IRS Criminal Investigation releases Fiscal Year 2018 Annual Report

The Internal Revenue Service released on November 14, 2018 the Criminal Investigation Division’s (CI) annual report, reflecting significant accomplishments and criminal enforcement actions taken in fiscal year 2018.

 

 

"This Report Shows That As Financial Crime Has Evolved

and Proliferated around the World, so

 Have IRS Criminal Investigation Special Agents and

Their Abilities to Track the Proceeds of Financial Crime,"

  

Said IRS Commissioner Chuck Rettig. “CI uses cutting-edge technology combined with sophisticated investigative work to bring the most impactful cases that affect tax administration. I am extremely proud of our special agents and professional staff and their work serving the nation.”


A major focus of CI in fiscal 2018 was traditional tax cases, including international tax enforcement, employment tax, refund fraud and tax-related identity theft. Other areas of emphasis included public corruption, cybercrime, terrorist financing and money laundering.

"We Prioritized the Use of Data in Our Investigations in Fiscal 2018," Said Don Fort, Chief of CI.

 

“The future for CI must involve leveraging the vast amount of data we have to help drive case selection and make us more efficient in the critical work that we do. Data analytics is a powerful tool for identifying areas of tax non-compliance.”

CI initiated 2,886 cases in fiscal 2018, with traditional tax cases accounting for 73 percent of the total. The number of CI special agents dipped below 2,100 by the end of fiscal 2018, which is the lowest level since the early 1970’s. Consequently, CI turned to data analytics to assist in finding the most-impactful cases.

CI is the only federal law enforcement agency with jurisdiction over federal tax crimes. CI achieved a conviction rate of 91.7 percent in fiscal 2018, which is among the highest of all federal law enforcement agencies. The high conviction rate reflects the thoroughness of CI investigations and the high quality of CI agents. CI is routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes.

CI has published an annual report since 1920 to highlight the agency’s successes and provide a historical snapshot of the make-up and priorities of the organization. The 2018 report is interactive, summarizes a wide variety of CI activity during the year, and features examples of cases from each field office on a wide range of financial crimes.

The current year, fiscal 2019, marks the 100-year anniversary of CI as a law enforcement agency. CI’s crime-fighting techniques have come a long way in that time. The federal fiscal year begins Oct. 1 and ends on Sept. 30.

“As we begin our 100th year, I could not be prouder to lead this exceptional agency of dedicated women and men," Fort said. "We have never been more capable, better trained or more relevant to the financial crimes landscape."



Have a Criminal Tax Problem?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.
 

 

for a FREE Tax Consultation contact us at

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

 

 

Disregarded Entities Are Not Always Disregarded

Under the check the box rules, entities owned by one person can often be disregarded for federal tax purposes. Such entities are referred to as "disregarded entities." 

As time has progressed since the passage of the check the box rules, the IRS has created more and more exceptions to the disregarded treatment. The following is a summary of the principal exceptions, but is not intended to be exhaustive. If any readers think we have missed anything major, please feel free to comment to this posting.

1. Status is modified if the single owner of the entity is a bank. Treas. Regs. Section 301.7701-2(c)(2) (iii). 
2. Status is modified for certain tax liabilities. Treas. Regs. Section 301.7701-2(c)(2)(iii). These include: (1) federal tax liabilities of the entity with respect to any taxable period for which the entity was not disregarded; (2) federal tax liabilities of any other entity for which the entity is liable; and (3) refunds or credits of federal tax. 
3. Disregarded status ignored or modified for taxes imposed under Subtitle - Employment Taxes and Collection of Income Tax (Chapters 21, 22, 23, 23A 24, and 25 of the Code) and taxes imposed under Subtitle A including Chapter 2 - Tax on SelffEmployment Income. Treas. Regs. Section 301.7701-2(c) (2) (iv) (A). 
4. Status is modified for certain excise taxes, as described in Treas.Regs. Section 301.7701-2(c)(2J(v). Although liability for excise taxes isn't dependent on an entity's classification, an entity's classification is relevant for certain tax administration purposes, such as determining the proper location for filing a notice of federal tax lien and the place for hand-carrying a return under Code Section 6091
5. Conduit financing proposed regulations will treat a disregarded entity as separate from its single member. Code Section 7701 (I).
6. Special rules will apply in hybrid situations. Hybrid situations are circumstances where an entity is not disregarded in one jurisdiction but is disregarded in another.
7.  Final regulations (TD 9796) that treat domestic disregarded entities wholly owned, directly or indirectly, by foreign persons  as domestic corporations solely for purposes of making them subject to the reporting requirements under Internal Revenue Code, Section 6038A that apply to 25% foreign-owned domestic corporations.

