New Developments and Options
This presentation was given by our firm’s Robert McCallum and Darek Jarski at a conference in May 2015. It has useful information regarding significant changes to the Offshore Voluntary Disclosure Program (OVDP) and offshore compliance procedures.
To see the presentation outline, click here.
However, it also increases the offshore penalty from 27.5% to 50% in certain cases.
Purpose of the streamlined procedures: The streamlined filing compliance procedures described below are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations. These procedures will be available for an indefinite period until otherwise announced.
To read more, please see the article on IRS.gov
This presentation was created by our firm’s Rob McCallum for a CLE lecture in December of 2012. The presentation has useful information for people with international accounts and interest in making a voluntary disclosure on offshore accounts.
To view the presentation click here.
In a fresh assault on undeclared offshore accounts, two federal courts have approved the issuing of summonses to five U.S. banks in connection with transfers made on behalf of two foreign banks, officials announced this week.
To read the complete article, please follow the link to The Wall Street Journal’s website.
Swiss Bank Clients are Being Pressured to Declare Their Offshore Accounts
There is a new rush by U.S. taxpayers to confess secret offshore accounts to the Internal Revenue Service, experts say.
Bryan Skarlatos, a partner at law firm Kostelanetz & Fink in New York, which has handled more than a thousand confessions, says his firm is now getting “two or three calls a day” from U.S. taxpayers with secret accounts compared with “one or so a week” during the previous two years.
He and other experts say the cause of the rush is pressure from Swiss banks themselves. The banks are warning current and former U.S. clients that their names and account information soon could be disclosed, and that such disclosure will disallow the taxpayer’s entry into the IRS’s limited-amnesty program for undeclared offshore accounts.
To read the rest of the article from The Wall Street Journal click here.
The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.
Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.
“This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves…”
To learn more, please read the full article on the IRS website.
The IRS has recently issued Revenue Ruling 2013-14 (click here to download) regarding Mexican Land Trusts, sometimes referred to as fideicomisos. After years of confusion, the IRS has ruled that MLTs which fall within the ruling will not be treated as a trust for U.S. federal tax purposes. This ruling is likely to have a substantial impact on information return filing requirements for qualifying MLTs. Nevertheless, the IRS cautions that not all MLTs will fall under the ruling.
Certain employers with potential employment tax liability exposure for having treated employees as independent contractors have until June 30, 2013 to take advantage of the Voluntary Classification Settlement Program’s Temporary Eligibility Expansion. Assuming eligibility requirements are met, the VCSP Temporary Eligibility Expansion allows employers who did not file Forms 1099 to settle with the IRS, resulting in substantial reductions to what they would normally have to pay.
For more information please contact Rich Johnson at 206-624-1040.
A recent press release indicates that U.K. tax authorities are working with the U.S. and Australia to analyze 400 gigabytes of data on potential tax structures in Singapore, the British Virgin Islands (BVI), the Cayman Islands, and the Cook Islands.
Depending on the type of information, 400 gigabytes is a sufficiently large amount of data that could contain a treasure trove of information on many taxpayers and structures.
To view the new Offshore Voluntary Disclosure documents, please follow the links below.
Taxpayers who expatriate and meet certain criteria must file Form 8854 - Initial and Annual Expatriation Statement. It has come to our attention that the IRS is concerned whether complete and accurate Forms 8854 are being filed. Taxpayers filing Forms 8854 need to be aware that the IRS is starting to audit these forms.
The IRS (apparently in conjunction with the Department of Justice) has revoked at least some of the voluntary disclosures for taxpayers who had accounts at Bank Leumi. At this point, it appears that the voluntary disclosures have been revoked since Bank Leumi had already turned over the names of certain customers to the Department of Justice. Presumably, the IRS was not aware of this development when the voluntary disclosures were initially accepted. It is not clear how many voluntary disclosures have been revoked. The IRS has always made it clear that a voluntary disclosure is not a guarantee of non-prosecution. Nevertheless, taxpayers whose voluntary disclosures have been revoked likely relied in good faith on the IRS’ pre-clearances/acceptances and disclosed further details regarding their non-compliance in the documentation submitted as part of the OVDP. It is unknown what action the IRS will take with respect to the revoked Bank Leumi disclosures.
