US Couple Owe $1M In FBAR Penalties - OUCH !!!

According to Law360, an American couple owe the government almost $1 Million in FBAR Penalties and interest for willfully failing to report their overseas bank account, the U.S. told a federal court in a civil action to collect tax penalties.

Juan and Catherine Reyes did not file the report, commonly known as an FBAR, for 2010, 2011 and 2012 for a foreign bank account containing over $2 million, the U.S. said in a complaint filed in U.S. v. Juan Reyes and Catherine Reyes, case number 1:21-cv-05578, in the U.S. District Court for the Eastern District of New York on October 7, 2021.

Juan Reyes was born in Nicaragua but has lived in the U.S. for more than 60 years and is a naturalized American citizen, the U.S. said in its complaint. His parents opened an account for him at Banco de Londres y America del Sur in 1972. Catherine Reyes became a joint owner of the account around 2000, it said. 

They Linked The Account To Credit Cards
That Paid For Their Domestic Living Expenses,
The U.S. Alleged.

• The couple filed joint federal income tax returns for the 2010-2012 tax years without disclosing the account, the U.S. claimed.
• They checked "No" on each year's Schedule B form when asked if they had an interest in a foreign account, the U.S. said. 
• They also did not disclose the account to their tax preparer for the 2010-2012 tax years, the U.S. added. 

As of July 2021, each owed $472,000 in penalties and interest, the U.S. said.

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9th Circ. Affirms That Pot Biz Owner Owes Tax Fraud Penalties

According to Law360, A tax preparer owes around $103,000 in Fraud Penalties, as the Ninth Circuit ruled on October 8, 2021, that the U.S. Tax Court was justified in finding he underpaid his marijuana business's taxes, hid income and failed to cooperate with the IRS. 

The Ninth Circuit affirmed in Raymond and Ruby Chico v. Comm., case number 20-71017, in the U.S. Court of Appeals for the Ninth Circuit, the lower court's decision finding that Raymond Chico owes fraud penalties under Internal Revenue Code Section 6663  for 2010 through 2012 for underreporting income from his marijuana cigarette container company, Doobtubes, and other ventures. 

The Tax Court wasn't wrong to find there was convincing evidence that Chico committed fraud, including his presenting of scant documentation supporting his tax reporting for those years and is failure to cooperate with an Internal Revenue Service investigation.

Other "Badges of Fraud"
Supporting Chico's Liability For The Section 6663 Penalties Include: That He Hid Income From a Marijuana Dispensary Owned By Raymond Chico And That He Underreported More Than $275,000 in Income,

According To The Opinion.The Ninth Circuit declined to give the case a fresh look and instead reviewed the Tax Court's decision for clear error.

"The Tax Court did not clearly err in finding clear and convincing evidence of fraud based on the six badges of fraud present in the record," the opinion said. 

The U.S. Tax Court found in September 2019 that Raymond Chico had failed to report Doobtubes' gross receipts for the three tax years by around $180,000 and that Chico wasn't entitled to business deductions he originally claimed on tax returns. He also failed to report constructive dividends from the marijuana dispensary and failed to report income from a rental property, according to the opinion.

The lower court also held him liable for the fraud penalties, and indicated in an order in January 2020 that that liability totaled around $103,000.

Chico told the Ninth Circuit in December 2020 that there's not enough evidence indicating he fraudulently underreported his income and that he initially relied on an attorney who failed to cooperate with the IRS in its audit and was later disbarred from practicing law in California.

The U.S. rejected those arguments, saying in its own filing in February 2021 there was more than enough evidence indicating he committed fraud. This evidence includes that he understated income, kept inadequate records and failed to file business tax returns, according to the government.

In its opinion, the Ninth Circuit said: 

1. The Tax Court wasn't mistaken in finding that the evidence justified the imposition of tax fraud penalties against Chico. and
2. The Tax Court wasn't wrong to find that Chico's status as a certified tax return preparer, further strengthened the finding that he committed fraud, the appeals court said. (ya think?)
   
   

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New Int'l Tax Reporting Rules For Pass-Throughs

According to Law360, the world of international tax reporting has grown more complicated. In addition to the general globalization in business, the 2017 Tax Cuts and Jobs Act made significant changes to the international tax landscape.

The TCJA introduced the base erosion and anti-abuse tax, global intangible low-taxed income, foreign derived intangible income, and the participation exemption regime. These new international tax rules, coupled with an already complicated U.S. tax system, make tax compliance a daunting task for even the most sophisticated companies and investors.

Navigating this landscape has become particularly complicated for investors in pass-through entities that rely on Schedule K-1, used to report a partner's share of income, deductions credits and other items, to comply with their U.S. income tax reporting requirements. The way international tax items were reported on Schedule K-1 historically lacked structure — often leaving investors to sort through lengthy footnotes that were inconsistent in presentation from one investment to the next.

In response to this problem, the Internal Revenue Service released Schedule K-2, for reporting a partner's international distributive share items, and Schedule K-3, for reporting a partner's share of international income, deductions, credits, etc., on June 3 and June 4, along with corresponding forms related to Form 1120-S.

