Wednesday, March 30, 2022

Texas Couple Who Owes $4M in an FBAR Dispute Offers IRS Different Accounts for Garnishment

According to Law360, a couple will allow the government to garnish a different set of financial accounts in a dispute over whether they owe more than $4 million for failing to report their foreign accounts, according to filings with a Texas federal court. The case is U.S. v. Gerald P. Foox and Carol A. Foox, case number 6:22-cv-00048, in the U.S. District Court for the Eastern District of Texa

Gerald and Carol Foox consent to the government's application for a writ of garnishment over accounts they own or control at six banks, according to the application, filed Friday with the U.S. District Court for the Eastern District of Texas

Writs Were Placed On Three Financial Accounts That
Contain Securities And Stocks That Fluctuate In Value Or
Are The Fooxes' Everyday Accounts. 

The Couple Wishes To Substitute Them
With The Accounts At The Six Banks,
 The Government Said.

The couple has been accused of failing to submit reports of foreign bank and financial accounts they held in Israel, New Zealand and South Africa for tax years 2011 through 2015.

The Fooxes each owe $2.1 million in penalties, penalty assessments and interest as of May, plus late payment penalties, collection costs and interest, the government said.

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TIGTA - IRS Primarily Uses Lien Foreclosures For Principal Residences Which Do Not Provide the Same Legal Protections as the Seizure Process

The Treasury Inspector General for Tax Administration (TIGTA) released its reportThe IRS Primarily Uses Lien Foreclosures When Pursuing Principal Residences, Which Do Not Provide the Same Legal Protections as the Seizure Process.  

The report found that in Fiscal Year 2020, the IRS used lien foreclosure suits more often than seizures when pursing principal residences, which do not provide the same legal protections as seizures. 

  • For seizures, the IRS must comply with the legal provisions set forth in I.R.C. §§ 6330 through 6344, which govern many aspects of the seizure process, including requiring a thorough exploration of collection alternatives before a levy action can be taken and additional Collection Due Process appeal rights. 
  • In contrast, for lien foreclosure suits, I.R.C. § 7403 offers very little discretion for the court to consider anything other than determining the merits of all claims to and liens upon the property. In addition, unlike the sale of real property at a distraint (seizure) sale, the taxpayer has no right to redeem the property after court ordered foreclosure of the Federal tax lien. Therefore, it is important that the IRS pursue a seizure rather than a suit to foreclose, whenever possible, to ensure that taxpayers are afforded all available administrative and legal protections.

Additionally, TIGTA reviewed 96 lien foreclosure cases identified on the IRS’s eApproval system between October 1, 2018, and September 30, 2020, that were in litigation status as of January 12, 2021, and 35 suit recommendations that were in declined status during this same time frame. Revenue officers generally followed procedures and internal controls; however, TIGTA identified some instances in which procedures and internal controls were not followed or were not clear. For example, TIGTA identified instances in which revenue officers were asked to make revisions on suit packages, but improper or untimely actions prevented the IRS from filing suit. TIGTA also identified cases in which suit packages were missing required forms or case actions were not timely.

Finally, while the IRS has developed a system to track lien foreclosure cases internally, once the cases are sent to the Department of Justice for litigation, there is no way to track and measure the outcome or the related costs and revenues collected on lien foreclosure cases.

TIGTA made five recommendations, including recommending that the IRS work with the Department of the Treasury Office of Tax Policy to consider a legislative proposal to amend the law (I.R.C. § 7403) so that taxpayers are afforded the same rights and protections whether the IRS is conducting a Federal tax lien foreclosure or a seizure on their property. Additionally, TIGTA recommended that the IRS make several updates to the Internal Revenue Manual to ensure that Field Collection managers and employees take timely and proper case actions when determining whether to recommend a suit to foreclose on a taxpayer’s property.

The IRS agreed with four of the five recommendations. However, the IRS disagreed with TIGTA’s recommendation to work with the Department of the Treasury to consider a legislative proposal. The IRS’s view is that, while each process has its own advantages and disadvantages, each ensures taxpayers’ rights are protected. TIGTA continues to believe that similar legal protections are needed for both processes.

