tag:blogger.com,1999:blog-1519969502186924526.post3182609713066251304..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: 11th Circuit Holds Clear and Convincing Evidence Required for Section 6701 Penalty; Can Reasoning be Extended to FBAR Willful Penalty? (6/14/14)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-1519969502186924526.post-71167526926349291002014-07-14T14:33:07.884-05:002014-07-14T14:33:07.884-05:00It seems inconsistent for a bank to claim that it ...It seems inconsistent for a bank to claim that it cannot pay for the documentation/release while at the same time if an account is still open it offers to keep it open if the information is supplied. In my view, a bank that allows an American to keep his account open is very valuable consideration. <br /><br />Also, I think the Category 2 banks overestimated the response they would get to their requests. Typically a survey gets a small response. The response would be even lower when substantial work is involved (getting a copy of proof of compliance, reading and understanding the legal verbiage of the release.) Some of the account holders also have moved or died.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-72845119338406649902014-06-24T12:11:10.298-05:002014-06-24T12:11:10.298-05:00Somewhat to my surprise, since this hasn't hap...Somewhat to my surprise, since this hasn't happened to anyone I know, the freezing of accounts by some (unnamed) Swiss banks has been complained of several times. Put the following query into a search engine: site:englishforum.ch freeze bank account <br />It was only 5 years ago that at least two Swiss bank directors "confided" in me that they could freely accept deposits from Americans because they had no branches or offices there and the USG lacked jurisdiction over them. I wasn't so sure, but it didn't concern my clients. I recall one meeting with a cantonal bank to discuss a mortgage and bank account and the account manager beginning to write furiously when I made clear that the client was reporting the account to his foreign tax authorities as required.<br />For what it is worth (I know because I have done it successfully) the procedure for litigating a claim against a Swiss defendant is to file the claim (in a local language) with the Office des Poursuites et Faillites / Betreibungs- und Konkursämtern. There may follow mediation and if that fails a court hearing. A lawyer is not needed but fluency in the language is. And the venue for filing suit is the commune where the head office of the defendant is located, this may be far away and in a different language. It's not a procedure to be undertaken lightly even if one is resident in Switzerland.5thSwissnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-90159125089538512282014-06-20T15:23:47.786-05:002014-06-20T15:23:47.786-05:00In my case -- Swiss bank freezing all funds until ...In my case -- Swiss bank freezing all funds until I provide personal documents -- you can take that even farther: "Hey, I noticed you own a vacant lot, which I like. Give it to me for free or I will block you from any further access to it."seabreezenoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-40468273417092509572014-06-20T15:17:18.597-05:002014-06-20T15:17:18.597-05:00Jack - Would the total tax liability one owes to I...Jack - Would the total tax liability one owes to IRS for past 3 / 8 years come into play in deciding whether one acted willfully or nonwillfully?<br /><br /><br />RegardsDesi bnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-53519251091656141772014-06-20T14:23:38.918-05:002014-06-20T14:23:38.918-05:00Just_Me - Can you please share your thoughts on my...Just_Me - Can you please share your thoughts on my case? Would truly appreciate it..<br /><br /><br />Best,<br />DesiDesi bnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-24192430580765374212014-06-20T11:04:14.719-05:002014-06-20T11:04:14.719-05:00Thank you for the response.. much appreciated.. ho...Thank you for the response.. much appreciated.. however this has been very frustrating for me and my whole family..<br /><br /><br /><br />my tax liability for last 8 years hardly comes to max of 4K - 5K.. i am not a criminal.. it was just an oversight and lack of understanding of the law.<br /><br /><br />and the rent i reported isn't anywhere in my bank account however i just wanted to come clean <br /><br /><br />i have a big family to take care of and close to my retirement age .. and really can't afford to lose much.. i don't mind paying a hefty penalty for my mistake however to lose half of my savings for a minor mistake.. is that justice?Desi bnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-7636606299404565322014-06-20T10:42:09.042-05:002014-06-20T10:42:09.042-05:00exposure of around $250K (mainly due to purchase o...<i> exposure of around $250K (mainly due to purchase of property and I was stupid enough to show the rent when i was filed for 2013 without realizing what i am doing )<br /><br /></i><br /><br />That's a very .. unusual .. statement. You are saying that it was 'stupid' to report your tax liabilities correctly ? <br /><br /><i><br /><br />I always used tax software and always checked No on do you have a foreign account<br /><br /></i><br /><br />There have been court cases where the DoJ has won willful penalties against people who checked 'No'. Check this blog for Williams. And that was for only 1 week. <br /><br />I am sure there are several factors at work, but I doubt anyone can advise you without talking to you in detail. So find a good laywer and talk to him/her. And be careful in your statements about whether its 'stupid' to report foreign income on your tax return.SleepyGoldennoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-11335813186521124072014-06-20T10:23:39.351-05:002014-06-20T10:23:39.351-05:00I am on VISA in US for past 12+ years .. have expo...I am on VISA in US for past 12+ years .. have exposure of around $250K (mainly due to purchase of property and I was stupid enough to show the rent when i was filed for 2013 without realizing what i am doing ).. except for the early years when i wasn't taxed in native country, for rest of these years, I have been paying hefty tax in my native country for this account.