Issues With Potential Criminal Charges: Voluntary Disclosure-FBAR-OVDI

Lance Wallach

From the IRS website:

New Filing Compliance Procedures for Non-Resident U.S. Taxpayers

The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1. Some of these taxpayers have recently become aware of their filing obligations and now seek to come into compliance with the law. The Service is announcing a new procedure for current non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns to file their delinquent returns. This procedure will go into effect on Sept. 1, 2012.

Description of proposed new procedure:

While more details will be forthcoming, taxpayers utilizing the new procedure will be required to file delinquent tax returns, with appropriate related information returns, for the past three years and to file delinquent FBARs for the past six years. All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the procedure and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.

Unfiled Returns

The remedy is to get the returns filed

There are two advantages to filing as soon as possible:
Generally, if a taxpayer is due a refund for withholding or estimated taxes paid, it must be claimed within 3 years of the return due date or risk losing the right to it. The same rule applies to a right to claim a tax credit such as the Earned Income Credit (EIC).
Self-employed persons who do not file a return will not receive credits toward Social Security retirement or disability benefits. Failure to file results in not reporting any self-employment income to the Social Security Administration.
Taxpayers who haven’t filed returns always want to know what problems could result from failure to file returns. The following is from the IRS website:
A long-standing practice of the IRS has been not to recommend criminal prosecution of individuals for failure to file tax returns, provided they voluntarily file, or make arrangements to file, before being notified they are under criminal investigation. The taxpayer must make an honest effort to file a correct return and have income from legal sources. A letter from the IRS concerning taxes is not a notice that a taxpayer is under criminal investigation.
The IRS helps to get people back into the system as part of its long-term plan to improve voluntary tax compliance. The IRS wants to get people back into the system, not prosecute ordinary people who made a mistake. However, flagrant cases involving criminal violations of tax laws will continue to be investigated.

Attention taxpayers who have undisclosed foreign accounts

You need to consider the 2012 Offshore Voluntary Disclosure Program (OVDP)
From question 4 of Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers:
Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and will become more available under the Foreign Account Tax Compliance Act (FATCA) and Foreign Financial Asset Reporting (new IRC § 6038D).
From question 3 of Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers:
When a taxpayer truthfully, timely, and completely complies with all provisions of the voluntary disclosure practice, the IRS will not recommend criminal prosecution to the Department of Justice.

IR-2012-5, Jan. 9, 2012

WASHINGTON — 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.

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.

www.fincen.gov/forms/files/FBAR Notice re Extended Filing Date %28532-2013%29_editSig.pdf

www.fincen.gov/forms/files/FBAR Notice re Extended Filing Date %28532-2013%29_editSig.pdf

FBAR/OVDI LANCE WALLACH: 412i, 412e3, www.412iplans.org Lawline.com Continu...

FBAR/OVDI LANCE WALLACH: 412i, 412e3, www.412iplans.org Lawline.com Continu...

Foreign help vowed in tax evasion Crackdown

It will soon get a lot harder to use overseas accounts to hide income and assets from the Internal Revenue Services.

More than 77.000 foreign banks, investment funds and other financial institutions have agreed to share information about U.S. account holders wit the the IRS as part of a crackdown on offshore evasion, the Treasury Department announced yesterday. 

The list includes Russian financial institutions. Russian banks had to apply directly to the IRS because the United States broke off negotiations with the Russian governments over an information-sharing agreement because of Russia's actions in the Ukraine.

Nearly 70 countries have agreed to share information from their banks as part of a U.S. law that targets Americans hiding assets overseas. Participating countries include the world's financial giants, as well as many places where Americans have traditionally hidden assets, including Switzerland, the Cayman Islands and the Bahamas.

Starting in March 2015. these financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by U.S. taxpayers.

Under the law, foreign banks that don't agree to share information with the IRS face steep penalties when doing business in the United States.

The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program- a significant price for access to the world’s largest economy.

The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage- some say force- foreign financial institutions to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.

Foreign help vowed in tax evasion Crackdown

It will soon get a lot harder to use overseas accounts to hide income and assets from the Internal Revenue Services.

More than 77.000 foreign banks, investment funds and other financial institutions have agreed to share information about U.S. account holders wit the the IRS as part of a crackdown on offshore evasion, the Treasury Department announced yesterday. 

The list includes Russian financial institutions. Russian banks had to apply directly to the IRS because the United States broke off negotiations with the Russian governments over an information-sharing agreement because of Russia's actions in the Ukraine.

Nearly 70 countries have agreed to share information from their banks as part of a U.S. law that targets Americans hiding assets overseas. Participating countries include the world's financial giants, as well as many places where Americans have traditionally hidden assets, including Switzerland, the Cayman Islands and the Bahamas.