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Tuesday, March 29, 2022

Proposed FBAR Reporting For Crypto

According to Law360, interests in some foreign accounts holding digital assets such as cryptocurrency would have to be disclosed to the Internal Revenue Service under a proposal put forth Monday by the U.S. Department of the Treasury.

The proposal outlined in Treasury's "Green Book" explanation of tax policies would impose a reporting mandate for foreign digital asset accounts under Internal Revenue Code Section 6038D(b)

The Mandate Would Apply To Taxpayers Who Have
More Than $50,000 In Cryptocurrency,
Financial Accounts And Other Assets Held Overseas.

The proposal would cover any account housing digital assets maintained by a foreign digital asset exchange or asset service provider, and Treasury would be permitted to issue regulations expanding the scope of the accounts, according to the Green Book. The proposal would be effective for returns that have to be filed starting in 2023.

Section 6038D, created by the Foreign Account Tax Compliance Act, already requires reporting from anyone holding an interest in at least one specified foreign financial asset with a total value of at least $50,000, according to the Green Book. Treasury said in the Green Book that mandating people to specifically report offshore holdings of accounts with digital assets, subject to big penalties if they don't, is vital to curbing potential use of digital assets for tax avoidance.

"Tax Compliance And Enforcement With Respect To
Digital Assets Is A Rapidly Growing Problem,"
Treasury Said In The Green Book.

The Green Book also calls for increased reporting from financial institutions and digital asset brokers for purposes of exchanging information with foreign governments. Some financial institutions would have to report the account balance for all accounts housed at U.S. offices and held by foreign individuals, according to the Green Book. 

Furthermore, if adopted and combined with existing law, the proposal would force brokers to report gross proceeds and other required details regarding sales of digital assets with respect to customers and substantial foreign owners in the case of some passive entities, the Green Book said.

That proposal would allow for the automatic exchange of information with other countries and provide Treasury with details on U.S. taxpayers who directly or through passive entities engage in digital asset transactions outside the country, according to the Green Book.

Treasury also wants to allow actively traded digital assets and derivatives or hedges of them to be marked to market if dealers or traders elect to under rules similar to those applying to actively traded commodities, the Green Book said.

The Green Book was released the same day President Joe Biden's administration released its budget proposal, which calls for raising the corporate tax rate to 28% and imposing a minimum tax rate of 20% on taxpayers whose incomes top $100 million.

The digital assets proposals in the Green Book together would raise about $11 billion, according to Treasury. In total, the Biden administration's budget is proposing $2.5 trillion in revenue increases.

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Monday, March 28, 2022

2023 White House Budget Would Hike Taxes On Billionaires & Corporations

According to Law360, Minimum taxes would be imposed on billionaires and wealthy corporations under President Joe Biden's fiscal 2023 budget proposal, released Monday, which he said would ensure the rich pay their fair share of taxes.

Biden's budget proposes to crack down on sophisticated tax planning used by the wealthy to avoid paying federal taxes by imposing a minimum rate of 20% on taxpayers with incomes exceeding $100 million. The budget also proposes raising the corporate tax rate to 28% — reversing the cut that businesses received in the GOP's 2017 tax overhaul law  and curbing the use of tax havens by multinational corporations that attempt to undercut a global minimum tax rate.

Shalanda Young, chief of the Office of Management and Budget, told reporters the budget would reduce the federal budget deficit by $1.3 trillion this year without raising taxes on those earning less than $400,000 annually. 

"The Budget Shows That We Can Grow The Economy From
The Bottom Up And Middle Out And Invest In
American People, And That We Can Do It In A Smart,
Fiscally Responsible Way," Young Said.

The president's annual submission to Congress marks the start of negotiations between the White House and lawmakers to set spending and tax priorities for the federal government beginning this October. Biden signed the fiscal 2022 budget this month after a series of stopgap funding bills that kept the government operating at the previous year's spending levels.

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The IRS updates Form 14457 – Voluntary Disclosure Practice Preclearance Request and Application

The Internal Revenue Service announced on February 15, 2022 that Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, has been revised, including expanding a section on reporting virtual currency. 

Form 14457 permits taxpayers who may face criminal prosecution for willful violation of tax law to voluntarily disclose information to the IRS that they failed to previously disclose. 