<br /><br />I had no knowledge of my obligation to report my native (Indian accounts) as Foreign accounts nor have I heard of FBAR till this year<br /><br /><br /><br />I always used tax software and always checked No on do you have a foreign account<br /><br /><br />Can someone please advise me if I qualify for the Streamline procedure?Desi bnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-25722477246861321252014-06-20T09:51:57.325-05:002014-06-20T09:51:57.325-05:00Thank you. I'll report back if I have any succ...Thank you. I'll report back if I have any success resolving this.seabreezenoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-37097165573975375432014-06-20T09:50:24.197-05:002014-06-20T09:50:24.197-05:00Thank you for your thoughts. I want to close the a...Thank you for your thoughts. I want to close the account; the bank says I can't until I provide personal documents of past tax compliance or entry into OVDP. <br /><br />I understand that, should I wish to keep the account open, I am required to provide identifying information. I do not want to keep the account open, but the bank is refusing to close it unless I provide the personal documents that will mitigate its penalty. So not only is this particular bank not paying compensation, it is attempting to coerce me into providing what it needs by denying me access to my own money until I do.seabreezenoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-32733684391061241482014-06-20T09:12:14.055-05:002014-06-20T09:12:14.055-05:00...However, unless there is a strong non-economic ......However, unless there is a strong non-economic non-tax reason to keep a <br />Swiss account, why would one do that. Similar kind and quality services<br /> can usually be obtained elsewhere cheaper, with equal or more <br />convenience and equal safety...... Such a naive statement can only come from a person who hasn`t been out much in the real expat world we are living in !!GlobalCapitalismnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-28031882176725230372014-06-20T09:09:06.804-05:002014-06-20T09:09:06.804-05:00In the example of a $1M account one could argue th...In the example of a $1M account one could argue that a reasonable payment would be half the penalty, or $100K. It seems to me that the party looking to obtain the information should be the one to make the first offer (just as if I owned a piece of real estate worth $100K which was not currently for sale.) What the banks are doing is tantamount to sending a letter that says "Hey, I noticed you own a vacant lot, which I like, will you let me have it for free?" <br /><br />I suspect that many former bank customers are put off by such an approach and will not bother replying unless the bank makes a serious offer. This is similar to many Swiss banks which simply ignore emails from Americans asking whether it is possible to open an account instead of having the courtesy to at least say, "Sorry, no."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-9566841068208260882014-06-20T09:01:36.161-05:002014-06-20T09:01:36.161-05:00In the case of accounts which are currently open, ...In the case of accounts which are currently open, the Swiss bank is offering to keep the account open, in exchange for proof of compliance and signing a release. It seems to me that keeping the account open is as much "consideration" (in the legal sense of the word) as paying money for the information. Given the difficulty that US persons face in opening a Swiss account, the consideration of keeping the account open is quite valuable. It seems inconsistent to allege that asking for payment constitutes noetigung/contrainte and threatening to close the account if the information is not provided, is somehow okay.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-61968522849014741502014-06-20T08:53:57.440-05:002014-06-20T08:53:57.440-05:00First, I am not a Swiss lawyer and hence do not kn...First, I am not a Swiss lawyer and hence do not know whether the Swiss could withhold your account funds for failure to produce documents showing that you are in past U.S. tax compliance. I would be surprised, however, ;if the banks had that authority under Swiss law. The banks may be exercising the power -- not the same as the authority -- and you may have to get a Swiss lawyer to rattle their cage if they are misbehaving under Swiss law.<br /><br />Second, under FATCA, the bank is required to get your identifying information and report the income annually going forward in the future. It can and should close down your accounts if it does not get that information. That information, however, has only to do with FATCA compliance going forward. It has nothing to do with providing proof of past U.S. tax compliance.<br /><br />So, I would think that if you provide them your U.S. identifying information; and whatever consent local law requires to do the FATCA reporting going forward, the bank should not close down your account.<br /><br />However, unless there is a strong non-economic non-tax reason to keep a Swiss account, why would one do that. Similar kind and quality services can usually be obtained elsewhere cheaper, with equal or more convenience and equal safety.