Starting in March 2015. these financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by U.S. taxpayers.

Under the law, foreign banks that don't agree to share information with the IRS face steep penalties when doing business in the United States.

The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program- a significant price for access to the world’s largest economy.

The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage- some say force- foreign financial institutions to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.

Multinational and international taxation services

Multinational and international taxation services

Fbar Ovdi Want to Go to Jail? Offshore Tax. Lance Wallach, expert witness.

The Federal government is aggressively pursuing taxpayers with undisclosed foreign accounts and unreported foreign income using information furnished by the foreign banks and other sources. If you have not yet applied for the Offshore Voluntary Disclosure Program, Recent convictions involving UBS Clients:

1. Jan. 30, 2012 - Stephen M. Kerr, Michael Quiel and Christopher M. Rusch were charged in Phoenix, Ariz., with conspiracy to defraud the IRS for concealing millions of dollars in assets in numerous secret Swiss bank accounts held at UBS and elsewhere.

2. Jan. 20, 2012 - Kenneth Heller, of New York, N.Y., was sentenced to 45 days in prison and two years of supervised release. Heller pleaded guilty to income tax evasion in June 2011 and admitted to hiding more than $26.4 million in a bank account at UBS AG. He has agreed to pay a civil penalty of over $9.8 million.

3. Jan. 11, 2012 - Michael Reiss, a doctor, professor and medical researcher, of Princeton, New Jersey, was sentenced to eight months in a community confinement center for failing to file FBAR's with the IRS. Reiss pleaded guilty in August 2011 and agreed to pay back taxes of at least $400,000 and to pay a civil penalty of over $1.2 million.

4. Dec. 7, 2011 - Amir Zavieh, of San Francisco, Calif., was indicted with conspiring to defraud the Internal Revenue Service (IRS). According to the indictment, Zavieh concealed a bank account at UBS by placing his domestic assets in the name of a nominee and failing to file income tax returns.

5. Nov. 9, 2011 - Robert E. Greeley, of San Francisco, was sentenced to three years probation and ordered to pay $16,869 in restitution to the IRS. In addition, Greeley will pay over $6.8 million in civil penalties and interest. Greeley pleaded guilty in August 2011 to charges of filing a false federal income tax return. He concealed more than $13 million in two bank accounts he held with UBS AG.

6. Nov. 9, 2011 - Richard Werdiger, of Purchase, N.Y., was sentenced to one year and one day in prison for conspiring to defraud the IRS by hiding more than $7.1 million at UBS, filing false income tax returns and evading nearly $400,000 in taxes. In addition, Werdiger agreed to pay a civil penalty of over $3.8 million.

7. Oct. 5, 2011 - Peter Schober, of Boston, Mass., was sentenced to one month in prison and six months of supervised release, of which two months will be served in home confinement. Schober was also ordered to pay $77,870 in restitution and a $777,986 civil penalty. In November 2010, Schober pleaded guilty to willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR) concealing over $1 million from the IRS.

8. July 14, 2011 - Anton Ginzburg pleaded guilty to failing to file a Report of Foreign Bank and Financial Accounts (FBAR). Ginzburg agreed to pay a civil penalty of over $1.5 million.

9. June 20, 2011 - Sean and Nadia Roberts, of Tehachapi, Calif., pleaded guilty to filing a false tax return related to an undisclosed Swiss bank account at UBS AG.

10. May 24, 2011 - Harry Abrahamsen, of Oradell, N.J., was sentenced to three years probation, including 12 months of home confinement with electronic monitoring, and ordered to pay $600,000 in restitution to the Internal Revenue Service (IRS). In addition, Abrahamsen agreed to pay a civil penalty in excess of $300,000. In April 2010, Abrahamsen pleaded guilty to failure to file a (FBAR) report and admitted that he concealed over $1 million in Swiss bank accounts.

11. May 23, 2011 - Lucille Abrahamsen Jackson, of Hilldale, N.J., was sentenced to one-year probation. In addition, Jackson agreed to pay a civil penalty in excess of $379,000. Jackson pleaded guilty in November 2010 to filing a false tax return and failing to file a Report of Foreign Bank or Financial Account (FBAR). She admitted to concealing over $750,000 in a UBS account by transferring ownership of the account to a nominee Panamanian corporation.

12. April 21, 2011 - Ernest Vogliano, of Manhattan, N.Y., was sentenced to two years probation and ordered to pay a $940,000 civil penalty. He pleaded guilty on Dec. 22, 2010, to filing false tax returns and conspiring to defraud the Internal Revenue Service by hiding $4.9 million in an offshore bank account with UBS, AG.

