SC Will Not Review Start Date of 30 Day Levy Notice

The Supreme Court has declined to review the DC Circuit's affirmance of a Tax Court decision that, for purposes of determining whether IRS has met the requirement in Code Sec. 6330(a) that it notify the taxpayer by mail no less than 30 days before the date of a levy that the taxpayer has the right to a collection due process (CDP) hearing, the 30 days is measured from the mailing date of the IRS notice.

IRS generally may not levy against a person's property or right to property unless it gives the person a notification in writing of his right to, and the opportunity for, a pre-levy CDP hearing with IRS. (Code Sec. 6330(a)(1), Reg. § 301.6330-1(a)(1)).

One way in which that notice may be made is by sending the notice by certified or registered mail at least 30 days before the day of the first levy with respect to the unpaid tax for the tax period. Hand delivery within that same time frame is also allowed. (Code Sec. 6330(a)(2)).

In an effort to collect the taxpayer's Mr. Weiss's unpaid tax liabilities by levy, IRS attempted to hand-deliver the notice at Weiss's residence during a field call on February 11 but, deterred by Weiss's dog, was unsuccessful.

Two days later, IRS initiated the mailing of the notice by certified mail to Weiss's last known address. IRS did not generate a new levy notice dated February 13 but rather enclosed in the envelope the original notice dated February 11.

The taxpayer challenged the timeliness of the levy notice in the Tax Court. The Court held that the mailing date, February 13, was the relevant date from which the 30-day period was measured.

The Circuit Court for the District of Columbia, affirming the Tax Court, has held that the mailing date, February 13, controlled the issue. The Court reasoned that the statute looks to the date the notice is sent; in the context of a mailed notice, "sent" means "mailed."

On Dec. 3, 2018, the Supreme Court refused to review the DC Circuit's decision. Accordingly, that decision is now final.

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Panama Papers Lead To Indictment Of 4 (3 Professionals & 1 Client)

According to Law360, New York federal prosecutors announced the indictment of a lawyer and three other men on December 4, 2018 on charges of wire fraud, tax evasion and money laundering, tying the case to the 2016 leak of documents from the law firm Mossack Fonseca called the Panama Papers.

Law enforcement officials described the charges against attorney Ramses Owens, who remains at large, and investment manager Dirk Brauer, accountant Richard Gaffey and businessman Harald Joachim von der Goltz, all of whom have been arrested, as a warning to would-be tax criminals and those who would help them. The defendants could face decades in prison.

“Law firms, asset managers and accountants play key roles enabling entry into the global financial system,” Assistant Attorney General Brian Benczkowski said in a statement.  

“The Charges Announced Today Demonstrate Our Commitment to Prosecute Professionals Who Facilitate Financial Crimes across International Borders and the Tax Cheats Who Utilize Their Services.”

According to the government, Owens and Brauer, who worked for a firm called Mossfon Asset Management SA with close ties to Owens’ law firm, have spent decades helping U.S. citizens avoid their tax obligations. One such client was von der Goltz, although four other unnamed clients are referred to in the indictment. Gaffey allegedly helped von der Goltz and at least one other client of of Mossack Fonseca.

With help from Mossack Fonseca, the government claims, clients like von der Goltz used shell companies in offshore jurisdictions with strict financial secrecy laws that were technically owned by sham foundations to hide untold amounts of money from the IRS. Von der Goltz falsely told prosecutors that his 102-year-old mother, who lives in Guatemala, was the beneficial owner of companies linked to him, the government claims.

The defendants, who range in age from 50 to 81, face a total of 11 counts. Two of the counts are against von der Goltz alone for allegedly providing false statements to the government after an unnamed representative of a U.S. law firm reached out to the U.S. Department of Justice after the Panama Papers disclosure and offered to set the record straight, according to the indictment.

Authorities said the investigation was a joint effort of investigators at the IRS, the FBI and the U.S. Department of Homeland Security.
 

“The Unsealing Of This Indictment Sends A Clear Message That IRS-CI Is Actively Engaged In International Tax Enforcement, And More Investigations Are On The Way,”

said Don Fort, who leads the tax agency’s criminal investigations unit. “Cases like this help maintain the public’s confidence in our tax system by letting them know that we investigate and prosecute those who evade their tax obligation.” The case is U.S. v. Owens et al., case number 1:18-cr-00693, in the U.S. District Court for the Southern District of New York.

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IRS Update Makes Voluntary Disclosures For Foreign Accounts More Expensive

The cost of voluntarily disclosing previously unreported offshore assets to the IRS avoid criminal prosecution, just got more expenses under an updated procedures the revenue agency released on November 29, 2018.
 

