Criminal Score Getting Worse For Offshore Account Holders!

In our previous post UBS Criminal Casualties, so Far and More Guilty Pleas Over Offshore Accounts in the Works! regarding the U.S. and Swiss Reach a Deal on American Tax Evaders, the IRS hunt for offshore income and accounts continues unabated!

Our other post Criminal Score Card Not Good For Offshore Account Holders!, is a must read for US Taxpayers who have still not addressed their undeclared income from their foreign accounts, discusses H. Ty Warner, the billionaire creator of Beanie Babies plush toys, pleaded guilty to evading taxes on secret Swiss bank accounts that held as much as $107 million and the lists the of Criminal Prosecutions of UBS Clients thus far.

Bloomberg has published Offshore Tax Scorecard: UBS, Credit Suisse, HSBC, Baer which discusses the various prosecution of the various Swiss, Liechtenstein and Israeli Banks and Offshore Tax Crimes Scorecard: Bankers, Lawyers, Advisers which discusses the various prosecution of Bankers, Advisers, Lawyers affiliated with the establishment of noncompliant offshore accounts.

The IRS' hunt for offshore income and accounts is intensifying. See our post IRS Actively Seeking US Tax Dodgers Abroad! which discusses Caroline D. Ciraolo , principal deputy assistant attorney general for policy and planning at the division, statement that

"The Department of Justice Tax Division is ramping up an intense crackdown on offshore tax evasion, and people hiding assets overseas should come forward as soon as possible"

and also discusses that the combination of FATCA reporting, Swiss Banks turning over names of US depositors, the Government's review of US citizens giving up their US passport and expatriating and intensification by DoJ find offshore tax cheats; does not put the odds in favor of US taxpayers who have not done anything to correct their failure to report income from the foreign accounts. 
 

The IRS said people may be able to run, but they can't hide. The IRS said it is going to have agents all over the world, as they are going to work closely with foreign governments through the information exchange program and the financial institutions.

The U.S. State Department estimates that 7.2 million U.S. citizens live abroad, many of whom surely have reportable bank accounts, yet only a total of 825,000 FBAR reports were filed for 2012.    

Are You One of the > 7 MM Americans
with Unreported Foreign Bank Income?

For Those Who Don't Come Forward 
 before They Are Found, 
Being Found Can Be Awfully Painful!

 Want to know if  the OVDP Program

is right for you?

 

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The IRS has posted an Update to the Instructions for Form 8938 for 2014

This update reflects changes to the Form 8938 reporting requirements made in the final regulations under section 6038D of the Internal Revenue Code ("final section 6038D regulations").  TD 9706, 79 FR 73817, 2014-53 IRB 890 (December 12, 2014).  It also contains additional information not included in the published 2014 Instructions for Form 8938 (Rev. December 2014) ("published 2014 instructions").


Dual resident taxpayers
The final section 6038D regulations have changed the reporting rules for dual resident taxpayers, effective for taxable years beginning after December 19, 2011.  For this reason, the published 2014 instructions and the instructions for Form 8938 for prior years are modified as provided in this update.


The following Form 8938 reporting rules, as more fully set forth in the final section 6038D regulations, apply to a dual resident taxpayer (within the meaning of §301.7701(b)-7(a)(1)) who determines his or her income tax liability for all or a portion of the taxable year as if he or she were a nonresident alien as provided by §301.7701(b)-7:

• Specified individual filing as a nonresident alien at the end of his or her taxable year  

    A specified individual who computes his or her U.S. income tax liability as a nonresident alien on the last day of the taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the individual’s taxable year covered by Form 1040NR, “U.S. Nonresident Alien Income Tax Return,” or Form 1040NR-EZ, “U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents,” as applicable, if the individual  complies with the filing requirements of §301.7701(b)-7(b) and (c).   These requirements include the requirement to timely file Form 1040NR or Form 1040NR-EZ, as applicable, and attach Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).”