13. March 14, 2011 - Jeffrey Chatfield, of San Diego, Calif., was sentenced to three years' probation and ordered to pay more than $96,000 to resolve his civil liability with the IRS for failing to file the required Reports of Foreign Bank and Financial Reports (FBARs). Chatfield pleaded guilty on Nov. 18, 2010, to filing a false tax return in which he failed to report a UBS account containing $900,000. Between 2000 and 2008, Chatfield transferred the $900,000 through several offshore accounts of nominee entities.

14. March 8, 2011 - Edward Gurary, of Orange Village, Ohio, pleaded guilty to filing false income tax returns for the years 2004 through 2008. Gurary owned and controlled a financial account at UBS AG which was in the name of a Bahamian entity and failed to report interest income earned on his tax returns.

15. March 4, 2011 - Arthur Joel Eisenberg, of Seattle, Wash., was sentenced to serve three years' probation and to pay a $2.1 million penalty for failing to file a Report of Foreign Bank or Financial Account (FBAR) form. Eisenberg pleaded guilty in December 2010 to willfully filing a false tax return which failed to report over $3.1 million in various UBS bank accounts.

16. Dec. 7, 2010 - Samuel Phineas Upham, of New York, N.Y., was indicted conspiring with a family member to hide over $11 million in an offshore UBS bank account. He also assisted in establishing a sham foundation in Liechtenstein to further conceal money from the IRS.

17. Nov. 19, 2010 - Bernard Goldstein, of Carlsbad, Calif., was indicted for conspiracy to defraud the IRS, filing false tax returns, and failing to file Report of Foreign Bank or Financial Accounts (FBARs). Goldstein is alleged to have transferred over $2 million in a UBS account to a sham Panamanian corporation in an effort to conceal the account from the IRS.

18. Nov. 10, 2010 - Sybil Nancy Upham, of Manhattan, N.Y., pleaded guilty to conspiring to defraud the IRS and subscribing to false federal income tax returns. As part of her plea agreement, Upham has agreed to pay over $5.5 million in penalties for failure to file FBARs. On April 15, 2010, Upham was indicted with five other individuals for hiding millions of dollars in secret Swiss bank accounts.

19. Oct. 4, 2010 - Gregory Rudolph, of Brookline, Mass., pleaded guilty to failing to comply with foreign bank account reporting requirements. UBS bankers assisted Rudolph with creating a shell company registered in the British Virgin Islands and a shell corporation registered in Hong Kong in hiding in excess of $1 million. In October 2010, Rudolph was indicted with Peter Schober.

20. Sept. 21, 2010 - Jules Robbins, of New York, N.Y., who owned and operated watch distribution companies, was sentenced to one-year probation and ordered to pay a civil FBAR penalty of $20.8 million. Robbins set up a sham Hong Kong corporation which was listed as the holder of an UBS account in an effort to conceal his income from the IRS. This account and Robbins' other offshore accounts collectively contained almost $42 million in unreported income.

21. Sept. 17, 2010 - Federico Hernandez, of New York, N.Y., was sentenced to 12 months in prison, six months home confinement, and ordered to pay a civil FBAR penalty of $4.4 million. Hernandez used sham companies set up in the British Virgin Islands and Panama to conceal his ownership of UBS accounts totaling $8.8 million.

22. July 1, 2010 - Leonid Zaltsberg, of Milltown, N.J., pleaded guilty to filing a false tax return for 2003 and failing to file a Report of Foreign Bank or Financial Accounts (FBAR). In his plea agreement, Zaltsberg admitted failing to disclose the existence of a Swiss bank account on his tax returns for the years 2000 through 2006 and concealing over $2 million in his Swiss account. On Dec. 20, 2010, Zaltsberg was sentenced to four years of probation, including one year of home confinement. In addition, he was ordered to pay civil penalties for failing to file an FBAR and a $3,000 fine.

23. April 15, 2010 - In Manhattan, N.Y., seven UBS clients were indicted for collectively hiding over $100 million in secret Swiss bank accounts. Two of these individuals, Jules Robbins and Federico Hernandez, pleaded guilty and agreed to pay civil penalties of $20.8 million and $4.4 million, respectively. The remaining indicted clients were Kenneth Heller, Sybil Nancy Upham, Richard Werdiger, Ernest Vogliano and Shmuel Sternfeld.

24. April 13, 2010 - Paul Zabczuk, of The Woodlands, Texas, pleaded guilty to filing a false tax return wherein he failed to report his interest in or signature authority over financial accounts at UBS AG. Zabczuk was sentenced on July 27, 2010, to three years of supervised release with one year served in home detention and 150 hours community service. In addition, Zabczuk was ordered to file accurate tax returns and pay all taxes, interest and penalties due and owing to the IRS.