IRS deputy commissioner for services and enforcement Kirsten Wielobob issued a memorandum on November 20, 2018 that the IRS posted publicly Thursday, November 28, 2018, which outlines the process for all voluntary disclosures following the closing of the IRS’s Offshore Voluntary Disclosure Program on Sept. 28, 2018. She noted in the memo that the 2014 OVDP began as a modified version of the OVDP that launched in 2012 after earlier programs in 2009 and 2011. 


Voluntary disclosure is a long-standing practice of the IRS to provide taxpayers with criminal exposure a means to come into compliance with the law and potentially avoid criminal prosecution. See I.R.M. 9.5.11.9. This memorandum updates that voluntary disclosure practice. Taxpayers who did not commit any tax or tax related crimes and do not need the voluntary disclosure practice to seek protection from potential criminal prosecution can continue to correct past mistakes using the procedures the updated Voluntary Disclosure Program or by filing an amended or past due tax return. When these returns are examined, examiners will follow existing law and guidance governing audits of the issues.
“These programs were designed for taxpayers with exposure to potential criminal liability or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets,” Kirsten Wielobob wrote.

 “They Provided Taxpayers With Such Exposure Potential Protection from Criminal Liability and Terms for Resolving their Civil Tax and Penalty Obligations.”

The new procedures are effective for all disclosures after Sept. 28, 2018. The penalties have continue to increase, since the original OVDI program began in 2009.
 

The process begins with taxpayers requesting “pre-clearance” for participation from the agency’s Criminal Investigation Division, after which civil examiners determine tax liabilities and penalties. The civil penalties, which may be assessed for fraud or the fraudulent failure to file income tax returns, could be higher than what would have been assessed under the old Offshore Voluntary Disclosure Program that the IRS ended Sept. 28.

For all cases where CI grants preclearance, taxpayers must then promptly submit to CI all required voluntary disclosure documents using a forthcoming revision of Form 14457. This form will require information related to taxpayer noncompliance, including a narrative providing the facts and circumstances, assets, entities, related parties and any professional advisors involved in the noncompliance.

Once CI has received and preliminarily accepted the taxpayer’s voluntary disclosure, CI will notify the taxpayer of preliminary acceptance by letter and simultaneously forward the voluntary disclosure letter and attachments to the LB&I Austin unit for case preparation before examination. CI will not process tax returns or payments.  

The updated Voluntary Disclosure Procedures also provide for various outcomes depending upon the extent of taxpayers’ cooperation with the IRS.

If the Parties Are Unable to Reach an Agreement, IRS Examiners Have the Discretion to Increase the Disclosure Period to the Full Duration of Noncompliance and Assert Maximum Penalties with the Approval of Management.

Civil penalties for fraud are to be applied to the tax year with the highest tax liability, but in the absence of an agreement, they could be applied to a greater number of years within the six-year scope.

  

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Decade Of Dodging US Taxes Gets UK Lawyer 20 Months in Prison

According to Law360, a Manhattan federal judge sentenced English lawyer Michael Little to 20 months in prison on November 20, 2018 for helping the children of a deceased investor dodge taxes on their $14 million inheritance over a decade and for failing to pay his own taxes, ruling also that the former Royal Marine lied as he testified in his own defense.

U.S. District Judge P. Kevin Castel ordered Little, 68, to report to federal prison on Feb. 19. The sentence came in well below a request by prosecutors for a prison term in the range of 10 to 12 years as contemplated by official guidelines.

“Evasion unpunished breeds more evasion,” the judge said, saying Little’s tax-dodging was born of greed and arrogance but adding he was unlikely to offend again

upon leaving custody.

Judge Castel held off on the government’s request to order Little to pay roughly $4.4 million of restitution. Little contests the amount, and the matter will be briefed in coming weeks.

The judge did find that Little lied repeatedly on the witness stand during his trial earlier this year. A jury convicted Little on 19 criminal counts on April 10, finding:

• he obstructed the IRS,
• conspired with the family of deceased investor Harry Seggerman to file false tax returns from 2001 to 2010,
• failed to report foreign bank accounts, and
• failed to file his own taxes from 2005 to 2010.

Among other lies Little told the jury, he said he did not enter into a conspiracy with the Seggermans, prosecutors said in a court filing after the verdict. That contention was adopted by Judge Castel, who found Little also lied when he told the jury he had had no intention to break the laws of the U.S.

Prosecutor Christopher DiMase said Little’s conduct amounted to “an egregious pattern of lies and deception.”

Acting as his own counsel, as he did at trial, Little pushed back against many of the prosecution’s characterizations of his conduct during the lengthy sentencing hearing, which stretched over three hours.

“I am being blamed for their misdeeds,” Little said of the Seggerman family.