However, in light of this development, taxpayers who have accounts at Bank Leumi who have not yet entered OVDP will be faced with a tough decision as to how to proceed.
Credit Suisse will be sending notices to depositors that their information is being turned over to the Swiss Federal Tax Administration (the “SFTA”) for turnover to the IRS unless the taxpayer invokes Swiss processes to prevent the turnover.
To read a copy of this notice, go to federaltaxcrimes.blogspot.com
From the IRS:
The Internal Revenue Service today announced a plan to help U.S. citizens residing overseas, including dual citizens, catch up with tax filing obligations and provide assistance for people with foreign retirement plan issues.
“Today we are announcing a series of common-sense steps to help U.S. citizens abroad get current with their tax obligations and resolve pension issues,” said IRS Commissioner Doug Shulman.
Visit the IRS Website for more information.
The IRS has published new information and updated FAQs on its 2012 Offshore Voluntary Disclosure Program:
The IRS began an open-ended offshore voluntary disclosure program (OVDP) in January 2012 on the heels of strong interest in the 2011 and 2009 programs. The IRS may end the 2012 program at any time in the future. The IRS is offering people with undisclosed income from offshore accounts another opportunity to get current with their tax returns. The 2012 OVDP has a higher penalty rate than the previous program but offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk detection by the IRS and possible criminal prosecution.
Visit the IRS website for more information.
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.
Visit the IRS Website.
Wegelin & Co., a Swiss private bank, was indicted today for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts and the income these accounts generated from the Internal Revenue Service (IRS), the Justice Department announced today. This is the first time an overseas bank has been charged by the United States for facilitating tax fraud by U.S. taxpayers.
Read the DOJ Press Release.
On January 9, 2012, the IRS released a new offshore voluntary disclosure program. The new program is modeled after the 2009 OVDP and 2011 OVDI except that the penalty rate has increased to 27.5% (although in certain circumstances a 12.5% or 5% penalty may apply). The program does not currently have a termination date, and the IRS plans to release additional details at a later date.
LeSourd & Patten, P.S. is proud to announce that, for the second year in a row, it earned a first-tier ranking of firms that practice tax law in Seattle as ranked by U.S. News & World Report and Best Lawyers. Only three other firms in Seattle share this distinction.
The following LeSourd & Patten attorneys are listed in Best Lawyers. Click the “Attorneys” link at the top of this page to view their profiles.
Richard L. Johnson
Robert M. Kane, Jr. (2012 Lawyer of the Year - Litigation & Controversy - Tax)
Judd R. Marten
Robert M. McCallum
Diane E. Tebelius
Rodney J. Waldbaum
From the IRS fact sheet:
The IRS is aware that some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so. Some of those taxpayers are now aware of their filing obligations and seek to come into compliance with the law. This fact sheet summarizes information about federal income tax return and FBAR filing requirements, how to file a federal income tax return or FBAR, and potential penalties.
Note that penalties will not be imposed in all cases. As discussed in more detail below, taxpayers who owe no U.S. tax (e.g., due to the application of the foreign earned income exclusion or foreign tax credits) will owe no failure to file or failure to pay penalties. In addition, no FBAR penalty applies in the case of a violation that the IRS determines was due to reasonable cause.
As part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities, the Internal Revenue Service launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.
For more information, see the IRS Press Release.
If you are interested in participating in this program and would like to discuss your options, please call Rich Johnson at 206-357-5084.
From the 2011 OVDI Website:
Due to the potential impact of Hurricane Irene, the IRS has extended the due date for offshore voluntary disclosure initiative requests until Sept. 9, 2011. For those taxpayers who have not yet submitted their request and any documents, the following actions are necessary by Sept. 9, 2011:
Identifying information must be submitted to the Criminal Investigation office. This includes name, address, date of birth and Social Security number and as much of the other information requested in the Offshore Voluntary Disclosures Letter as possible. This information must be sent to:
Offshore Voluntary Disclosure Coordinator
600 Arch Street, Room 6404
Philadelphia, PA 19106
Send a request for a 90-day extension for submitting the complete voluntary disclosure package of information to the Austin campus. This request must be sent to:
Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative
Swiss bank Credit Suisse is being probed by the U.S. Department of Justice as part of a broader investigation into banks suspected of helping Americans evade taxes. For more information, view the press release from Credit Suisse.