25. Feb. 4, 2010 - Jack Barouh of Golden Beach, Fla., pleaded guilty to filing a false tax return. Barouh admitted to filing a false tax return for 2007 in which he failed to report a foreign bank account. He was sentenced to 10 months in prison and ordered to pay all taxes, interest and penalties due and owing.

26. Oct. 5, 2009 - Roberto Cittadini of Bellevue, Wash., pleaded guilty to filing a false tax return and admitted to concealing nearly $2 million in Swiss bank accounts. Cittadini, a retired sales manager for Boeing, failed to file a Report Foreign Bank and Financial Accounts for 2001 through 2003. Cittadini was sentenced on Jan. 8, 2010, to six months home detention and one year supervised release and was ordered to pay a $10,000 fee and $17,985 in restitution.

27. Sept. 25, 2009 -Juergen Homann of Saddle River, N. J., pleaded guilty to failure to file a Report of Foreign Bank or Financial Accounts and accepted responsibility for concealing more than $5 million in Swiss bank accounts. Homann was sentenced on Jan. 6, 2010, to five years probation and was ordered to pay a $60,000 fine.

28. Aug. 14, 2009 - John McCarthy of Malibu, Calif., pleaded guilty to failing to inform the government of a Swiss bank account as part of a scheme to move at least $1 million from the United States into Swiss bank accounts with the goal of avoiding the payment of federal income taxes. McCarthy was sentenced on March 22, 2010, to three years of supervised release with six months served in home detention and 300 hours community service. In addition, he was ordered to pay a $25,000 fine and to file tax returns for 2003 through 2008 and pay all taxes due and owing.

29. July 28, 2009 - Jeffrey P. Chernick of Stanfordville, N.Y., pleaded guilty to charges of filing a false tax return. Chernick, who owns a corporation which represents toy manufacturers in China and Hong Kong, accepted responsibility for concealing more than $8 million in Swiss bank accounts. Chernick was sentenced on Oct. 30, 2009, to three months in prison and one year of supervised release with six months served in home detention.

30. June 25, 2009 - UBS client Steven Michael Rubinstein of Boca Raton, Fla., pleaded guilty to filing a false tax return for tax year 2004. On April 1, 2009, Rubinstein was charged with filing a false tax return that intentionally failed to disclose the existence of a Swiss bank account maintained by UBS of which he was the beneficial owner and failed to report any income earned on that account. Rubinstein was sentenced on Oct. 28, 2009, to three years probation, of which 12 months will be served in home detention.

31. April 14, 2009 - Robert Moran of Lighthouse Point, Fla., pleaded guilty to a criminal information charging him with filing a false income tax return. Moran accepted responsibility for concealing more than $3 million in assets in a secret bank account at UBS in Switzerland. Moran was sentenced on Nov. 6, 2009, to two months in prison and one year of supervised release with five months in home confinement.

 As an expert witness Lance Wallach's side has never lost a case. People need to be careful of 419 Welfare Benefit Plans, 412i plans, Section 79 plans and Captive Insurance Plans. Most of these plans are sold by insurance agents. If you are in an abusive, listed or similar transaction plan you need to file under IRS 6707a. The participant files form 8886, and the salesmen or accountant who signs the tax returns files form 8918 if they got paid over $10,000. They are called Material Advisors and face a minimum $100,000 fine. Some plans are offshore which could involve FBAR or OVDI filings. If you have money overseas you probably need to file for IRS tax amnesty. If you want to reduce the tax we suggest that you first file and then opt out. For more information Google Lance Wallach.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

Attention taxpayers who have undisclosed foreign accounts You need to consider the 2012 Offshore Voluntary Disclosure Program (OVDP)

Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and will become more available under the Foreign Account Tax Compliance Act (FATCA) and Foreign Financial Asset Reporting (new IRC § 6038D).

From question 3 of Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers:

When a taxpayer truthfully, timely, and completely complies with all provisions of the voluntary disclosure practice, the IRS will not recommend criminal prosecution to the Department of Justice.

IR-2012-5, Jan. 9, 2012

WASHINGTON — 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 getright with us before we find you,” Shulman said. “We are following more leadsand 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.

Should You Close Your Foreign Bank Account

Lance Wallach

Wouldn’t it be nice if we lived in a fair world? Wouldn’t it be nice if the IRS gave the little guy a break?  Unfortunately, that’s just not the way it is. The news is littered with casualties of the IRS’ aggressive stance on taxpayers who don’t come clean.

The IRS is convinced — despite all evidence to the contrary — that the way to collect more tax revenue is to go after US taxpayers who have undeclared foreign accounts. The IRS has decided that it should increase its audit of so-called wealthy taxpayers, just hoping they can land someone with undeclared bank accounts.

It is common to wonder if closing a foreign bank account can solve disclosure problems.