Four of Harry Seggerman’s children, all government cooperators who have admitted guilt, took the stand during the trial to testify against Little. That included Seggerman’s daughter Yvonne Seggerman, who told the jury that Little was present at a 2001 meeting at the Four Seasons hotel in Manhattan when a plan to avoid paying the IRS was crafted.

“They will pay for their crimes at the time of their sentencing,” Judge Castel said, calling both Little and the Seggerman family “tax cheats.”

Little had asked for a non-prison sentence, saying his legal saga has “broken” his health and telling Judge Castel that he suffered a heart attack on July 1. Little also said in court filings that he has reported all income to British tax authorities.

But the prosecution noted Tuesday that he did not do so until after he was criminally charged. Little was arrested in May 2012.

Little said at the end of Tuesday’s hearing that he intends to file an appeal.

The case is U.S. v. Little, case number 1:12-cr-00647, in the U.S. District Court for the Southern District of New York.

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Venezuelan Billionaire News Network Owner and Former Owner of Dominican Republic Bank Charged in Money Laundering Conspiracy Involving Over $1 Billion in Bribes

According to the DoJ, a Venezuelan billionaire who owns Globovision news network was charged in an indictment unsealed yesterday for his role in a billion-dollar currency exchange and money laundering scheme.  A former Venezuelan national treasurer and a former owner of Banco Peravia bank in the Dominican Republic each pleaded guilty in proceedings unsealed today for their roles in the scheme.

Raul Gorrin Belisario (Gorrin), 50, a Venezuelan citizen with a residence in Miami, Florida, was charged in an indictment filed on Aug. 16, 2017 in the Southern District of Florida with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), one count of conspiracy to commit money laundering and nine counts of money laundering. 

The case has been assigned to U.S. District Judge William P. Dimitrouleas of the Southern District of Florida.  Alejandro Andrade Cedeno (Andrade), 54, a Venezuelan citizen residing in Wellington, Florida and a former Venezuelan national treasurer, pleaded guilty under seal on Dec. 22, 2017 before U.S. District Judge Robin L. Rosenberg of the Southern District of Florida to one count of conspiracy to commit money laundering. 

Gabriel Arturo Jimenez Aray (Jimenez), 50, a Venezuelan citizen residing in Chicago, Illinois and former owner of Banco Peravia bank, pleaded guilty under seal on March 20, 2018 in the Southern District of Florida before Judge Rosenberg to one count of conspiracy to commit money laundering.  Charges against Andrade and Jimenez were unsealed today.

The indictment alleges that Gorrin paid millions of dollars in bribes to two high-level Venezuelan officials, including Andrade, to secure the rights to conduct foreign currency exchange transactions at favorable rates for the Venezuelan government.  In addition to wiring money to and for the officials, Gorrin allegedly purchased and paid expenses for them related to private jets, yachts, homes, champion horses, high-end watches and a fashion line.  To conceal the bribe payments, Gorrin made payments through multiple shell companies.  Gorrin allegedly partnered with Jimenez to acquire Banco Peravia, a bank in the Dominican Republic, to launder bribes paid to Venezuelan officials and proceeds of the scheme.

As part of his guilty plea, Andrade admitted that he received over $1 billion in bribes from Gorrin and other co-conspirators in exchange for using his position as Venezuelan national treasurer to select them to conduct currency exchange transactions for the Venezuelan government.  As part of his plea agreement, Andrade agreed to a forfeiture money judgment of $1 billion and forfeiture of all assets involved in the corrupt scheme, including real estate, vehicles, horses, watches, aircraft and bank accounts.  His sentencing is scheduled for Nov. 27.

As part of his guilty plea, Jimenez admitted that, as part of the scheme, he conspired with Gorrin and others to acquire Banco Peravia, through which he helped launder bribe money and scheme proceeds.  His sentencing is scheduled for Nov. 29.

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TCJA Divots Golf Corse Expenses and Takes a Bite out of the Meal Deduction.

Taking clients to ballgames? Tax law change makes it costlier.

Businesses, especially smaller firms, may scale back on treating clients to major league baseball games, golf outings and the like after Congress and President Donald Trump ended a tax break for such entertainment.

Tax reform law commonly referred to as H.R. 1 Tax Cuts and Jobs Act of 2017 has changed the deductibility of certain meals, entertainment and transportation expenses.

• Prior to 2018, a taxpayer could deduct 50 percent of business meals and entertainment and 100 percent of meals provided through an in-house cafeteria or meals provided for the convenience of the employer (i.e., de minimis fringe benefit).
• Under the new law, effective January 1, 2018:
• entertainment is no longer deductible and
• meals provided through an in-house cafeteria or for the convenience of the employer are subject to the 50 percent limitation.

Maximize tax deductions and save time on tax preparation by setting up separate general ledger accounts for business meals (50 percent deductible), entertainment (nondeductible), and recreational/social employee expenses (100 percent deductible).

