Showing posts with label IRS Fines. Show all posts
Showing posts with label IRS Fines. Show all posts
IRS: Disclose Offshore Accounts or Go to Jail
Brian M
That's pretty much the headline from a CNBC article on Friday. And it's true.
In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn't illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.
U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.
So what is a person to do? Taxpayers can do nothing and hope they don't lose the "audit lottery" (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That's right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.
Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms ("FBAR's"), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.
Those that don't comply face prison and loss of 50% of their highest account value.
So what is the risk of getting caught? We think it is quite high.
Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.
The U.S. has been issuing "John Doe" subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.
Still not convinced? The IRS paid its first award under the new whistle blower program - $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.
The world suddenly got much smaller.
In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn't illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.
U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.
So what is a person to do? Taxpayers can do nothing and hope they don't lose the "audit lottery" (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That's right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.
Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms ("FBAR's"), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.
Those that don't comply face prison and loss of 50% of their highest account value.
So what is the risk of getting caught? We think it is quite high.
Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.
The U.S. has been issuing "John Doe" subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.
Still not convinced? The IRS paid its first award under the new whistle blower program - $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.
The world suddenly got much smaller.
Lance Wallach comment: I do not believe all of the above, but if you have money overseas you should file for amnesty and then probably opt-out. That is a special way to get to IRS appeals where you can make a deal. You probably should get help from an ex IRS agent who is a CPA and has done lots of these.
Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He is an American Institute of CPA’s course developer and instructor and has authored numerous best selling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications. For more information and additional articles on these subjects, visit www.vebaplan.com, www.taxlibrary.us, lawyer4audits.com or call 516-938-5007
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Unreported Bank Leumi or Mizrahi Tefahot Bank Account?
By Brian M
You are new to this blog; you already know that we write many articles about offshore tax compliance and in particular, the need to disclose foreign bank and financial accounts. Generally, the IRS operates on a first contact policy meaning if you contact them before they find you, it’s possible to avoid audit, criminal prosecution and the harshest of penalties. (Unreported foreign accounts can carry a penalty as high as $100,000 per account or 50% of the highest account balance for each year the account was not properly disclosed.)
There are exceptions to that policy and they include situations where the IRS had already obtained your name from a cooperating bank – even if the IRS had not first contacted you. Many taxpayers were stunned this week when the IRS elected to rescind participation to many folks already accepted into the offshore amnesty program. From what we can piece together, these folks all had accounts at Bank Leumi and possibly Mizrahi Tefahot Bank.
What happened?
That’s something being asked by many tax lawyers and CPAs. Officially, the IRS can’t answer those questions because of taxpayer confidentiality laws. It appears, however, that the IRS dusted off the amnesty rule that says participation can be denied to folks whose names had already been disclosed.
At first, that sounds reasonable, however, in this case the IRS had already sent acceptance letters to these folks. The IRS’ stated mission is to promote voluntary compliance. That mission is seriously jeopardized when the IRS pulls the rug out from folks who in good faith came forward and tried to do the right thing.
The problem may lie within the IRS computer systems. The organization is so big that the folks running the amnesty program don’t know what is happening in other places within the IRS. Your name could be sitting on an auditor’s desk for months yet the people issuing the acceptance letters have no idea that your account has already been identified. Mistakes happen but taxpayers shouldn’t be punished for the IRS’ own errors.
Already the IRS’ own taxpayer advocate has publicly reported the agency’s failure in communicating the need to disclose offshore accounts. Kicking folks out who have already been accepted will only further hurt the agency’s credibility.
Foreign bank and financial accounts (that includes hedge funds, some insurance vehicles, CDs and brokerage accounts) must be reported annually on a Report of Foreign Bank and Financial Accounts or FBAR form. Failure to report could be a felony and also subject you to huge civil penalties. The IRS has been running an amnesty program to encourage people with unreported accounts to come forward, avoid audit and prosecution and receive a break on penalties. Thousands came forward and were accepted into the program.
This week we learned that some folks with Bank Leumi and Mizrahi Tefahot accounts in Israel were later tossed from the amnesty program even after they had previously been sent acceptance letters. This suggests that the IRS already had their names and account information from these banks. If so, those account holders are not eligible for amnesty but may still be able to avoid prosecution and receive a break on penalties if they can demonstrate that their failure to file an FBAR was because of mere negligence or ignorance.
Getting tossed from the program isn’t necessarily the end of the world for most taxpayers but it means more stress, an audit, higher legal fees and the possibility of much higher penalties. For some, it also means the possibility of prison. If the IRS already had their names, attempting to hide wouldn’t have worked anyway.
The take away from all this is that time is running out. Soon foreign banks will be required to identify and report U.S. account holders and many are doing so already pursuant to John Doe subpoenas and existing tax exchange treaties. The message from the IRS is clear. Get to us before we get to you (or get your name).
Because the IRS does not publicize the names of banks that are under investigation or cooperating, it’s impossible to know what banks have turned over names and when. The sooner one comes forward, however, the better the chances of avoiding the worst penalties.
This is a very good article. I do not agree with all of it. I think if you file and opt out you will get much better results with the IRS and with the IRS fines. Make sure that you use someone who knows what he is doing. Do not pay a CPA or attorney to learn on the job. For more on this Google Lance Wallach or contact him.
RS Offshore Programs Produce $4.4 Billion To Date for Nation’s Taxpayers; Offshore Voluntary Disclosure Program Reopens
I
IR-2012-5, Jan. 9, 2012WASHINGTON — The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.
The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.
“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”
The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.
“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”
The third offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.
In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.
The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.
For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.
Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.
The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.
More details will be available within the next month.
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