Unfortunately, it can’t. As numerous prosecutions make clear, the stakes have never been higher and the potential liabilities can be staggering. Consider these 10 rules:

1. You Must Report Worldwide Income. You must report your worldwide income on your U.S. income tax return. Plus,  if you have an interest in a foreign bank or financial account you must check “yes” (on Schedule B). This is true even if you live outside the U.S. or pay foreign taxes on your foreign income.

2. FBARs Too. Tax return filing alone isn’t enough. All U.S. persons with foreign bank accounts exceeding $10,000 at any time during the year must file an FBAR by each June 30.

3. New Form. Now with your tax return, you may also need to file an IRS Form 8938 to report your foreign accounts and assets

4. There Are Big Penalties. Failures can be considered tax evasion and fraud. The criminal statute of limitations is six years. Plus, the statute of limitations never expires on civil tax fraud.

5. FBAR Penalties Are Worse. The penalty for failing to file an FBAR is $10,000 for each non-willful violation. If willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account for each violation. Each year you didn’t file is a separate violation.

6. You Can Even Go To Jail. Tax evasion can carry a prison term of up to five years and a fine of up to $250,000. Filing a false return can mean up to three years in prison and a fine of up to $250,000. Failing to file a tax return can mean a one year prison term and a fine of up to $100,000. Failing to file FBARs can be criminal too with monetary penalties up to $500,000 and prison for up to ten years.

7. Voluntary Disclosure Is Still An Option. If you admit your failures to the IRS and say you want to make it right, you’ve made a “voluntary disclosure.” You will pay back taxes and penalties but not be prosecuted

8. “Quiet Disclosures” Are Discouraged. A “quiet” disclosure is a correction of past tax returns and FBARs without drawing attention to what you are doing. The IRS warns against it.

9. Prospective Compliance Only Is Risky. Can you start filing complete tax returns and FBARs prospectively, but not try to fix the past? Maybe, but the risk is that your past non-compliance will be noticed and it may then be too late to make a voluntary disclosure.

10. Disclosure Is The Key. You can have money and investments anywhere in the world as long as you disclose your foreign accounts. When in doubt, disclose.

There’s widespread confusion, misinformation and noncompliance.

You need an Expert. Contact Lance Wallach today.

If you use a CPA who was with the international division of the IRS you should opt out after filing to reduce your taxes. If done correctly this is the best way to pay a lot less.

NOTE: Your request for this information is completely confidential and is 100% protected.

 Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows.

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.

FBAR Prosecution Warning

 (PRWEB) March 05, 2013

“For those individuals who have yet to come forward and report their foreign income, as well as the existence of their foreign accounts, the clock is ticking”.  “Individuals will face serious civil and criminal penalties as well as the possibility of criminal prosecution. If ever there was a sense of urgency, it is now!”

Over the past several years the Treasury Department has been increasing its enforcement initiatives with respect to unreported offshore income as well as its investigation of unreported foreign financial accounts.

On February 14, 2013, the U.S. Department of the Treasury announced the signing of a bilateral agreement with Switzerland to assist it with the implementation of the information reporting and withholding tax provisions, commonly known as the Foreign Account Tax Compliance Act (FATCA).

According to Acting Secretary of the Treasury, Neal S. Wolin, the announcement “marks a step forward” in the Treasury’s efforts to work with foreign governments in order to combat offshore tax evasion and to flush out those taxpayers who have decided to wait and see what happens rather than proactively addressing their compliance issues in the form of participation in the Off Shore Voluntary Disclosure Program or by taking other compliance measures.

FATCA, which was enacted by Congress in 2010, focuses on non-compliance by U.S. taxpayers who utilize foreign accounts. The bilateral agreement signed on the 14th of February is the first signed agreement and is based on the second of the two model agreements circulated by the Treasury Department.

Switzerland is one of eight countries that have either signed or initialed the intergovernmental agreement (IGA) which helps facilitate the effective and efficient implementation of FATCA and indirectly, will help weed out those individuals who were required but failed to file Foreign Bank Account Reports (FBARS). The Treasury Department is currently engaged with more than 50 countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.

"The impact of these agreements will be immediately felt by those taxpayers who have heretofore elected not to comply with FATCA and who have failed to otherwise comply with the FBAR reporting requirements," states Verni.

The latest initiative comes on the heels of last year’s amendment to Section 6501 (e) of the Internal Revenue Code, which extends the statute of limitation for purposes of assessment from three to six years in cases where unreported offshore income exceeds $5,000.00. The stature extends the period in which the Internal Revenue Service may assess additional income tax to six years from the latter of when the return was due without regard to extension or the date the return was actually filed.