The IRS’s FAQs were updated on June 2, 2011. The new FAQs include examples of situations in which taxpayers may qualify for a penalty less than 25% if they opt out of the program. Additionally, FAQ #52(3) provides for a 5% penalty for U.S. taxpayers who are foreign residents and meet certain conditions. Read more HERE.
Also, on June 1, 2011, the IRS issued procedures for opting out of the OVDI.
Read more HERE.
Information about the IRS Offshore Voluntary Disclosure Initiative (“OVDI”) is now available from the IRS in eight languages. As mentioned previously, the OVDI is designed to bring offshore money back into the U.S. tax system and to bring individuals with unreported income in their undisclosed accounts into compliance.
More information can be found HERE.
Download information in the following languages:
The Washington State Department of Revenue has announced a new tax amnesty program that begins February 1, 2011. This amnesty program is open to registered and unregistered businesses, and it waives the penalty and interest for participating taxpayers on unpaid state business and occupation tax, state public utility tax, and state and local sales and use tax.
To qualify, taxpayers must:
1) File an application with the Department by April 18, 2011.
2) File all outstanding tax returns and any amended returns for which they are requesting waivers by April 18, 2011.
3) Pay all tax due by April 30, 2011. All tax due on any invoice for which the taxpayer is seeking a waiver must be paid even if the tax is not included in this program. The penalties and interest on taxes not included in this program must also be paid.
4) Pay all filing and other fees on tax warrants for which the taxpayer is seeking a waiver.
5) File and pay all tax returns on time during the amnesty period.
6) Waive the right to seek a refund or challenge the taxes on any invoice for which they seek a waiver.
Taxpayers with offshore accounts who submitted voluntary disclosures after the October 15, 2009 deadline for the Offshore Voluntary Disclosure Program have not known how the IRS will handle their cases. Fifteen months after the October deadline, it appears the IRS will introduce a second voluntary compliance program.
On January 21, IRS Deputy Commissioner (Services and Enforcement) Steven Miller spoke at an American Bar Association Section of Taxation luncheon for certain committees of the Section. Mr. Miller apparently stated that the IRS is preparing to introduce the new program and that the new program would apply to the approximately 3,000 taxpayers who made voluntary disclosures that did not qualify for the 2009 program.
LeSourd & Patten, P.S. is proud to announce that it earned a first-tier ranking of firms that practice tax law in Seattle in the inaugural 2010 Best Law Firms rankings by U.S. News & World Report and Best Lawyers. Only three other firms in Seattle share this distinction. LeSourd & Patten’s tax law practice was also recognized nationally by the U.S. News rankings, with no Seattle firm being given a higher ranking.
“Achieving a high ranking is a special distinction that signals a unique combination of excellence and breadth of expertise,” according to a press release from U.S. News & World Report and Best Lawyers. The rankings include data from reputational surveys and more than 3.1 million evaluations of individual lawyers. The rankings are posted online at http://usnews.com/bestlawfirms or view LeSourd & Patten’s “Best Law Firms” profile directly HERE.
The Swiss Finance Ministry said it has released data on half of the 4,450 accounts it promised to IRS. “Based on information received to date and assurances by the Swiss government, we anticipate being in a position to withdraw the John Doe summons this fall,” IRS said in a statement. Read Article at reuters.com
UBS held a telephone conference today, June 15, 2010, to update practitioners on the status of the Swiss government’s action on the treaty. The UBS representative explained that the government-to-government treaty requires parliamentary approval, and, at this point, both houses of parliament have approved a form of the deal. However, one house is calling for a referendum by the voters. If both houses cannot agree, a reconciliation counsel will be appointed in an effort to resolve the dispute.
Ultimately, the UBS representative expected a final decision by Parliament no later than June 18, 2010, which is the end of the parliamentary session.