tag:blogger.com,1999:blog-1519969502186924526.post1150649818453574622..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: Daugerdas Gets 15 Year Sentence (6/25/14)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger38125tag:blogger.com,1999:blog-1519969502186924526.post-4724988944209275162014-06-28T18:28:33.183-05:002014-06-28T18:28:33.183-05:00Yes, I concur with Jack. Why would anyone enter OV...Yes, I concur with Jack. Why would anyone enter OVDP first if they intend to go into streamlined (SFOP/SDOP)? You would be hurting yourself if you do that because then you would be bound by the Transition FAQs which say you would need to amend the last 8 years of returns & FBARs.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-50530702822494892572014-06-28T18:25:21.474-05:002014-06-28T18:25:21.474-05:00Good post Jack. Thank you.Good post Jack. Thank you.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-15281571395909317722014-06-28T18:14:28.281-05:002014-06-28T18:14:28.281-05:00I don't think so. If the examination is closed...I don't think so. If the examination is closed, you could always call the OVDP hotline and ask, or simply attempt for a pre-clearance.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-6407984281147135442014-06-28T16:50:31.762-05:002014-06-28T16:50:31.762-05:00I asked that question of the Hotline person who sa...I asked that question of the Hotline person who said it could be done. I then asked the question of Jennifer Best who was the IRS representative at an ABA webinar. Ms. Best answered the question that it was permissible to withdraw before 7/1/14 and proceed only under the new streamlined program. She suggested that we write a letter prior to 7/1/14 notifying the IRS of the withdrawal and not to expect the complete package.<br /><br />If it helps, here is a recording of the Q&A which I just made from the recording on the ABA web site (hope I am not violating the law):<br /><br />https://drive.google.com/file/d/0B0SLTNWD-Z3YSnZ1eTNMcm9LMjQ/edit?usp=sharing<br /><br />Here is the link to the description of the program:<br /><br />http://apps.americanbar.org/cle/programs/nosearch/tgtemo.html<br /><br />Best,<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-60832043921152844582014-06-28T16:19:41.195-05:002014-06-28T16:19:41.195-05:00Wow. GREAT point.Wow. GREAT point.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-55688736702578987962014-06-28T16:04:15.860-05:002014-06-28T16:04:15.860-05:00Expattobe,
I am assuming you meet faq 52 under 2...Expattobe, <br /><br />I am assuming you meet faq 52 under 2012 OVDI PERFECTLY. Unless you do, you will NOT get it. You might want to see see sections 3 & 4 of "Options Available For U.S. Taxpayers with Undisclosed Foreign Financial Assets."<br /><br />http://www.irs.gov/Individuals/International-Taxpayers/Options-Available-For-U-S--Taxpayers-with-Undisclosed-Foreign-Financial-AssetsMilan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-47381535507474509322014-06-28T16:00:27.464-05:002014-06-28T16:00:27.464-05:00I agree, because foreign financial asset has missi...I agree, because foreign financial asset has missing income which was not reported, and signatory accounts do not have any income owned by the taxpayer which need to have been reported. See here:<br /><br />"A foreign financial asset is also subject to the 5-percent miscellaneous offshore penalty in a given year in the covered tax return period if the asset was properly reported for that year, but gross income in respect of the asset was not reported in that year."<br /><br /><br /><br />Bad part is, it could include the value of rental real estate in the penalty base. Ouch.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-36062212883984680962014-06-28T15:54:03.490-05:002014-06-28T15:54:03.490-05:00Jack, in re your discussion that someone currently...Jack, in re your discussion that someone currently in OVDP could withdraw prior to July 1, I know at least one person who raised point with OVDP hotline and got response that opt out would mean in eligibility. Any thoughts on best way to get clarity on that point?gottaloveUStax1noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-83491305514349299542014-06-28T15:36:14.419-05:002014-06-28T15:36:14.419-05:00MM,
