Tuesday, May 21, 2024

Argentina 1st Country to Have Automatic FATCA Information Exchange

According to Law360the Internal Revenue Service approved cybersecurity measures by Argentina in a step that clears the way for the first automatic information exchange under the Foreign Account Tax Compliance Act between the two countries in September, Argentina's revenue service said on May 20, 2024.

Florencia Misrahi, the Argentina revenue agency's federal administrator, met with banking associations and other organizations in April to prepare them for the upcoming exchanges, the agency said in a news release. Such entities will need to report bank account information, such as U.S. tax identification numbers and account balances, of U.S. citizens holding accounts in Argentina.

The countries reached a FACTA agreement in 2022, Argentina's Federal Administration of Public Income said. FATCA requires foreign financial institutions to report the banking information of U.S. clients as a way to combat tax avoidance and to improve compliance.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

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Toll Free at 888 8TAXAID (888-882-9243)

Monday, May 20, 2024

Husband's "Knowledge" of Wife's Exercise of $100.5 MM in Stock Options Disqualifies Him From Innocent Spouse Relief

According to Law360, the husband of a former president of InfoSpace can be held jointly liable for a nearly $40 million tax debt the IRS asserted against a return they filed for the 2000 tax year, the U.S. Tax Court ruled, saying he didn't qualify for so-called innocent spouse relief.

The court agreed with the Internal Revenue Service that Mark Strom, a former cardiac and thoracic surgeon and husband of a former InfoSpace president and COO, Bernee Strom, knew of his wife's exercising of stock options that led to unreported income of $100.5 million. 

Just Knowing About The Understatement,
The Court Said, Torpedoed His Claim For Relief
From Joint And Several Liability.

Bernee Strom received incentive and nonstatutory stock options when tech company InfoSpace hired her in 1998, and she exercised the nonstatutory options in 2000, the decision said. The couple talked with advisers and chose to defer calculation and recognition of most of the income attributable to exercising options in 2000 to the 2021 tax year when the market value of the company's stock was much lower, according to the decision. The plan resulted in more than $100 million in income being left off the Stroms' 2000 return, the court said.

Mark Strom was involved in the exercising of the options and the talks with lawyers and tax consultants to develop "tax-favorable" reporting positions on the 2000 return and approved those positions, according to the decision. Holding Mark Strom jointly liable for the resulting taxes assessed by the IRS is fair because he knew all the facts pertaining to the transactions, the court said.

Internal Revenue Code Section 6015 governs relief from joint and several liability on joint tax returns. Mark Strom sought innocent spouse relief in 2009 and again in 2012, both for the 2000 tax year, the decision said.

 Have an IRS Tax Problem? 
Contact the Tax Lawyers at 
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Tax Preparer Pleads to Filing False Tax Returns as Part of a Nationwide Abusive-Trust Tax Shelter Scheme

On January30th 2024 we posted Two Men Indicted On Charges Of Peddling Abusive Trusts, where we discussed that two men promoted and sold abusive tax shelters for the last six years by instructing their clients to use sham trusts to hide business income and illegally deduct personal expenses such as family weddings, according to an indictment in a Colorado federal court in the case of U.S. v. Conner et al., case number 1:23-cr-00390, in the U.S. District Court for the District of Colorado.

Now according to the DoJ, an Arizona man pleaded guilty on May 17, 2024 to two counts of assisting in the preparation of false tax returns for individuals who used an abusive-trust tax shelter to underreport their income and tax liabilities.

According to court documents and statements made in court, from 2017 to 2023, Kent Ellsworth operated Ellsworth Stauffer P.C., a return preparation business. During that time, Ellsworth participated in a scheme to defraud the IRS that involved the promotion, sale and implementation of a fraudulent tax shelter. Ellsworth participated by preparing and filing over 500 false tax returns for approximately 60 clients nationwide who used the tax shelter to conceal income from the IRS and not pay tax. Ellsworth intentionally caused more than $60 million in income to be fraudulently sheltered from the IRS, which resulted in a tax loss to the IRS of approximately $17 million.

Ellsworth Prepared The False Tax Returns To Further The Abusive-Trust Tax Shelter Scheme Carried Out By Others.

Clients who purchased the tax shelter, most of whom were successful business owners, were directed to assign or “donate” nearly all of their income to sham trusts and a so-called “private family foundation” to create the illusion that the income was not theirs. However, the sham trusts and foundations were nothing more than bank accounts designed to hold funds the clients earned and continued to control. 