Updates and additions to this form include:

  • IRS Criminal Investigation now accepts photocopies, facsimiles and scans of taxpayer signatures. Taxpayers can send this form via eFax to 844-253-5613 to reduce mailing and processing times. Previously, Part II of this form had to be mailed.
  • An expanded section for reporting virtual currency.
  • A penalty structure for employment tax and estate and gift issues.
  • A check-box for inability to pay in full.

The updates reflect input from practitioners and stakeholders and take into account trends in the type of financial asset that taxpayers hold.

“This is an important form and process for people who recognize it’s better to step forward and address their tax situations head-on, before facing IRS enforcement action,” said Doug O'Donnell, Deputy Commissioner Services and Enforcement. “The revised form includes a number of updates, and we encourage people to review the guidelines and consult a trusted tax professional.”

Thousands of taxpayers have used the Voluntary Disclosure Practice since its inception. It serves as a compliance option for taxpayers who have potential criminal exposure and wish to come into compliance with the tax laws. Those making such disclosure are still subject to civil examination and the payment of all applicable taxes, interest and penalties.

Taxpayers who did not commit any tax or tax-related crimes and wish to correct mistakes or file delinquent returns should consider other options available to comply with their tax and reporting obligations. The IRS encourages taxpayers to consult with professional tax or legal advisors in determining which option is the most appropriate.

A taxpayer’s voluntary disclosure must be timely, accurate and complete. The taxpayer must also cooperate with the IRS in determining the correct tax liability, and make full payment of the tax, interest and any applicable penalties.

Cooperation includes full payment of all tax, interest and penalties. A taxpayer who is unable to make full payment may request that the IRS consider other payment arrangements. If a taxpayer anticipates they cannot pay the total amount of tax, interest and penalties required, they must disclose this and submit a proposed payment arrangement and a completed, and executed, Collection Information Statement (Form 433-A). The burden is on the taxpayer to establish inability to pay, to the satisfaction of the IRS, based on full disclosure of all assets and income, domestic and foreign, under the taxpayer’s control.

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CI - Former Defense Contractor Executive Pleads Guilty to Tax Evasion

According to the DoJ, from 2010 through 2019, James M. Robar, of Colorado Springs, Colorado, did not timely file tax returns with the IRS. Beginning in approximately February 2012 James Robar was employed by a U.S. Department of Defense contracting company, eventually serving as its managing director starting in 2015. 

In 2016 And 2017, Robar Evaded Taxes By Having
His Employer Hold His Bonus Payments In An Offshore Corporate Bank Account Rather Than Have Those
Funds Transferred To His Domestic Bank Account.

In 2019, after receiving a $1 million bonus from his employer, Robar purchased two properties at a total cost of slightly more than $1 million, and he titled both properties solely in his spouse’s name. 

In Total, Robar Did Not Report Approximately $5.5 Million
In Compensation He Earned From 2012 Through 2019, Causing A Tax Loss To The Government Of More Than $1.5 Million.

Robar is the second defendant associated with the defense contracting company to plead guilty. Charles Squires pleaded guilty to tax evasion in February 2022.

Robar is scheduled to be sentenced at a later date and faces a maximum penalty of five (5) years in prison. He also faces a period of supervised release, restitution and monetary penalties. 

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IRS Lists Reasons Why Tax Refunds Filed Electronically Take Longer Than 21 Days

Even though the Internal Revenue Service issues most refunds in less than 21 days for taxpayers who filed electronically and chose direct deposit, some refunds may take longer.

Many different factors can affect the timing of a refund after the IRS receives a return. A  manual review may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud.

Other returns can also take longer to process, including when a return needs a correction to the Child Tax Credit or Recovery Rebate Credit amount, includes a claim filed for an Earned Income Tax Credit or an Additional Child Tax Credit, or includes a Form 8379, Injured Spouse Allocation , which could take up to 14 weeks to process.

The fastest way to get a tax refund is by filing electronically and choosing direct deposit. Taxpayers who don’t have a bank account can find out more on how to open an account at an FDIC-Insured bank or the National Credit Union Locator Tool.

The IRS Cautions Taxpayers Not To Rely On Receiving

A Refund By A Certain Date, Especially
When Making Major Purchases Or Paying Bills.