• Specified individual filing as a resident alien at the end of his or her taxable year

    A specified individual who computes his or her U.S. income tax liability as a resident alien on the last day of the taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the individual’s taxable year reflected on the schedule to Form 1040, "U.S. Individual Income Tax Return," or the schedule to Form 1040EZ, "Income Tax Return for Single and Joint Filers With No Dependents," as applicable, that is required by §1.6012-1(b)(2)(ii)(a), if the individual  complies with all of the filing requirements of §1.6012-1(b)(2)(ii)(a).  These requirements include the requirement to timely file Form 1040 or Form 1040EZ, as applicable, and attach a properly completed Form 8833 to the schedule to such Form 1040 or Form 1042EZ.

Accounts excluded from the definition of a financial account under an applicable Model 1 or Model 2 IGA

For taxable years beginning on or before December 12, 2014, if the jurisdiction in which a financial account is maintained has an IGA in effect, or is treated as having a Model 1 IGA or Model 2 IGA in effect, on or before the last day of the taxpayer's taxable year, retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in 1.1471-5(b)(2)(i) that are excluded from the definition of financial account in such IGA are not required to be reported on Form 8938.   

NOTE:   For taxable years beginning after December 12, 2014, the final section 6038D regulations provide that, in addition to retirement and pension accounts and non-retirement savings accounts described in §1.1471-5(b)(2)(i), any retirement and pension accounts, non-retirement savings accounts, and accounts satisfying conditions similar to those described in §1.1471-5(b)(2)(i) that are excluded from the definition of financial account in an applicable Model 1 IGA or Model 2 IGA must be reported by the taxpayer on Form 8938.  Thus, such accounts are subject to uniform reporting rules and must be reported without regard to whether the account is maintained in a jurisdiction with an IGA.

Joint Form 5471 or Form 8865 filing
A specified person that is included as part of a joint Form 5471 filing or a joint Form 8865 filing and who notifies the Internal Revenue Service as required will be considered to have filed a Form 5471 or Form 8865.  Accordingly, the taxpayer does not have to report any asset on Form 8938 if the asset is reported on such Form 5471 or Form 8865 that is timely filed with the IRS for the same tax year and the taxpayer reports on Form 8938 the filing of the form on which the asset is reported.

Correction of references to U.S. Treasury Department's Financial Management Service

The U.S. Treasury Department's Financial Management Service has been consolidated into the U.S. Treasury Department’s Bureau of the Fiscal Service.  Thus, references in the 2014 instructions to the U.S. Treasury Department’s Financial Management Service or U.S. Treasury Financial Management Service should be changed to the U.S. Treasury Department’s Bureau of the Fiscal Service.

Have A Tax Problem?

  

Contact the Tax Lawyers at 

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at: www.TaxAid.us or www.TaxLaw.ms or

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

Ex-TigerDirect Executives Charged In $9M Kickback Plot, Get Years In Prison For Fraud

Gilbert Fiorentino, 54, and Carl Fiorentino, 57, both of Coral Gables, Florida, were sentenced in Federal Court in the Southern District of Florida, in connection with their participation in an illegal scheme to obtain more than $11 million dollars in kickbacks and other benefits, and to conceal this illicit income from the IRS, while employed as senior executives at Systemax, Inc. (“Systemax”) and its subsidiary, TigerDirect, Inc. (“TigerDirect”). 

Carl Fiorentino was sentenced to 80 months’ imprisonment. Gilbert Fiorentino was sentenced to 60 months’ imprisonment. A hearing to determine the remaining amount of restitution owed to Systemax by the defendants, who are brothers, has been scheduled for April 3, 2015.

On December 2, 2014, Carl Fiorentino pleaded guilty to one count of conspiracy to commit mail and wire fraud, and one count of tax evasion, and Gilbert Fiorentino pleaded guilty to one count of conspiracy to commit securities fraud and to impair and impede the lawful functions of the Internal Revenue Service.