 

Have a Tax Problem?  

 



 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 for a FREE Tax Consultation Contact us at

www.TaxAid.com or www.OVDPLaw.com

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

 

J5 Collaborate on Data Analytics Against 'Enablers'

On July 17, 2018 we posted The J5 International Tax Hunt is On! where we discussed that the tax authorities of the UK, US, Australia, Canada and Netherlands have set up a joint committee to improve international enforcement against tax crime and money laundering. The first meeting of the so-called J5 Group (Joint Chiefs of Global Tax Enforcement) was held during July 2018 where plans where developed to detect cyber criminals and enablers of offshore tax crime.

 

Now the J5 have held a meeting focussing on new data matching techniques to identify 'professional enablers suspected of facilitating significant tax fraud across international boundaries'.

The J5 have during the week of November 5th, brought together their leading data scientists, technology experts and investigators in a coordinated push to track down those people who make a living out of facilitating and enabling international tax crime.

The event, known as ‘The Challenge,’ was hosted by the Fiscal Information and Investigation Service (FIOD) in Amsterdam to identify, develop, and test tools, platforms, techniques, and methods that contribute to the mission of the J5. The Challenge focused on identifying professional enablers facilitating offshore tax fraud and financial crime posing a threat to the J5 jurisdictions.

Experts from each country gathered with the mission of optimizing data from a variety of open and investigative sources available to each country, including offshore account information. Using various analytical tools, the teams were tasked to find schemes, identify potential enablers, and propose actions to J5 leadership to address these threats.

At the conclusion of ‘The Challenge,’ each team identified new targets of investigations, developed investigative schemes to address those targets and increased their ability to share information and find similar patterns and targets in the future.

“Financial crime goes across borders,” said Hans van der Vlist, General Director of FIOD. “That is why operational collaboration is essential and possible. The J5 is a great example. The goal of this challenge is to define unknown professional enablers of tax fraud and financial crime.”

In addition to the Challenge, the J5 has already identified and is actively pursuing a number of professional enablers suspected of facilitating significant tax fraud across international boundaries. J5 partners are now working jointly to tackle each of these enablers through coordinated international action. These individuals were identified through intelligence sharing between J5 members since the alliance was formally announced (PDF 212KB)This link will download a file earlier this year in Montreal, Canada.

The J5 has also made progress in identifying websites that enable fraud through the promotion of schemes to hide income and assets offshore. J5 partners have shared intelligence and capability to collectively close in on these enablers by monitoring their users and using that in their investigations into those involved in these schemes.

 

Have Undeclared Income from an Offshore Account?
 

 

Want to Know What Voluntary Disclosure Program is Right for You?

  

 

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation Contact us at:

 www.TaxAid.com or www.OVDPLaw.com or

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

 

 

Sources:

Australian Tax Office Canada Revenue Agency

 

Former U.S. Congressman Sentenced to 10 Years in Prison for Tax Fraud and Election Crimes

According to DoJ, a former U.S. Congressman Stephen E. Stockman was sentenced on November 7, 2018 to serve 120 months in prison and ordered to pay $1,014,718.51 in restitution, to be followed by 3 years of supervised release, for orchestrating a four-year scheme to defraud charitable donors of hundreds of thousands of dollars and secretly to funnel the proceeds to pay for personal expenses and to illegally finance his campaigns for public office.

“Former Representative Stockman Stole Hundreds of Thousands of Dollars from Charities, then used the money to Pay Personal Expenses and Fund his Political Campaigns,”

said Assistant Attorney General Benczkowski. 

 

“At trial, the government proved to the jury that former Congressman Stockman ran his campaign and fraudulent charities to simply enrich himself and defrauded well-meaning donors,” said U.S. Attorney Patrick.

“This Type of Corruption by Public Officials Gives

Our Entire Democratic System a Black Eye.”



Former U.S. Representative Stephen E. Stockman, 61, was convicted by a federal jury in Houston on April 12, of 23 counts of mail fraud, wire fraud, conspiracy to make conduit contributions and false statements to the Federal Election Commission, making false statements to the Federal Election Commission, making excessive coordinated campaign contributions, money laundering, and filing a false tax return. 

Two of Stockman’s former congressional staffers previously pleaded guilty in the case. 

• Thomas Dodd, 39, of Houston, Texas, pleaded guilty on March 20, 2017, to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to make conduit contributions and false statements. 
• Jason T. Posey, 48, of Tupelo, Mississippi, pleaded guilty on Oct. 11, 2017, to one count of mail fraud, one count of wire fraud, and one count of money laundering.

