Thursday, June 27, 2013

Articles of Interest to Tax Crimes Enthusiasts (6/27/13)

These are some new articles.  Enjoy!
  • Stever Toscher and Della Bauserman, Suprise-The Tax Fraud of YOur Tax Preparer May Extend the Statute of Limitations on Tax Assessments, J. Tax Prac. & Proc. 31 (April-May 2013), here.
The authors review the wreckage from Allen v. Commissioner, 128 T.C. 37 (2007).  Although I have written about Allen before, this excerpt should remind readers. 
The issue in Allen was whether the taxpayer must have an intent to evade tax in order to keep the statute of limitations on assessment open indefinitely under Code Sec. 6501(c)(1). The Tax Court concluded the statute of limitations would remain open if the tax preparer had the intent to evade tax. To state this conclusion another way, the Tax Court allowed the statute of limitations on assessment to remain open forever  when the tax preparer has fraudulently filed a tax return even if the innocent taxpayer was also defrauded by the tax preparer. This was a startling proposition—at least at first blush—for most of us in the tax litigation field.
  • Josh Ungerman, What to Do When the Special Agent Arrives (Outline for speech at the Tax Alliance Conference 6/12/13), here.
Josh offers some good insights on the initial surprise "interview" by Special Agents and then damage control after it occurs.
  • Charles P. Rettig, IRS Offshore Voluntary Disclosure Program: Opt-Outs, a Revised FBAR and Rescissions of Pre-Clearance Letters by Criminal Investigation, J. Tax Prac. & Proc. 23 (April-May 2013), here.
Chuck provides some timely information about developments in the offshore account area, including most prominently (i) summary observations on joining OVDP in the first place and then in opting out and (ii) lines of inquiry that might be asked by the agent on the opt out or an AUSAs or IRS agent assisting a grand jury investigation of enablers.
  • Edward M. Robbins, Jr., The Fifth Amendment FBAR Lives!, 139 Tax Notes 1546 (June 24, 2013) [no link for this yet, but will post it when I get it; in the meantime, readers might check his firm's publications page here]
Ed provides a very tight but enlightening on review of the required records area which has been ugly for noncompliant offshore account holders lately, but concludes that all may not be lost:   
In short, some might assert that the required records doctrine applies to the annual FBAR reporting requirement just as much as a subpoena for offshore account information. However, the foregoing cases stand for the proposition that the Fifth Amendment does not apply to the production of previously existing documents, whether they are records maintained for inspection or records required to be filed periodically with officers of the United States. They also stand for the noncontroversial proposition that the Fifth Amendment will not excuse a person from creating records required to be filed periodically with the government. These cases do not suggest that a person may be compelled to give current testimony over a Fifth Amendment objection, beyond the testimony inherent in the act of production. Recall the testimony allowed in the required records cases over a Fifth Amendment objection: (1) the records I am producing in response to the subpoena exist; (2) the records are in my possession or control; and (3) the records are authentic, that is, the records are those described in the subpoena. There is no suggestion in any of these cases that a foreign bank account holder can be hauled in front of a grand jury and compelled, over his Fifth Amendment objections, to orally answer each and every question included on the FBAR. Likewise, the foreign account holder cannot be compelled, over his Fifth Amendment objections, to file a true and complete FBAR. 
Accordingly, it appears that a good-faith Fifth Amendment FBAR is currently alive and available as a defense tactic in the appropriate situation.


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  2. The Rettig article refers to what is avoided by NOT opting out. For many of us, the risk of additional penalties for required foreign information reports is nonexistent, since we did not have entities. Also, he says OVDI limits the number of tax years at issue. This would be only the case where there is fraud involved since the SOL would be unlimited, and from a practical matter I would not expect the IRS to bother with fraud occurring say ten years ago, if there is already fraud that can be demonstrated in more recent years.

    I also take issue with the statement that "waiting is not a viable option." Although it entails risk, the IRS has made it so. Someone who voluntarily entered OVDI a year and a half ago will be subject to the 27.5% penalty, plus back taxes to 2003. Anyone who found out about the requirements at the same time, but is only entering now, possibly because he chose not to do so until his information was about to be disclosed, will pay the same 27.5% but taxes only back to 2005. Furthermore, for many US persons who are and have been foreign residents for many years, the risks of disclosure are much smaller, as is the ultimate possibility of collection. The onerous penalties create an incentive for such people NOT to disclose their accounts, and the IRS has chosen to trade off large penalties now from a few, for forward compliance from many.


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