U.S. Attorney Wifredo A. Ferrer stated, “Gilbert and Carl Fiorentino hid their ill-gotten financial gains from the IRS and the shareholders of Systemax. They violated their positions of trust by accepting illegal kickbacks, driving up the price of the consumer electronics and passing the price increase to the consumer. Yesterday’s sentences demonstrate our commitment to root out corporate fraud and enforce the laws that protect investors in financial markets.”

“For years, the brothers Fiorentino financed their luxury lifestyles with illicit kickbacks, 

all the while concealing their fraudulent gains from the shareholders of Systemax and the IRS. 

Such illegal self-enrichment, at the expense of a publicly-traded corporation and the IRS, cannot be tolerated,” stated United States Attorney Lynch. “Yesterday’s sentences should serve as a stern reminder that those who commit corporate fraud will be held accountable.”

Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, stated, “The Fiorentinos financed their extravagant lifestyle with $11 million in kickbacks. These kickbacks paid for, among other things, a waterfront Florida mansion. But the excess ends today. This sentence should put anyone who plans to shakedown shareholders on notice.”


Systemax had its principal place of business in Port Washington, New York, and sold personal computers and other consumer electronics through its websites, retail stores, and direct mail catalogs including TigerDirect, CompUSA, and Circuit City. In fiscal year 2010, Systemax had annual sales revenue of approximately $3.6 billion according to its public filings. Gilbert Fiorentino was a director of Systemax and was the Chief Executive Officer of its Technology Product Group, including its subsidiary TigerDirect. Carl Fiorentino was the former president of TigerDirect. Both defendants worked at TigerDirect’s Miami offices before they were terminated on April 18, 2011.

As senior executives of Systemax and TigerDirect, Gilbert Fiorentino and Carl Fiorentino had responsibility for, among other things, purchasing and sourcing hundreds of millions of dollars’ worth of computer and electronics items for Systemax and its various operations. Gilbert Fiorentino and Carl Fiorentino conspired with each other and third parties to obtain unlawful kickbacks in exchange for steering business to companies that paid the kickbacks. For example, Carl Fiorentino received millions of dollars in payments from one TigerDirect supplier, including more than $3 million to pay for his waterfront residence in Gables Estates and millions of dollars’ worth of luxury furniture, art, and high-end electronics. Gilbert Fiorentino received hundreds of thousands of dollars in payments. These included deliveries of gold coins, cash handed over in the parking lot of the Miami offices of TigerDirect, and furniture and other goods and services delivered to his Gables Estates waterfront home.

In connection with this scheme, Carl and Gilbert Fiorentino filed false United States Individual Income Tax Returns and also regularly signed conflict of interest questionnaires in which they falsely and fraudulently concealed from Systemax their receipt of cash and other remuneration from vendors who did business with the company.

In doing so, they mislead Systemax’s auditors and prevented them from performing accurate reviews and audits of the company’s books, records, and accounts. Additionally, when Carl Fiorentino learned that he was under investigation by the government, he obstructed justice by instructing witnesses to lie to federal authorities to conceal his criminal conduct.

This case was originally investigated by the U.S. Attorney’s Office for the Eastern District of New York with the assistance of the FBI New York Field Office and the IRS-CI Miami Field Office. Carl Fiorentino was previously charged in the Eastern District of New York on June 18, 2013, with conspiracy to commit mail and wire fraud, multiple counts of mail and wire fraud, and money laundering. The case involving Carl Fiorentino was transferred to the Southern District of Florida by court order on January 6, 2014.

Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.

Do You Have Unreported Income?

 

Want to Know Alternatives to Get Right With the IRS?

 

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at: www.TaxAid.us or www.TaxLaw.ms or

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

Source
DoJ

IRS Actively Seeking US Tax Dodgers Abroad!

 
According to Bloomberg The Department of Justice Tax Division is ramping up an intense crackdown on offshore tax evasion, and people hiding assets overseas should come forward as soon as possible, an agency official said March 6, 2015. Caroline D. Ciraolo , principal deputy assistant attorney general for policy and planning at the division said:

“Time is of the essence,”

“Come in now or face the consequences.”