The effective date for the amendment to Section 6501 applies to all returns as long as the time period for the assessment of taxes has not expired as of March 18, 2010. Accordingly, if the income tax return was filed after March 18, 2010, or the assessment statute was still otherwise open as of that date, and more than $5,000.00 was omitted from gross income that is attributable to specified foreign financial assets, the statute remains open under Section 6501€ for a total of six years from the date the return was filed. The foregoing applies whether or not Form 8938 was filed with the taxpayer’s Form 1040.

For further information about FBAR regulations contact Lance Wallach the Expert 0516-938-5007

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.

The IRS really, REALLY wants your FBAR

Penalties?

• If non-filing is accidental, up to $10,000.
• If non-filing is intentional, up to the greater of $100,000 or 50 percent of account balances. Plus criminal penalties may also apply.

Haven’t filed FBAR in the Past?
The OVDI (Offshore Voluntary Disclosure Incentive) program is still open, albeit with a higher penalty. Lots if Internet chatter about OVDI exists. For more information on various strategies available for OVDI, please click OVDI on the drop down Category list in the right sidebar. Yes, we prepare OVDI applications, including amended returns.
What is FBAR?
Expat CPAs usually say it’s a form used by the IRS to help track foreign banking transactions by US “persons”. Tracking means:

• Looking for taxable income that should have been reported on your Form 1040 or business return.
• Looking for illegal foreign banking transactions. Like money laundering .

A US person includes US residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
You file FBAR separately from your Form 1040. So it’s not like Form 2555 that you file with your Form 1040. For more FBAR information, click FBAR in the Forms drop down list on the right sidebar.
How to get the correct dollar value for FBAR

• Look at your bank statements for the year.
• Find the time period when you had the most assets in those accounts.
• Convert that highest amount to US dollars using the end of the year conversion rate.
• Enter the US dollar amount on FBAR.

Who has to File?

• Did you control a non-US bank account?
• Did the highest total balance in your non-US bank accounts ever exceed $10,000 for the year?
• Are you a US person as defined above?

If you answered yes to all three questions you have to file FBAR.
FBAR vs. Form 8938
They’re similar. Expat CPAs worry about the stiff penalties for not filing Form 8938 because it’s new and folks living outside the US might not be aware of the new reporting requirements. Click on 8938 in the Forms list for more info.
Are there exceptions for filing FBAR?
Yes. Here’s the IRS list:

• Certain foreign financial accounts jointly owned by spouses.
• United States persons included in a consolidated FBAR.
• Correspondent/nostro accounts.
• Foreign financial accounts owned by a govermental entity.
• Foreign financial accounts owned by an international financial institution.
• IRA owners and beneficiaries.
• Participants in and beneficiaries of tax-qualified retirement plans.
• Certain individuals with signature authority over but no financial interest in a foreign financial account.
• Trust beneficiaries.
• Foreign financial accounts maintained on a United States military banking facility.

Our CPA who was a manager in the international division of the IRS suggests filing, and then opting out to try to reduce the tax. Our Tax atty agrees.

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.

IRS Says Offshore Effort Tops $5 Billion, Announces New Details on the Voluntary Disclosure Program and Closing of Offshore Loophole

IR-2012-64, June 26, 2012

WASHINGTON —

 The Internal Revenue Service today announced that its offshore voluntary disclosure programs have exceeded the $5 billion mark and released new details regarding the voluntary disclosure program announced in January, including tightening the eligibility requirements.

"We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore," said IRS Commissioner Doug Shulman. "People are finding it tougher and tougher to keep their assets hidden in offshore accounts."

Shulman said the IRS offshore voluntary disclosure programs have so far resulted in the collection of more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs. In addition, another 1,500 disclosures have been made under the new program announced in January.
The voluntary disclosure programs are part of a wider effort by the IRS to stop offshore tax evasion and ensure tax compliance. This includes beefed up enforcement, criminal prosecution and implementation of third-party reporting through the Foreign Account Tax Compliance Act ( FATCA).

The IRS also closed a loophole that’s been used by some taxpayers with offshore accounts. Under existing law, if a taxpayer challenges in a foreign court the disclosure of tax information by that government, the taxpayer is required to notify the U.S. Justice Department of the appeal.

The IRS said that if the taxpayer fails to comply with this law and does not notify the U.S. Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the Offshore Voluntary Disclosure Program ( OVDP). The IRS also put taxpayers on notice that their eligibility for OVDP could be terminated once the U.S. government has taken action in connection with their specific financial institution.

Additional details of these eligibility issues are available in a new set of questions and answers released today on the current OVDP, which was announced in January ( see IR-2012-5). The IRS reopened the OVDP following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs.

This program – which helps bring people back into the tax system -- will be open for an indefinite period until otherwise announced. 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.

