Season Opens As Planned Following Extenders Legislation

ollowing the passage of the extenders legislation, the Internal Revenue Service announced it anticipates opening the 2015 filing season as scheduled in January.

The IRS will begin accepting tax returns electronically on Jan. 20. Paper tax returns will begin processing at the same time.

The decision follows Congress renewing a number of "extender" provisions of the tax law that expired at the end of 2013. These provisions were renewed by Congress through the end of 2014. The final legislation was signed into law Dec 19, 2014. See our post entitled Two Weeks To Benefit from the Recently Passed Tax Extenders Bill!

"We have reviewed the late tax law changes and determined there was nothing preventing us from continuing our updating and testing of our systems," said IRS Commissioner John Koskinen. "Our employees will continue an aggressive schedule of testing and preparation of our systems during the next month to complete the final stages needed for the 2015 tax season."

The IRS reminds taxpayers that filing electronically is the most accurate way to file a tax return and the fastest way to get a refund. There is no advantage to people filing tax returns on paper in early January instead of waiting for e-file to begin.

  • Important Note for Business Filers: The IRS will begin accepting Business tax returns on January 9, 2015.
  • For information on draft Tax Forms access the following link. 2015 Draft Tax Forms

Have A Tax Problem?

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

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

Monday, January 5, 2015

Tax Cases To Watch In 2015?

According to Law360 -- The U.S. Supreme Court is poised to decide three weighty tax cases in 2015 that could implicate:
  • How states assess income taxes,
  • Whether taxpayers can challenge state tax reporting requirements in federal court, 
  • How discrimination is defined in federal tax statutes,
  • As well as a high-profile transfer pricing case and 
  • 2 economic substance cases.

Here are some of the cases Tax Attorneys, Tax Accountants & CPA's should be following:
  1. Comptroller of Maryland v. Wynne - In 2015, the U.S. Supreme Court is set to decide the constitutionality of a Maryland law that allows residents with out-of-state income to offset their state income taxes but doesn’t apply to county taxes, in a case that could significantly narrow states' taxing authority if the high court squashes Maryland's current regime.
  2. Direct Marketing Association v. Brohl -So-called Amazon taxes have sparked litigation across the country, and in Direct Marketing Association v. Brohl the question before the Supreme Court is whether aspects of Colorado's tax law are protected from challenges in federal court. A ruling in favor of Colorado could make it nearly impossible for businesses to challenge state tax administration practices in federal court and get answers that apply uniformly across jurisdictions.
  3. Alabama Department of Revenue v. CSX Transportation Inc. - The federal Railroad Revitalization and Regulatory Reform Act is a highly specific piece of law meant to shield the rail industry from discriminatory sales and use taxes, but an upcoming Supreme Court ruling in a dispute between CSX Corp. and the Alabama Department of Revenue could determine how courts generally define discrimination in tax statutes.
  4. Inc. v. Commissioner of Internal Revenue - Amazon is bitterly locked in a $1.5 billion transfer pricing dispute with the Internal Revenue Service over an arrangement it inked with a European subsidiary, and the outcome of the case, which is sitting in U.S. Tax Court, is being closely watched by multinationals and tax lawyers alike.
  5. Salem Financial v. U.S. and AIG v. U.S. - BB&T Corp. and American International Group Inc. are currently fighting the IRS in two separate cases, denying that transactions they used for foreign tax credits lack economic substance. And tax attorneys are closely watching the litigation, which is pending before federal circuit courts, to see if the IRS will be able to successfully expand its economic substance doctrine.
Have A Tax Problem?

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

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