“Former Congressman Stockman was entrusted by his constituents to serve in their best interest,” said FBI Special Agent in Charge DeSarno.  “Instead, Stockman used his position in a series of schemes for personal gain at the expense of the public.

Today’s Sentence Should Send a Clear Message

That the Laws of the Land Apply to Everyone,

Regardless of Position or Power.

 



According to the evidence presented at trial, from May 2010 to February 2014, Stockman and his co-defendants solicited $1,250,571.65 in donations from charitable organizations and the individuals who ran those organizations based on false pretenses, then used a series of sham nonprofit organizations and dozens of bank accounts to launder the money before it was used for a variety of personal and campaign expenses.

Specifically, the evidence established that

• in 2010, Stockman and Dodd solicited an elderly donor in Baltimore, Maryland for $285,000 to be used for legitimate charitable and educational purposes. 
• Stockman and Dodd used a sham charity named the Ross Center to funnel the money to be used for a variety of personal expenses. 
• The evidence further established that, in 2011 and 2012, Stockman and Dodd received an additional $165,000 in charitable donations from the Baltimore donor, much of which Stockman used illegally to finance his 2012 congressional campaign. 

The trial evidence also showed that

• shortly after Stockman took office as a Member of the U.S. House of Representatives in 2013, he and Dodd used the name of another sham nonprofit entity, Life Without Limits, to solicit and receive a $350,000 charitable donation, to be used to create an educational center called the Freedom House.  
• Stockman, Dodd, and Posey instead used this donation for a variety of personal and campaign expenses, including:
• illegal conduit campaign contributions,
• a covert surveillance project targeting a perceived political opponent,
• an in-patient alcoholism treatment for a female associate, and
• payments for hundreds of thousands of robocalls and mailings promoting Stockman’s candidacy for U.S. Senate in early 2014.

In addition, the evidence established that,

• in connection with Stockman’s Senate campaign, Stockman and Posey used another sham nonprofit entity to secure a $450,571.65 donation in order to fund a purportedly legitimate independent expenditure promoting Stockman’s candidacy.  
• The evidence showed that the purportedly independent expenditure was in fact secretly controlled by Stockman, who directed his campaign and Posey to file false affidavits with the FEC covering up Stockman’s involvement. 

Finally, the evidence at trial demonstrated that Stockman failed to pay taxes on any of the $1,250,571.65 in fraudulently acquired donations.  In addition, during the early stages of the investigation, Stockman directed Posey to flee to Cairo, Egypt, for two and a half years so that Posey could not be questioned by law enforcement.

 

Have a Criminal Tax Problem?

 



Contact the Tax Lawyers at

Marini & Associates, P.A.

 

for a FREE Tax Consultation Contact us at:

www.TaxAid.com or www.OVDPLaw.com

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

 



 

President Trump Expands Venezuela Sanctions

On November 1, 2018 President Donald J. Trump issued a new Executive Order 13850 (E.O.) blocking all property and interests in property of any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:  

1. to be operating in the gold sector of the Venezuelan economy or in any other sector of the Venezuelan economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State;  
2. to be participating in any transaction or series of transactions involving deceptive practices or corruption and the Government of Venezuela or projects or programs administered by the Government of Venezuela;
3. to be an immediate adult family member of such a person;
4. to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any activity or transaction described in section ii above, or any person whose property and interests in property are blocked pursuant to the E.O.; or
5. to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to the E.O.

The Office of Foreign Assets Control ("OFAC") has released a FAQ clarifying that it expects to use the E.O. to target those persons who operate corruptly in the gold or other identified sectors of the Venezuelan economy, and not those who are operating legitimately in such sectors.

 

Want to Emigrate to the US?


Contact the Tax Lawyers at

Marini & Associates, P.A.

 

for a FREE Tax Consultation Contact us at:

www.TaxAid.com or www.OVDPLaw.com

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

 



 

 

 

 

Tax Court Rejected Wesley Snipes' Offer of $842K to Settle His $23.5M Tax Debt

According to Law360, The Internal Revenue Service rejected actor Wesley Snipes' offer to settle his tax debt by paying 4 % of what he owed. (AP).

The star of the "Blade" trilogy and "White Men Can't Jump," who served three years in prison for unpaid taxes until his release into a months long house arrest in 2013, had told the Internal Revenue Service that his financial adviser had taken out loans and disposed of his assets and income without his knowledge.

 

His Offered the IRS a Little More than $842,000 as a Compromise to Settle His Tax Debt.

However, Tax Court Judge Kathleen Kerrigan said Snipes did not produce “bona fide documentation” beyond affidavits of misconduct from his financial adviser, showing that his income or assets had been dissipated.