Speaking at the Federal Bar Association Tax Law Conference, Ciraolo said the government's reach has extended far beyond Switzerland to jurisdictions including:

1. Israel, 
2. India, 
3. Liechtenstein, 
4. Luxembourg and 
5. Barbados 

and hasn't yet revealed its hand in numerous investigations. 

“The lack of public disclosure should be in 

no way viewed as inaction,” she said.

The DOJ official said the government is using the information it is receiving from a host of sources to open new investigations and target new misconduct. That includes its program for Swiss banks to turn over a broad range of data and pay hefty fees to avoid prosecution, she said, adding, “We are looking at everything we receive.”

This is consistent with the Government's stated position  at a recent International Tax Conference in Miami, which I attended, where IRS officers were present for questions and answers. 

These officers included David W. Horton, director, international individual compliance; Kelly R. Jackson, special agent in charge of criminal investigation; and W. Robert Abramitis, senior counsel, which was also posted in The Gleaner. 

FATCA

The IRS team said that FATCA has been successful so far. They said they have collected US$6.5 billion and they reasonably believe that as much as US$100 billion per year could be collected. They are working with other countries that would like to use the US model to improve their tax collection. The IRS will be working closely with the Organization for Economic Cooperation and Development (OECD) to implement Global FATCA; and also that the forms to request information from financial institutions would be standardized so that all countries would use the same forms, making it easy on the financial institutions.

The IRS reasonably believes that FATCA can work, and given that the law has the effect of forcing compliance by every country, ultimately, everyone will benefit.

FBAR

The team said that FBAR is different from FATCA and the requirements are also different. While FATCA is reported on the tax returns, FBAR is an informational submission that must be filed with the Treasury Department if you have more than US$10,000 in financial assets overseas. So, for FATCA, the financial institutions and the foreign governments will report to the IRS directly, but for FBAR, the taxpayers must self-report to the United States Treasury Department by June 30 each year.

FOREIGN CORPORATIONS

The IRS officers said they have a special interest in foreign corporations, i.e., corporations organized outside the United States. They are interested in shareholders with at least 10 per cent ownership and directors of these foreign corporations. Foreign corporations are very important because that is where the big bucks are. They want US citizens and green card holders who are 10 per cent shareholders and directors (in said corporations) to provide information from the following sources annually: articles of incorporation, listing of directors, annual returns for the company filed with the registrar of companies and financial statements. While this information is filed for informational purposes only, the foreign corporations should file a tax return with the IRS. You should note that the requirement applies to partnerships and trusts also.

THOSE WHO GAVE UP CITIZENSHIP

The IRS said a record number of Americans have given up citizenship recently and some may have done so with the intent to get around FATCA. But the news is bad, because every one of those citizens will be thoroughly investigated with a view to seeing if they are trying to evade taxes.

The IRS said that people with a certain amount of assets will be treated as if all the assets were sold and will be taxed as at the day when citizenship was given up. This will also apply to long-term green card holders. Also, if one has given up citizenship and spends more than 30 days in the United States in a calendar year, he may be taxed as if he were a citizen.

BAD BANKS

The IRS has named about a dozen banks worldwide that are considered bad and if you have an account in one of those banks and failed to comply with your filing and tax-reporting obligations, you are very likely to have a problem with the IRS. 

IRS WANTS TO HELP

There is a program to help citizens and green card holders become compliant with their tax obligations without facing a penalty. This can be achieved by filing three years of tax returns and six years of FBARs returns, and paying all taxes and interest, if you live outside the US. But if you live in the US, there is a five per cent penalty calculated on the highest balance of financial assets for the last three years. You must certify under penalties of perjury that you were not trying to evade taxes. The IRS said the break could be withdrawn at any time, so people should jump at the opportunity to be compliant.

ARE THEY WATCHING YOU?