I am assuming you feel that the snowbird yo...MM, <br /><br /><br />I am assuming you feel that the snowbird you are referring to, EXACTLY fits the FAQ 52 example under OVDP 2012 program, and that's why you are rushing to get it to the IRS before July 1st. Unless your situaiton EXACTLY matches FAQ 52 examples, it's probably not worth the grief of trying to see if you can get that 5% treatment. Am also assuming you've explored that filing original returns would trigger excessive penalties under various statutory provisions of the Code, and that those penalties do not have reasonable cause or that the legal expenses would be too much to explain reasonable cause and good faith in an examination setting, appeal setting, and in a court setting, if it goes that far. If you've done all that, then I assume it's worth you trying to go for FAQ 52 in the 2012 OVDI.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-11337751929845249632014-06-28T15:23:12.174-05:002014-06-28T15:23:12.174-05:00For SDOP, this is true, but for SFOP, a person jus...For SDOP, this is true, but for SFOP, a person just need not have reported income from a foreign financial asset. However, you might have other concerns. You do not state why that taxpayer has not filed for many years, and for what reason he/she did not file. Is there reasonable cause for not having filed? Was there willful intent to not file? The Service does not look kindly upon filers who have not even file a timely return. I remember the Richard Hatch case fondly. For US Citizens & green card holders, the bar, in my opinion, is lower (that's why the IRS's terms & standards for SFOP are superior to SDOP's). For someone who has not filed, no accuracy penalty can be leveled, especially if IRS has not estimated that taxpayer's missing returns, just fyi. Foreign disclosure penalties do come into play with original returns (Section 6038D for 5471 & 3520, 3520-A filers, which have hefty penalties). OVDP is the program which the IRS wanted anyone with missing foreign income & assets to come through, whether returns were originally filed or not. It was thus, the best possible way (at the times they were announced) to avoid multiple statutory penalties, willful assertions from the IRS, and possible criminal prosecution. But with SDOP & SFOP, OVDP is now being viewed as a way to wipe out the willful/nonwillful argument for a particular OVDP participant. You need a good adviser who can sift through what that taxpayer had, the penalties which can crop up in a quiet disclosure, and what if any mitigation can be done through reasonable cause and good faith arguments in light o those penalties in a quiet disclosure situation. Compare that, then, to the miscellaneous penalty in the OVDP and SFOP for that same taxpayer.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-11626364944501388092014-06-28T15:00:51.522-05:002014-06-28T15:00:51.522-05:00Yes, I agree with this. Besides, the extremely nar...Yes, I agree with this. Besides, the extremely narrowly defined examples within FAQ 52 (the 5% situations) were hardly ever applied (from what a few OVDI examiners have told me). So it goes to say, if you want the 5%, you have to walk over to SDOP/SFOP, but then, the willfulness/nonwillfulness argument of the original returns & missing FBARs of the taxpayer comes into play in exchange for 5%. Same is true for those in OVDP and transitioning to OVDP and who tried hard for the 5% through FAQ 52. I have one client who is like this (tried hard for 5% through FAQ 52, Example 1, for 2 years in the OVDP, but then late last week, got SDOP consideration). SoMilan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-1713404749575351682014-06-28T14:56:10.351-05:002014-06-28T14:56:10.351-05:00Agreed. So assuming someone reported their foreig...Agreed. So assuming someone reported their foreign rental property properly on Schedule E of their 1040 return, and used proper alternative depreciation method (40 years) for their property, does this construe it as proper reporting? Most people don't "properly" report their foeign rental property and complete leave off the the rental income. Most people just leave off their foreign rental property from their US returns all together, at least from what I have seen. So the SDOP/SFOP nuanced definition of foreign financial asset for real estate is that for which rental income was not disclosed on the original returns, regardless of whether the foreign rental property was reported on schedule e originally. <br /><br />OVDP is pretty clear. All foreign estate held in the covered years is subject to the miscellaneous penalty. Point blank. FAQ 35.