Under the current OVDP, the offshore penalty has been raised to 27.5 percent from 25 percent in the 2011 program. The reduced penalty categories of 5 percent and 12.5 percent are still available.

The IRS also announced a plan to help U.S. citizens residing overseas to catch up with tax filing obligations and assistance for people with foreign retirement plan issues

Corporate owned (or Foundation/Trust) Accounts vs. Personal

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April 29, 2013     By Lance Wallach, CLU, CHFC

Call (516) 938-5007

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HGExperts

If your primary reason for going offshore is for more secure, more private, safer and more varied banking and investment options then you may want to think again.

Invest & Bank Offshore


If your primary reason for going offshore is for more secure, more private, safer and more varied banking and investment options the first thing you need to consider is the forming of one or more offshore structures. Without thinking many people assume they can simply open a personal account in their name and because that account exists in a country and bank that still observes strict banking secrecy, their identity will be protected by the bank and that nation’s privacy law.
The problem here is that every time you want to make a payment into the account or out of it, your name will be in effect broadcast to the world as the owner of that account. This is because the so called numbered accounts of the past are no longer available anywhere. Any incoming or outgoing payment from the account will always have your name associated with it on the bank-to-bank routing instructions. Therefore it is imperative that the account be opened in the name of a company, foundation or possibly a trust rather than your personal name. Yes, as signatory on the account you will be still known to your bank, but your account will be anonymous to the world, so long as you bank in a country that still does not routinely share information with foreign governments and private investigators.
That way any payment into and out of the account is not automatically linked to yourself personally because the name of the company, foundation or trust will now only be on the inter-bank payment instructions and nothing else about the account will be visible. This concept of the “corporate shield” is one of the most important aspects of forming a foreign company even if you do not plan to conduct any business other than banking and investments. The company (or foundation) becomes a separate legal entity with its own life and rights under law. It is the whole basis behind the asset protection features of a foreign company formed in a country like Panama with favorable corporate laws that favor the ordinary person that merely wishes to shield their assets from predators.
The problem with all this is that you run into FBAR and OVDI IRS problems. For more on that Google Lance Wallach.


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.

ABOUT THE AUTHOR: Lance Wallach
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications,

Copyright Lance Wallach, CLU, CHFC
More information about Lance Wallach, CLU, CHFC

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

International Benefits

FBAR

In today’s global economy many companies now have employees that regularly work or travel overseas. Offering comprehensive benefits for expatriate employees is just as important as providing for those that work locally. RMA understands the complexities of employee benefits and their variations from country to country.

RMA Global Benefit Solutions

• Cross-border benefits for expatriates, third-country nationals, key local nationals
• Accident and health benefits for international business travelers
• Options for emergency evacuation
• Local benefits for local nationals
• Global benefit strategies: domestic & international harmonization, multinational pooling and captive insurance companies

We routinely assist our multinational clients with the design & implementation.

Options Available to Help Taxpayers With Offshore Interests

The IRS recognizes that its focus on offshore enforcement efforts and related disclosure programs has raised awareness among many U.S. citizens about tax filing and information reporting obligations. The IRS has prepared several documents that help explain those requirements, including FS-2011-13 and the U.S. Citizens and Resident Aliens Abroad page on IRS.gov. Situations of taxpayers with offshore compliance issues vary widely given the complexity of this area of tax law. The IRS reminds taxpayers that recently learned of these tax requirements that many options are available outside of the normal filing process to help them get current with their tax obligations. A number of the common situations and potential solutions are outlined below.

The IRS reminds taxpayers to consult with their professional tax advisor in determining which option is the most appropriate given their facts and circumstance.

Situation	Compliance Option
Taxpayers who have properly reported all taxable income but recently learned that he/she should have been filing FBARs in prior years to report a personal foreign bank account or to report signature authority over bank accounts owned by an employer.	Taxpayers who reported, and paid tax on, all their taxable income for prior years but did not file FBARs, should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Taxpayers who only have certain delinquent information returns, but no tax due.	A taxpayer who has failed to file tax information returns, such as Form 5471 for controlled foreign corporations (CFCs) or Form 3520 for foreign trusts but who has reported, and paid tax on, all their taxable income with respect to all transactions related to the CFCs or foreign trusts, should file delinquent information returns with the appropriate service center according to the instructions for the form and attach a statement explaining why the information returns are filed late. (The Form 5471 should be submitted with an amended return showing no change to income or tax liability.) The IRS will not impose a penalty for the failure to file the delinquent Forms 5471 and 3250 if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Non-resident U.S. taxpayers with delinquent returns with low risk factors (including tax owed less than $1,500/year).	Filing Compliance Procedures for Non-Resident U.S. Taxpayers Non-resident U.S. taxpayers should file delinquent tax returns, including delinquent information returns, for the past three years; delinquent FBARs for the past six years; and additional required information regarding compliance risk. Payment of any federal tax and interest due must accompany the submission.
Taxpayers with undisclosed foreign accounts and unreported income. Taxpayers seeking protection from criminal prosecution.	Offshore Voluntary Disclosure Program The Offshore Voluntary Disclosure Program (OVDP) offers a civil settlement structure in which taxpayers pay an offshore penalty in lieu of a number of other penalties that may be assessed in cases of offshore noncompliance. The OVDP also offers protection from criminal prosecution. In order to participate in the OVDP, taxpayers must first request acceptance into the program. Once they have been preliminarily accepted, taxpayers must submit certain information including eight years of amended tax returns, FBARs, and information returns as well as information about their offshore accounts. In addition, taxpayers must submit full payment of the tax and interest due, and certain penalty amounts. Taxpayers who have entered OVDP who disagree with the application of the offshore penalty given the facts and circumstances of their case may elect to opt out of the civil settlement structure of the program. In such situations, the IRS will determine if penalty mitigation is appropriate.