The IRS said it can tell when people enter and exit the country, and lying on immigration forms and tax returns is a federal offence. There is a website that can be used to tell whenever people enter and exit the United States. The number of days spent in the US may be important as follows:

For citizens, if you spend more than 330 days outside the US per year, you will not be required to participate in Obamacare, or the number of days spent abroad will affect the amount of foreign earnings you may be able to exclude from income, hence paying low or no tax to Uncle Sam. For green card holders, you have immigration issues, as well as tax issues if you spend more than a specified period outside the United States.

A WORD TO THE WISE

The IRS has said there are several scams going on with respect to FACTA; and taxpayers should note that the IRS does not communicate via emails. Therefore, I suggest that you should not communicate your tax or financial information by phone, Internet or fax to anyone, including your accountant, lawyer or tax preparer, as you don't know who may be zooming in on your information. Go the old-fashioned way by face-to-face meeting or use a courier service.

The IRS said people may be able to run, but they can't hide. The IRS said it is going to have agents all over the world, as they are going to work closely with foreign governments through the information exchange program 

and the financial institutions.

Also, they said they would be using Internet searches and social media like Facebook and LinkedIn to find tax dodgers, along with whistle-blowers. There will be Global FATCA, where other countries will be following the IRS path. They are proposing one standard form that will be used to get information from financial institutions worldwide. So, if China wants information from Swiss banks, it will use the same forms to make the request as Jamaica or France.

The idea is to make it easier for the banks to retrieve information. So, we may be looking to one tax system if the OECD has its way and tax evasion worldwide may very well be a thing of the past in a few years' time, and the full compliance with the IRS requirements is the best way forward.

CRIMINAL ENFORCEMENT

The Department of Justice’s greater concern is over funds that originated in the U.S. as opposed to funds that were always offshore. Thus, U.S. profits and gains diverted to offshore accounts garner more attention on the criminal side than do foreign gifts or inheritances that were deposited into offshore accounts.

Reliance on professional advice, once a defense, now has become evidence that the advisor and taxpayers were co-conspirators.

IRS is following transfers of funds by so-called “leavers.” Who moved funds from UBS in 2009 and 2010 and views that foolish conduct as significant evidence of willfulness.

OVDP

Preclearance of names is now taking much longer than when the Program first opened because IRS has much more data to go through in order to check a name.

Valuations of included non-financial assets: IRS generally allowing no discounts (minority interest or lack of marketability) from fair market value as it views the inclusion of the value as “rough justice.” Any reasonable good-faith estimate of value is acceptable.

STREAMLINED FILING COMPLIANCE PROCEDURES

The IRS continues to see no value in offering examples of what sort of conduct it would view as willful or non-willful. Each determination is very fact specific and there is a large body of case-law is applicable. Thus, the call is up to the attorney. Nothing more will be forthcoming from IRS on the question of non-willfulness.

• Willful is one of those “know it when you see it” things.
• Ask yourself: Are you nervous about having no protection from criminal indictment, or about having to pay the civil fraud penalty or draconian FBAR penalties? If not, Streamlined is OK.

Size of the account does matter but is not determinative other than at the extreme ends of the spectrum (very small being an indicator of non-willful conduct and very large being a strong indicator of willful conduct)

If joint returns were filed both spouses must file under the Streamlined Process because a joint return must be amended with a joint return. That is because the tax is assessed on the return and not under a closing agreement as in the OVDP (where one or both spouses can enter).

There is no acknowledgment of filing returns under the Streamlined Process because it is just a process for filing tax returns. Aside from the penalty relief it is just like filing a normal return.

Streamlined returns are not treated as ordinary returns. You are filing under threat of criminal prosecution if you do not meet the test of being non-willful, and of other charges if your Non-willfulness Certification is false or leaves out negative facts that make it misleading or if the returns you file are in any way false or misleading.

IRS cashing of your check or sending a bill for additional interest is not an acknowledgment that your returns pass muster in the Streamlined Process. Your return can still be selected for audit later on and there is no process by which one can request an early audit.

Taxpayers with accounts at listed banks can go Streamlined if non-willful.

Practitioners stated that some are submitting names preclearance even if they intend to go Streamlined, just in case evidence of willfulness is discovered. The IRS people discouraged this tactic.