Some returns may require additional review and may take longer. Also, remember to take into consideration the time it takes for a financial institution to post the refund to an account or to receive it by mail.

To check the status of a refund, taxpayers should use the Where’s My Refund? tool on Information for the most current tax year filed is generally available within 24 hours after the IRS acknowledges receipt of a taxpayer’s e-filed return. If they filed a paper return, taxpayers should allow four weeks before checking the status.

The IRS will contact taxpayers by mail when more information is needed to process a return. IRS phone and walk-in representatives can only research the status of a refund if it has been:

  • 21 days or more since it was filed electronically (or since the IRS filing season start date – whichever is later),
  • Six weeks or more since a return was mailed , or when
  • Where's My Refund? tells the taxpayer to contact the IRS.

Before filing a return, taxpayers should make their first stop to find online tools to help get the information they need to file. The tools are easy-to-use and available anytime. Millions of people use them to help file and pay taxes, find information about their accounts, get answers to tax questions and get tips on filing a return.

Taxpayers should review the special instructions to validate an electronically filed 2021 tax return if their 2020 return has not been processed or they used the Non-Filers tool in 2021 to register for an advance Child Tax Credit payment or third Economic Impact Payment in 2021.

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Presence Tests for 2021 Foreign Exclusions Waived for Iraq, 4 Other Countries

In Rev Proc 2022-18, 2022-13 IRB 933, the IRS waived the residency and presence tests applicable for the 2021 Code Sec. 911 foreign earned income and foreign housing cost exclusions with respect to certain U.S. individuals in:

  • Iraq, 
  • Burma (Myanmar), 
  • Chad, 
  • Afghanistan, and 
  • Ethiopia 
due to adverse conditions in those countries.

Code Sec. 911(a) and Code Sec. 911(c)(4) allow a "qualified individual" to exempt from taxation the individual's foreign earned income (up to the exclusion amount of $108,700 for 2021) and the housing cost amount.  

A qualified individual is an individual whose tax home is in a foreign country and who is either: (1) a U.S. citizen (or, in certain situations, U.S. resident alien) who satisfies the IRS that they have been a bona fide resident of one or more foreign countries for an uninterrupted period that includes an entire tax year (bona fide foreign residence test), or (2) a U.S. citizen or resident who, during a period of 12 consecutive months, is present in one or more foreign countries for at least 330 full days (foreign physical presence test). (Code Sec. 911(d)(1))

Under certain circumstances, the time requirements of the foreign residence test and the foreign presence test may be waived. If these requirements are waived, the taxpayer is treated as having met the foreign residence requirement for the period during which they were a bona fide resident of the foreign country, or the taxpayer will be treated as having met the foreign presence requirement for the period during which they were present in the foreign country.

Three conditions must be met for the waiver to apply: (1) the taxpayer must have been a bona fide resident of, or present in, a foreign country for a certain period; (2) before the taxpayer meets the time requirements for the foreign residence test or the foreign presence test, they must leave the foreign country during a period in which IRS determines, after consultation with the State Department, that individuals had to leave the foreign country because of war, civil unrest or similar adverse conditions in that country that prevented the normal conduct of business by those individuals; and (3) the taxpayer must establish to IRS's satisfaction that he could reasonably have been expected to meet the time requirements but for the war, civil unrest or similar adverse conditions. (Code Sec. 911(d)(4))

For 2021, the Treasury secretary, in consultation with the secretary of state, has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in the following countries beginning on the specified date:


Date of Departure On or After


January 19, 2021


March 30, 2021


April 17, 2021


April 27, 202


November 5, 2021

For example, for purposes of Code Sec. 911, an individual who left Iraq on or after January 19, 2021, will be treated as a qualified individual for the period during which that individual was present in, or was a bona fide resident of, Iraq if the individual establishes a reasonable expectation that he or she would have met the requirements of Code Sec. 911(d) but for those conditions.

To qualify for relief under section Code Sec. 911(d)(4), an individual must have established residency, or have been physically present, in the foreign country on or before the date that the Treasury secretary determines that individuals were required to leave the foreign country. Thus, for example, individuals who were first physically present or established residency in Iraq after January 19, 2021, are not eligible to qualify for the exception provided in Code Sec. 911(d)(4) for 2021.

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