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-34969473913723542312014-06-28T14:15:32.649-05:002014-06-28T14:15:32.649-05:00FAQ 52 examples in the 2011 & 2012 OVDP disclo...FAQ 52 examples in the 2011 & 2012 OVDP disclosure programs are extremely difficult circular holes to fit most taxpayer jagged edged, rectangular situations through. Or shall I say, possible, but highly improbable that an OVDP Examiner and his/her technical adviser will give you the 5% treatment. If you feel that you have "willful" nondisclosure characteristics on your originally filed returns, or if you feel that the IRS might assert willfulness on any subsequent examination of your "quiet disclosure" which you are now contemplating doing, then OVDP might be right for you. Barring willfulness, then SFOP might be good, depending on if you are living abroad (because it's no penalties whatsoever). SDOP is good too, assuming you are not knowingly signing the nonwillful certification and you have no willful characteristics of your original filings. However, you might want to talk to a CPA or lawyer well versed in these IRS programs and international tax laws before you venture out on your own. There are just so many moving parts to your or anyone's situation (e.g., like do you have foreign real estate, was it sold during the covered years or before?,OR, are any of your foreign banks publicly disclosed by the IRS as those directly working with DOJ or Treasury as a result of a subpoena?)<br /><br />You amending returns and filing FBARS before receiving OVDP pre clearance is actually not going to change anything, and if you get denied entry into OVDP, may actually put you in danger (I.e., be construed as you painting a red bullseye target on your back).<br /><br />You just need a good adviser to walk you through.Milan Madhani, CPAhttp://www.vimlantax.comnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-23994397305817777412014-06-28T07:48:55.630-05:002014-06-28T07:48:55.630-05:00I think that if you are in OVDP on July 1, then yo...I think that if you are in OVDP on July 1, then you proceed under OVDP and get a potential offshore penalty mitigation to the streamlined 0% or 5%, but the 8 years of amended returns with tax, penalty and interest are required. At least as I read the transition rules, if you are in OVDP on 7/1, you cannot withdraw and proceed only under Streamlined.<br /><br />If you clearly qualify for Streamlined, therefore you should not get into OVDP. If you are in the uncertain area on willfulness, perhaps you could get into OVDP, make the certification for the reduced offshore penalty and, if it is denied, continue under OVDP and not opt out.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-37182128898998144492014-06-27T23:41:32.059-05:002014-06-27T23:41:32.059-05:00Seems like it would be best to file intake letter ...Seems like it would be best to file intake letter by July 1rst and then enter Streamline procedure. This way you an still fall back on OVDP should you not be allowed the lesser penalty. Thoughts?CDOnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-18432672686280435312014-06-27T17:15:30.708-05:002014-06-27T17:15:30.708-05:00Thanks for the clarification UStax. I misspoke.
...Thanks for the clarification UStax. I misspoke.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-9842315235704824632014-06-27T16:19:41.985-05:002014-06-27T16:19:41.985-05:00....... "It is only if you are in OVDP and su.......... "It is only if you are in OVDP and subject to the 27 1/2% penalty that the penalty might kick up to 50% ".......<br />That is incorrect - for 2012 OVDP participants the in lieu penalty will stay @ 27.5% if you decide not to seek streamlined reduction !UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-37932388743057349782014-06-27T15:05:18.562-05:002014-06-27T15:05:18.562-05:00The benefit of streamlined is not related to which...The benefit of streamlined is not related to which financial institutions are involved. If you qualify -- that is, you can certify non-willfulness and prove that, if challenged -- it does not matter than HSBC India is involved.<br /><br />Now, if you are in OVDP (either 2012 or 2014) and stay in and get the streamlined reduction, I don't think that the 50% kickup applies. It is only if you are in OVDP and subject to the 27 1/2% penalty that the penalty might kick up to 50%. This kick-up is for willful actors.<br /><br />I will check out the calculation of the penalty base in the streamlined program. I just had not focused on it being a different measuring date than in the OVDP.<br /><br />I'll be back later to respond, but someone may respond before I am able to get to it.<br /><br />Also, I have a client demanding my attention and cannot get to the other issue. Hope someone can.