To carry out the scheme, Ellsworth was taught how to prepare tax returns utilizing the scheme’s fraudulent methods. He was instructed to report all income assigned to a sham trust as income of the trust and to offset that income by deducting all expenses paid for by the trust, including the clients’ personal living expenses. Ellsworth was paid fees for preparing the returns by the clients participating in the tax shelter.

Ellsworth is scheduled to be sentenced on Aug. 14. He faces a maximum penalty of three (3) years in prison for each count of preparing and filing false tax returns. Ellsworth also faces a maximum fine of $250,000, a period of supervised release and the costs of prosecution for each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Have An Abusive Trust?

Do You Like Your Freedom?

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

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


Thursday, May 16, 2024

CPAs and Attorneys Don't Get to Say "They Did Not Know" - Ex-CFO& CPA $44M FBAR Penalty Upheld

According to Law360The former chief financial officer of a Russian gas company who was sentenced to seven years in prison for hiding money in Swiss banks can't escape the government's civil suit seeking nearly $44 million in reporting penalties, a Florida federal judge ruled Wednesday.

In an order denying a dismissal request by ex-Novatek CFO Mark Gyetvay, U.S. District Judge John L. Badalamenti said the government had sufficiently alleged that Gyetvay had willfully failed to file a foreign bank account report, or FBAR, for 2014 on a Swiss account.

Specifically, The Judge Noted The Government's
of Gyetvay As "A Financially Educated, Savvy,
International Businessman" With A Background as a CERTIFIED PUBLIC ACCOUNTANT and Audit Partner,

Who Retained A Swiss Wealth Firm To Help Him Hide 
His Ownership Of Foreign Accounts.

The government's complaint also presented facts showing Gyetvay transferred the account to his wife after being asked to show he complied with U.S. tax laws, and that he swore to the Internal Revenue Service he lived in Russia when really he had a home in Florida, Judge Badalamenti said.

"In a nutshell, the complaint alleges myriad deliberate actions over the course of a decade by Mr. Gyetvay that establish plausible allegations of willfulness," Judge Badalamenti said in the order.

Gyetvay, in his October request to dismiss the suit, called the government's penalty "staggering." He asked the court to reduce the damages amount to $100,000, the penalty for a lower level of willful FBAR violation. The government's steeper penalty, equal to up to 50% of the account balance, is allowed only for a limited subclass of willful violations, he argued, namely those that involve a failure to report the existence of an account or its identifying information.

Gyetvay did report the account in question to the IRS for 2014, and he included the bank and account number, he said.

Judge Badalamenti rejected that argument Wednesday, saying Gyetvay erroneously interpreted the law as requiring a partial, rather than a full, reporting of account information, which includes the amount of money in the account.

According to the government's June complaint, the U.S. Treasury Department already had slapped Gyetvay with $38.6 million in penalties in 2021 for the inaccurate FBAR for 2014. Gyetvay's failure to pay pushed it to the $44 million being sought, the government said.

Gyetvay falsely reported that he had only signatory authority and no financial interest in the account for 2014, but he later admitted in an amended filing that it contained $79 million, the government said. By falsely claiming only signatory authority, Gyetvay avoided a requirement to report the value of the assets in the account, the government said.

Gyetvay has maintained his innocence since being indicted in 2021 and is appealing his conviction, which triggered not only the prison sentence but an order to pay $4 million in restitution. A Florida federal judge said in October that the appeal was unlikely to succeed, however, and denied Gyetvay's request to delay reporting to prison while he awaits the outcome.

Have an FBAR Penalty Problem?  
Never Stop Arguing
Legal Basis for Abatement!

 Contact the Tax Lawyers at 
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Toll Free at 888-8TaxAid (888) 882-9243

Wednesday, May 15, 2024

Appeals Decision in Farhy Limited to DC Circuit?

On May 3, 2024 the the D.C. Circuit Court of Appeals overturned the Tax Court's decision in Farhy v. Commissioner, 160 T.C. No. 6 (2023), which held that the IRS was without the authority to assess the Form 5471 imposed by Internal Revenue Code §6038(b). 

So Where Does That Leave Us?

For one thing this Appeal's decision controls cases, in the DC circuit.