The tax overhaul that Trump signed Dec. 22 eliminated a 50 percent deduction for business-related expenses for “entertainment, amusement or recreation.” Suddenly, luxury boxes at stadiums and arenas—along with theater and concert tickets—will be more costly for firms that use them to woo clients.

Businesses that use the entertainment deduction extensively, including law, investment, accounting and lobbying firms, will have to gauge the effects on their bottom lines. Smaller businesses will be less able to absorb the cost.

“I am a long-time, long-suffering season-ticket holder to the New York Jets, so a lot of time, I take clients,” said Charles Capetanakis, a lawyer and CPA at Davidoff Hutcher & Citron LLP, a mid-sized law firm in New York. Eliminating the deduction “is really going to hurt the small businesses that need to promote their business by entertaining clients.”

The loss of the entertainment deduction is a kind of counterpoint to the Republican Congress’s sweeping tax cuts for businesses. The overhaul slashed the corporate rate to 21 percent from 35 percent. It also created a new 20 percent deduction for many partnerships, limited liability companies, sole proprietorships and other “pass-through” businesses, whose owners pay individual tax rates on the income they earn.

One impact from the loss of the entertainment-expense deduction may be “smaller spends” on professional sports tickets, said Robert Delgado, the principal-in-charge of the compensation and benefits group of the Washington national tax practice at KPMG LLP. But the degree of any reduction “remains to be seen,” said Ed Sturm, a managing director at Deloitte Tax LLP, who heads the tax practice’s meals, travel and entertainment service areas.

“Each company will have to decide for itself whether the higher after-tax cost of these expenses makes good business sense,” Sturm said.

Some have already begun grappling with that decision.

The loss of the entertainment expenses “is painful,” said Washington lobbyist Ryan Ellis, who specializes in tax issues. But there’s still a bright side. Congress didn’t touch another break: Businesses still have a 50 percent deduction for clients’ meals—whether catered or at a restaurant.
Asked how K Street lobbyists in Washington would entertain clients going forward, Ellis said: “At restaurants.”

Planning tip 1 : Maximize tax deductions and save time on tax preparation by setting up separate general ledger accounts for business meals (50 percent deductible), entertainment (nondeductible), and recreational/social employee expenses (100 percent deductible).

The new law addresses transportation two times. It disallows a deduction for the expense of any qualified transportation fringe benefit provided to an employee of the taxpayer. Qualified transportation fringe benefits include transportation in connection with travel between the employee’s residence and place of employment, any transit passes and qualified parking. Qualified parking means parking provided to an employee on or near the business premises of the employer or on or near a mass transit station. The new law later goes on to say no deduction is allowed for any expense incurred for providing any transportation to an employee of the taxpayer in connection with travel between the employee’s residence and place of employment, “except as necessary for ensuring the safety of the employee.” No guidance has been provided to clarify the meaning of this “safety” clause.

Planning tip 2: If an expense is incurred to provide any transportation to an employee in connection with travel between the employee’s residence and place of employment to ensure the safety of employees, document these safety reasons to substantiate your deduction for these expenses.

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Sources:

TAX CUTS AND JOBS ACT

Taxprotoday

2017 TCJA Allows Small Businesses to Expense More

The Internal Revenue Service reminded small business taxpayers in IR-2018-223 that changes to the tax law mean they can immediately expense more of the cost of certain business property. Many are now able to write off most depreciable assets in the year they are placed into service.

The Tax Cuts and Jobs Act (TCJA), passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. Among those for business owners are tax rate changes for pass-through entities, changes to the cash accounting method for some, limits on certain deductions and more.

Section 179 expensing changes

A taxpayer may elect to expense all or part of the cost of any Section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. These changes apply to property placed in service in taxable years beginning after Dec. 31, 2017. For most businesses, this means the 2018 return they file next year.

Section 179 property includes business equipment and machinery, office equipment, livestock and, if elected, qualified real property. The TCJA also modifies the definition of qualified real property to allow the taxpayer to elect to include certain improvements made to nonresidential real property. See New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act for more information.

New 100 percent, first-year ‘bonus’ depreciation

The 100 percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify. The law also allows expensing for certain film, television, and live theatrical productions, and used qualified property with certain restrictions.

The deduction applies to business property acquired after Sept. 27, 2017, and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. In general, the bonus depreciation percentage is reduced for property placed in service after 2022. See the proposed regulations for more details.

Taxpayers may elect out of the additional first-year depreciation for the taxable year the property is placed in service. If the election is made, it applies to all qualified property that is in the same class of property and placed in service by the taxpayer in the same taxable year. The instructions for Form 4562, Depreciation and Amortization, provide details.

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