IRS Begins Rejecting OVDI Filings – Important News for Fence Sitters

By Brian M

We have written at least 100 posts about the Offshore Voluntary Disclosure Program (called OVDI or OVDP) and the need to file FBARs (Reports of Foreign Bank and Financial Accounts). In almost every such post we remind readers that time is running out. Many folks learned this week just how true that advice was.

The IRS has kicked out an undisclosed number of taxpayers from the OVDI program this week, even though they had previously received acceptance letters. Why? Because their names had already been disclosed to the IRS from a cooperating bank. The decision to begin enforcing the “first contact policy” has tremendous impacts on the millions of Americans with unreported foreign accounts.

Officially, anyone can participate in the Offshore Voluntary Disclosure Program unless they are under audit or criminal investigation, have received notice from the IRS regarding unreported foreign accounts or the IRS has already received their name from a cooperating bank. The first two exceptions are easy to understand = if you get a notice in the mail or a knock on the door from the IRS it’s too late to seek amnesty protection.

No one knows how or when the IRS will receive information from a cooperating bank. In some instances, the information could literally sit for months somewhere within the giant IRS bureaucracy until contact is made. That is exactly what has happened with last week’s recision letters sent by the IRS.

An undisclosed number of taxpayers who were already accepted into the program received letters from the IRS advising them that they were no longer eligible. Their participation was terminated meaning that they are now subject to audit, possible criminal prosecution and draconian penalties. Some had been in the program for 6 months before receiving the fateful letters.

Obviously, tax records are confidential and the IRS won’t share the names of those folks who have been rejected from the program. From what we can gather from the small community of lawyers that specialize in offshore tax reporting, most of those rejected had accounts at Bank Leumi. Coincidentally, Bank Leumi has been under investigation by the IRS and Justice Department for quite some time. This means that as part of the investigation, at some point Bank Leumi turned over the names of U.S. account holders rendering those people instantly ineligible for the amnesty program.

Is the IRS playing fair? Absolutely not but they are playing within the rules. Rules that they made.

We believe that once accepted into the program, participants should be allowed to complete the program and reap the benefits of compliance. The stated mission of the IRS is to promote voluntary compliance with the tax code. Pulling the rug out from under folks who made a good faith decision to come into compliance isn’t exactly fair. The IRS did reserve the right to reject anyone, however, if their name and identity had already been disclosed.

Because of the bureaucratic inefficiencies inherent within the IRS, that means others may find themselves accepted into the program and later rejected.

The message being sent by the IRS is crystal clear. The longer you wait, the higher the risks. Beginning next year, foreign banks will be required to identify and report account holders with ties to the United States. With hundreds of thousands of reports expected, it could be months – or more – before the IRS gets around to sending notices to anyone with a previously undisclosed account.

Receiving a rejection letter from the IRS isn’t the end of the world for some taxpayers. But it does mean an audit, more legal and accounting expenses and the potential of much higher penalties. (The penalties for unreported foreign accounts are as much as $100,000 per account or 50% of the highest account balance for each year the account was unreported.) If taxpayers can prove the failure to disclose the offshore accounts was due to mere negligence or ignorance, the penalties might actually be lower than those in amnesty.

The decision to reject Bank of Leumi account holders is something we will watch closely. Unfortunately, this probably is the beginning of a trend.

Our message needs to be repeated again. TIME IS RUNNING OUT. For a few it may already be too late. If you have unreported accounts, get off the fence and do something now. Before it’s definitely too late.

Above is an excellent article. I think that someone with this problem would do much better if they filed and the elected to opt out. That way you deal with the appeals division of the IRS and usually get a much better result.

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.