It is also persuasive authority for other circuits, as it relates to interpreting IRC §6038(b) in that it would be unlikely if not just inconsistent for Congress to allow the IRS to assert penalties under §6038(c), but not under §6038 (b) and it goes on to buttress its decision with Congressional Reenactment Doctrine by stating:

"[Our court's] conclusion is buttressed by more than forty years of congressional acquiescence
to the IRS’s practice of assessing section 6038(b) penalties. 'It is well established that when
Congress revisits a statute giving rise to a longstanding administrative interpretation without
pertinent change, the ‘congressional failure to revise or repeal the agency’s interpretation
is persuasive evidence that the interpretation is the one intended by Congress.’ Since adding
subsection (b) in 1982, Congress has amended section 6038 seven times; each time, it has
left undisturbed the IRS’s practice of assessing and administratively collecting penalties
imposed under section 6038(b)."

Whether the Congressional Reenactment Doctrine in this decision is dicta and does not need to be followed, I leave up to each of you.

Furthermore, the Tax Court in Mukhi v. Commissioner of Internal Revenue, stated that even though Farhy is on appeal in the D.C. Circuit, Mukhi's case, if appealed, would go to the Eighth Circuit, meaning any ruling from the D.C. Circuit wouldn't be binding for Mukhi, the court said.

So you can still argue that the IRS cannot assess certain information reporting penalties in other circuits and in Tax Court. Whether you be successful, still remains to  be seen?

Need To Successfully Contest Form 5471,
5472, 8938, & 3520 Late Filing Penalties?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

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

Monday, May 13, 2024

IRS Adds Additional Protections To CAF & Transcript Delivery System

In IR-2024-136 the Internal Revenue Service issued on May 8, 2024 additional protections for tax professionals being taken to increase security for the Centralized Authorization File (CAF) program and placed new guidelines on requesting client transcripts by phone.

“Tax professionals continue to present a tempting target to identity thieves and fraudsters,” said IRS Return Integrity and Compliance Services Director James Clifford. 

“With Identity Theft An Ongoing Concern, The IRS
Has Taken Additional Steps Needed To Protect Both
Tax Professionals And Their Clients Given The
Sensitivity And Importance Of The Information Involved.

The IRS will continue working with the tax professional community on these issues to minimize burden on practitioners while also working to ensure the safety and security of this information.” 

Tax Practitioners may also receive CP310 assigning A Personal Identification Number (PIN), which the tax professional Needs to associate with their CAF. This can be done online.

The IRS has become increasingly concerned about the risk a compromised CAF number presents to tax professionals and taxpayers. In these cases, there is risk that fraudsters could use a compromised CAF to obtain transcripts and other sensitive taxpayer personally identifiable information (PII) to commit identity theft refund fraud and other crimes. In many cases, the fraudster has not only obtained a practitioner’s CAF number but also has the practitioner’s sensitive personal information.

To Address This Issue, The IRS Has A Process In Which Suspected Compromised CAF Numbers Are Placed Into
A Suspended Status Pending Further Review.

Once placed into a suspended status, the owner of the CAF number will be contacted to confirm if the CAF number has been compromised. If the compromise is confirmed, the IRS will take the appropriate actions to address the compromised CAF number. The IRS recognizes the significance of the CAF process and is continuously working on ways to expedite this review process for impacted practitioners.

More information about this issue can be found in a special alert issued today by the IRS Office of Professional Responsibility.

In addition to the changes being made to protect tax professionals from a compromised CAF number, the IRS has also taken related security steps to change how tax professionals can order transcripts by phone through the Transcript Delivery System (TDS).

To Address This Issue, The IRS Has A Process In
Which Suspected Compromised CAF Numbers Are 
Placed Into A Suspended Status Pending Further Review.

That is not going to work well, as this week alone I waited one hour before I got complementary hang up, the second time called I waited two hours before I got a complementary hang up and if that wasn't bad enough I also got a call back, which when I picked it up hung up on me after two minutes.

IRS employees on other phone lines may not be authorized to provide transcripts through the SOR delivery method. Tax professionals will need to pass enhanced authentication. If the identity of the caller cannot be verified, transcripts will not be delivered using the SOR delivery method but will instead be mailed to the taxpayer’s address of record.

Tax professionals should also be on the lookout for unsolicited scam emails asking to provide credential information such as CAF number, Electronic Filing Identification Number (EFIN) information and driver’s license. These emails may look like they are coming from the IRS or a tax software company. Tax professionals who receive these unsolicited emails should report them to phishing@irs.gov.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

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