The schedules are designed to provide greater clarity for pass-through investors on how to compute their U.S. income tax liability with respect to items of international tax relevance — generally foreign activities or foreign partners.

Schedules K-2 and K-3, along with accompanying instructions, will affect taxpayers filing Form 1065, which is used to report partners' share of income and other items; Form 1120-S, which reports U.S. income tax for an S corporation; and Form 8865, which is used to report the income of foreign partnerships for the 2021 tax year.

The recent release of the final forms and instructions provides valuable insight into the future of reporting for international tax matters for pass-through entities. The compliance season for 2021 returns is fast approaching. Taxpayers should take advantage of the availability of the final forms and accompanying instructions — albeit some may be in draft form — as an opportunity to assess their ability to comply with the additional reporting they entail.

Taxpayers should also make any needed changes to their tax compliance processes and systems to best enable themselves to comply with the additional reporting.

Go to Law360 for more on an overview of the new reporting requirements and discusses how to prepare for what is poised to be one of the most significant changes to the partnership compliance function in decades.

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US Citizen- Swiss Resident Assessed $316,000 for Nonwillful Failure to File anFBARs

According to Law360, an American living in Switzerland owes the U.S. government more than $300,000 in penalties and interest for his non-willful failure to report 28 foreign bank accounts, the U.S. told a Virginia federal court.

The American, Albert Cambata, did not file the proper notification, known as a Report of Foreign Bank and Financial Accounts, from 2010 to 2012, the U.S. government said in a complaint filed in case is U.S. v. Albert K. Cambata, case number 5:21-cv-00065, in the U.S. District Court for the Western District of Virginia on October 6, 2021.

Cambata had accounts in multiple foreign banks, the government said, including UBS, HSBC and Bank Julius Baer & Co. LTD. 

The U.S. Treasury Department Has Cited Him For
11 FBAR Violations in 2010,
10 FBAR Violations in 2011 and

7 FBAR Violations in 2012,

For A Total of $280,000 in Assessments.

His fines remain unpaid even after the U.S. government sent him notices of assessment, according to the government, which said Cambata owes nearly $316,000 as of August 2021.

 Do You Have Undeclared Offshore Income?

 

Want to Know Which
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

European Tax Haven Ireland Agrees To Raise It's Tax Rate from 12 1/2% to 15% for Large Companies

According to Law360, Ireland endorsed a plan for landmark international tax reform on October 7, 2021 after successfully lobbying rich nations to alter terms backed by most of the world, constraining ambitions to potentially raise a 15% minimum corporate tax rate in the near future.

Ireland's Assent To The Agreement As A Member The Organization For Economic Cooperation And Development
Means The Country Has Pledged To Raise Its Corporate Income Tax Rate From 12.5% To 15% For Companies
With Annual Revenue Over €750 Million ($866 Million).

"The government has now approved my recommendation that Ireland join the international consensus, which, in turn, will secure certain strategic priorities for Ireland," Paschal Donohoe, the country's finance minister, said Thursday in a news conference.

While some countries wanted a higher minimum tax rate than 15%, Ireland's position "moderated those ambitions and views in the context of the broader agreement," he said.

Donohoe confirmed he had been lobbying the OECD since July for that change. A final draft of the agreement is due on October 8, 2021. 

Do You Have Undeclared Income
from a Tax Haven?

Is Your Name Being Handed Over to the IRS?

  

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NM Woman Granted Innocent Spouse Relief For Ex-Husband's Taxes

 

According to Law360, a New Mexico woman isn't liable for tax deficiencies related to her former husband's work in 2010 and 2015 because, among other things, she didn't know about the understatements on their joint returns, the U.S. Tax Court said on October 6, 2021.

April Gonzales didn't have knowledge of understatements on her jointly filed taxes because she wasn't substantially involved in filling them out, the court said. Although she had access to the family's financial information, erroneous deductions on their returns were based on mileage calculations unrelated to that information, the Tax Court said. 

The Tax Court also said Gonzales and her former husband, Anthony Todisco, couldn't claim deductions for tax preparation fees and $41,317 in unreimbursed business expenses for 2010, because the deductions were not substantiated by the record.

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US Expatriations Up 200% Over Previous Quarter

According to Law360, as of the end of June, 734 people had expatriated from the U.S. since March, slightly more than tripling the number from the first quarter of the year, the Internal Revenue Service said in a notice.

This rise in expatriations in the last quarter represents a turnaround in the number of people losing or renouncing their U.S. citizenship, coming after a series of decreasing expatriations that bottomed out at 228 people from January through March. Each quarter has up to this point shown a drop since the first quarter of 2020, in which there were about 2,900.

Expatriation Is The Term The IRS Employs For Loss Or Renunciation Of U.S. Citizenship Under Internal Revenue Code Section 877(A) And Section 877A, The Notice Said.

Expatriation has increased significantly in 2020. The latest U.S. Department of the Treasury Report reflects that a record 6,047 individuals expatriated during the first three quarters of 2020. In addition, 834,000 "green card" holders became U.S. citizens in FY 2019, which reflects an 11-year high.

Should I Stay or Should I Go?

Need Advise on Expatriation?

 

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