“The [IRS] settlement officer did not abuse her discretion in determining that acceptance of [Snipe’s offer-in-compromise] was not in the best interest of the United States,” Judge Kerrigan said, effectively holding up the IRS’ filing of a tax lien.

Snipes had argued that an IRS settlement officer, who was unnamed in the court’s decision, had abused her discretion by excluding his allegedly dissipated assets and by not investigating his adviser, W. Johnson.

However, Judge Kerrigan disagreed, finding the settlement officer had followed the revenue agency’s published guidance, “spent considerable time and effort” to determine Snipes’ income, equity, assets and transfers of real property, and ultimately lowered the IRS’ estimate of what it thought it could reasonably collect from Snipes from nearly $17.5 million to about $9.6 million.

“The settlement officer was unable to definitively determine that [Snipes] no longer owned certain properties, and [Snipes] could not provide bona fide documentation of these properties’ dissipation,” she said.

According to court records, Snipes had multiple assets and real estate holdings, and his debt arises from not filing tax returns from 2001 to 2006. Snipes had asked the IRS to accept his offer on the condition of proving his financial adviser’s own liability as a transferee, but Judge Kerrigan said the IRS was not in the position of accepting an offer with conditions imposed upon it.

In addition, taxpayers in “collection due process” hearings do not have the authority to compel the IRS to conducted expedited investigations into third parties, and Snipes had failed to prove that he would suffer economic hardship as a result of having to fork over what the IRS thought he could reasonably pay, the judge said.

 

Snipes made more than $37 million from 1999 to 2004, according to court documents. During that time, he became involved with American Rights Litigators, which believes that income taxes are largely unconstitutional, and he expressed that opinion in a letter he wrote to the IRS

In February 2008, Snipes was convicted on three counts of tax fraud. He was acquitted on three other counts of willful failure to file returns for the years 2002 to 2004, and on counts of conspiracy to defraud the IRS and submitting a false claim.

 

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 or

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

 

 

 

 

5 New LB&I Audit Campaigns Include FATCA Compliance

What Happened To The FATCA Wrecking Ball?

 

 

According to Law360  on October 30, 2018 the Internal Revenue Service released five additional compliance campaigns, which are areas the agency will focus on during audits of the largest corporations, including one that addresses requirements under the Foreign Account Tax Compliance Act.

The IRS’ Large Business and International Division said it has identified five additional compliance campaigns since announcing an overhaul to its audit procedures in 2015. Now with a total of 50 campaigns, the agency’s audit revamp involves moving toward issue-based examinations instead of the old approach of placing large multinational businesses under continuous audit by a rolling team of examiners.

“The campaigns are the culmination of an extensive effort to redefine large business compliance work and build a supportive infrastructure inside LB&I,” the IRS said in a statement. “Campaign development requires strategic planning and deployment of resources, training and tools, metrics and feedback.”

One Of The Five New Campaigns Announced ... Addresses “Those Entities That Have FATCA Reporting Obligations But Do Not Meet All Their Compliance Responsibilities.”

Under FATCA, which took full effect in 2014 after Congress passed it in 2010, Americans must report if they hold more than $50,000 in foreign assets. In addition, foreign financial institutions must disclose information on U.S. taxpayer accounts to the IRS through intergovernmental agreements.

The FATCA campaign comes after the Treasury Inspector General for Tax Administration, the agency watchdog, published a report in July that found although the IRS had spent nearly $380 million to carry out FATCA, the agency “is still not prepared to enforce compliance” with it.

Another campaign announced Tuesday involves focusing on individuals who have claimed foreign tax credits without meeting the requirements to do so.

 Another campaign targets the use of offshore service providers, which facilitate the creation of foreign entities and tiered structures “to conceal the beneficial ownership of foreign financial accounts and assets, generally, for the purpose of tax avoidance or evasion,” according to the IRS.

The other two campaigns announced Tuesday involve “delinquent-filed” 1120-F forms — the U.S. income tax return of a foreign corporation — and an effort to address the consequences of certification delays and “the burden of amended return filings” regarding the work opportunity tax credit.

When the agency first announced a reorganization to the LB&I division, it said the process involved winding down the coordinated industry case program of continuous audits and targeting areas for examination on the basis of compliance risks instead. Since then, there were scant details on how exactly large business audits, where businesses are suspected of evading taxes on significant sums of money, will change under the new regime.

Then, in January 2017, the IRS released the long-awaited list of campaigns, which included focuses on enterprise activities, cross-border activities and pass-through entities. There were 13 campaigns included in the first batch.

 

Have an IRS Tax Audit 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 or

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