The reason is that the accounting and investigative work in reviewing statements for the Streamlined may turn up evidence of willfulness. If names are submitted you will probably have 50 days before the OVDP Letter is due. During that time you should have a better idea if you can, in fact, certify non-willfulness.

You can also pull transcripts to ascertain if an audit has been commenced. But, the transcript may show an audit code before the audit has commenced. It is the sending of the audit notice and due process rights letter that commences the audit and disqualified a taxpayer from the Streamlined Process, not the entering of the code in the system.

The key element for IRS in ultimately agreeing or disagreeing with the non-willful certificates is when the taxpayer learned of the filing requirements.

There is no OVDP special rule for PFICs in the Streamlined Process.

Upfront Rejections from Streamlined are due mainly to the Certification on its face being insufficient and not reciting specific facts supporting the non-willful assertion. The IRS is not rejecting applicants merely because it disagrees with the conclusion that the conduct is non-willful.

The taxpayer no longer has to be otherwise tax-compliant to file returns under the Streamlined Process. The returns filed can be delinquent returns.

QUIET DISCLOSURES

IRS is screening for amended returns filed outside the OVDP or Streamlined Process. So, taxpayers taking this route may expect an audit.

May be applicable to persons if not worried about criminal charges or willful FBAR penalties and feel strongly that reasonable cause is present.

Do You Have Unreported Foreign Income?

 

  Your Information Is Scheduled To Be Reported 

To The IRS By March 31, 2015!

Want to Know if the OVDP Program is Right for You?

 

Contact the Tax Lawyers at

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

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

IRS Says 3 out of 5 Still Need to File Their 2014 Tax Returns

Issue Number:    IR-2015-38

WASHINGTON — With almost 59 million tax returns filed so far, the Internal Revenue Service estimates that three out of five taxpayers have yet to file their tax returns, according to statistics released today.

2015 FILING SEASON STATISTICS
Cumulative statistics comparing 2/28/14 and 2/27/15
Individual Income Tax Returns:	2014		2015		% change
Total Receipts	58,883,000		58,528,000		-0.6
Total Processed	57,410,000		56,857,000		-1.0
E-filing Receipts:
TOTAL	54,942,000		55,104,000		0.3
Tax Professionals	30,053,000		28,733,000		-4.4
Self-prepared	24,889,000		26,371,000		6.0
Web Usage:
Visits to IRS.gov	163,397,540		179,918,451		10.1
Total Refunds:
Number	48,429,000		47,547,000		-1.8
Amount	$146.918	Billion	$144.903	Billion	-1.4
Average refund	$3,034		$3,048		0.5
Direct Deposit Refunds:
Number	42,380,000		43,228,000		2.0
Amount	$131.203	Billion	$136.571	Billion	4.1
Average refund	$3,096		$3,159		2.0

For taxpayers still working on their taxes, the Internal Revenue Service added three revised publications to IRS.gov just this week. These publications will help businesses and individuals understand how to figure depreciation as well as pension options.

• Publication 946, How to Depreciate Property explains how you can recover the cost of business or income-producing property through deductions for depreciation. The publication was updated to reflect the extension of expiring tax provisions in legislation signed into law on Dec. 19.
• Publication 4587, Payroll Deduction IRAs for Small Businesses explains that individuals saving in a traditional IRA may be able to receive some tax advantages on the money they contribute, and the investments can grow tax-deferred.
• Publication 4334, SIMPLE IRA Plans for Small Businesses explains how a SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA plan offers great advantages for businesses that have 100 or fewer employees (who earned $5,000 or more during the preceding calendar year) and that do not have another retirement plan.

The IRS constantly adds revised tax forms, publications, instructions and tax information to IRS.gov. The IRS encourages taxpayers to frequently visit IRS.gov, including the forms and pubs page for all current forms and publications, updates and changes, and additional information.

Have A Tax Problem?

  

Contact the Tax Lawyers at 

Marini & Associates, P.A.

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

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