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-54270598018307901362014-06-27T14:10:40.673-05:002014-06-27T14:10:40.673-05:00All: Can anyone point me to a link to the OLD OVDP...All: Can anyone point me to a link to the OLD OVDP 2012 FAQs and the OLD voluntary disclosure letter form, attachment, and Foreign Account or Asset Statement? Googling only brings up the up-to-date version of the FAQs... Thanks!MMnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-29755838249498239402014-06-27T13:58:29.492-05:002014-06-27T13:58:29.492-05:00"If the IRS has initiated a civil examination..."If the IRS has initiated a civil examination for any year, regardless of whether it relates to undisclosed OVDP assets (see FAQ 35), the taxpayer will not be eligible to participate in the OVDP. A taxpayer under criminal investigation by CI is also ineligible. In these circumstances, the taxpayer or the taxpayer’s representative should discuss undisclosed financial accounts and assets with the agent."<br /><br /><br /><br />If I had received a notice of proposed assessment for one of my past returns where IRS changed itemized deductions to standard deduction and I paid. There was no penalty, just interest applied. My CPA wanted to contest but i did not want to go through hassles and just paid and cleared. Would this disqualify me?Anonymous101noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-23607479028050950262014-06-27T13:30:46.590-05:002014-06-27T13:30:46.590-05:00Thanks Jack. Correction to my question: I became a...Thanks Jack. Correction to my question: I became aware in Sept 2011 so could not file timely FBAR for 2010. <br /><br />So if i understand your response correctly, even if my account was in HSBC India, if I apply before Aug 4th 2014, I would still get the benefits of streamlined process and 5% penalty would apply? <br /><br />As for year end balance or any day highest balance, in the streamlined document, it states, "the highest aggregate balance/value is determined by aggregating the year-end account balances and year-end asset values of all the foreign financial assets subject to the miscellaneous offshore penalty..."; hence the question whether shall we use Dec 31 balance or any day of the year where balance was highest?<br /><br /><br /><br />Would I need to amend 2010 tax or just proceed with delinquent FBAR for 2009 and 2010?Anonymous101noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-46092333692610685432014-06-27T13:23:33.410-05:002014-06-27T13:23:33.410-05:00Sorry for my typo. I became aware in Sept 2011 and...Sorry for my typo. I became aware in Sept 2011 and hence that was the reason i could not file timely FBAR for 2010. Had i known just 3 months before. Even the CPA who assisted to file my 2010 taxes did not provide this information.Anonymous101noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-29196987629927084392014-06-27T12:50:27.802-05:002014-06-27T12:50:27.802-05:00Agreed. Although, if the IRS doesn't except yo...Agreed. Although, if the IRS doesn't except your certification, it may cause you to reconsider opting out.NJnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-3567335233208729952014-06-27T05:48:38.864-05:002014-06-27T05:48:38.864-05:00You say you 'became aware in Sept 2010'. T...You say you 'became aware in Sept 2010'. Then you say that you did not submit an FBAR for 2010 (due date June 30th 2011). You also seem to imply that your tax return for 2010 (due April 2011) was not 'correct'.<br /><br /><br /> I am not sure that your failure to file an FBAR for 2010 could be classified as non-willful in that case. <br /><br /><br />I will say (purely my opinion) that I think the IRS will pay more attention to (and be more skeptical of) streamlined procedure submissions from users who have accounts in banks that are in their 50% listsansanoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-26737273269236302532014-06-27T05:37:25.696-05:002014-06-27T05:37:25.696-05:00And, I am not sure that you would be disqualified ...<i><br />And, I am not sure that you would be disqualified if the IRS were to <br />start an audit. An audit is a disqualification under OVDP, but that is <br />to hustle the willful actors into OVDP. If you are a good streamlined <br />candidate, you are not a willful actor and should not get an onerous <br />result on opt out, so why not let you claim streamlined?<br /></i><br /><br /><br /><br />Jack<br /><br /><br /><br /><br />Bear in mind that non-willful or accuracy tax or FBAR penalties could also apply in an audit. Joining streamlined after an audit started would allow someone to bypass all accuracy related penalties (possibly even if only onshore issues were involved) AND restrict penalties to only 3 years instead of 6. That would seem to be a huge reason for the IRS to disallow streamlined once audit starts<br /><br /><br /><br />About FBAR penalties: for smaller account sizes, even a max of 10K/year could easily be greater than 5%. Particularly if (say) a couple is involved, and each has separate penalties. <br /> <br />So I think the IRS would definitely disallow streamlined once an audir started.wdlenoreply@blogger.com