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-69120861465788496672014-06-20T08:52:19.376-05:002014-06-20T08:52:19.376-05:00I have heard of banks freezing part of the account...I have heard of banks freezing part of the account until proof of tax compliance or being in OVDI is provided. I have also read that such action is NOT legal under Swiss law. As far as I know a bank can freeze an account on its own initiative in certain cases (such as money laundering) but only for a couple of days while it notifies the Swiss government and gives the government time to take action. <br /><br />A Swiss lawyer may or may not be able to give you a more definite answer since this is a relatively new area of the law.<br /><br />But I understand your point.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-43512648704415190382014-06-20T02:42:18.927-05:002014-06-20T02:42:18.927-05:00Jack: Do you know if Swiss banks are entitled unde...Jack: Do you know if Swiss banks are entitled under Swiss law to freeze accounts of clients until they provide evidence of tax compliance or entry into OVDP? <br /><br /><br />I like this talk of compensation, but I might be satisfied if my bank would just let me close my account and transfer the funds to the U.S. Then maybe we can talk about providing personal documents. They want the documents before allowing me access to my account.<br /><br /><br />But the bank also says in a letter than under the U.S.-Swiss agreement, it is required to close accounts of U.S. clients who don't provide proof that their account was declared.<br /><br /><br />So let me get this straight: The bank won't close accounts of clients until they provide personal documents, but the bank is required to close accounts of clients who don't provide such documents.<br /><br /><br />So do I just wait them out?Seabreezenoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-73327306975088291672014-06-18T11:37:26.368-05:002014-06-18T11:37:26.368-05:00An interesting colloquy. But not every American de...An interesting colloquy. But not every American depositor with a Swiss bank is in such a position of conflict.<br /><br />I represent investors in Swiss property, all of whom have been reporting their assets and income to the relevant Swiss canton tax authorities and to HMRC (if British) or the IRS (if American), some of them for several decades. None has been asked for proof of filing foreign tax returns. Here's a link to what Credit Suisse sent out last October: http://uniset.ca/misc/crsuisse_irs_hmrc_ltrs.pdf No client of mine has heard from the IRS as of yet but HMRC sent out that same month a scattershot mailing to persons reported to them by Swiss banks: http://uniset.ca/misc/hmrc_swiss_ltr_oct2013.pdf Unlike the IRS, HMRC does not ask about the value of foreign deposits, only the interest, dividends or other revenue earned. <br /><br />My clients, some of whom are Swiss nationals or married to Swiss nationals, express some anguish over the apparent assumption abroad that anybody with a Swiss account is a tax cheat. For one thing, over 700,000 Swiss citizens live abroad, more than 77,000 of them in the USA, and many or most have such accounts, along with pension assets from prior employment: http://www.eda.admin.ch/eda/en/home/doc/publi/ptrali/statis.html<br /><br />Since about 2010 Americans not resident in Switzerland (and for all I know maybe anybody resident in the USA) has been unable to get a new mortgage on Swiss property. This caused some grief to at least one client who had his mortgage offer withdrawn and who had to scramble for funds from within the USA to complete his purchase.5thSwissnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-49066698717058915332014-06-18T08:42:57.533-05:002014-06-18T08:42:57.533-05:00It's only in recent years, perhaps following t...It's only in recent years, perhaps following the lead of the US Treasury, that the European Commission has moved on (begun to address with Regulation (i.e. primary law) and Directive (which may or may not have "direct effect" and be self-implementing) personal income taxation and especially on tax evasion. Of course for the immediate future automatic exchange of information between EU Member States the USA is one-way and the USA remains something of a tax haven with its hybrid entities, secret directorships and so on. <br /><br />Within the EU reciprocal enforcement and extradition for tax crimes are now possible. European Arrest Warrants are a regular feature of cross-border law enforcement. <br /><br />But (as a law student) having read Zagaris ("U.S. Efforts to Extradite Persons for Tax Offenses"), Michael S. Kirsch ("Revisiting the Tax Treatment of Citizens Abroad"), and Hale Sheppard's articles, I'm puzzled about how claims by the USA against EU citizens and residents will be resolved. <br /><br />And how the IRS proposes to enforce its mandate as against those whose American citizenship is doubtful. There is a presumption of alienage in the case of birth abroad, where someone has never "availed himself of an attribute of U.S. citizenship". I think the IRS does not have status to rule on citizenship questions or to bring the issue before the State Department or an Immigration Court. And as far as I know a (foreign) country of which a US citizen is also a national may under international law treat that person as if it held only that other country's citizenship. (The ECJ's judgment in the famous Micheletti case goes further and may extend that to any EU Member State citizenship.) <br /><br />So we are left with, as Zagaris points out, non-tax crimes (money laundering, common-law fraud, wire fraud, and so on) which would be hard to assert until and unless a person's liability to tax and citienship status have been shown. <br /><br />Especially tenuous are claims by the IRS based on "quasi-nationality": noncitizen or former citizen US Person status maintained because, say, a post-1985 loss of status was not followed by filing Form 8854 (or any equivalent prior version) and payment of exit tax. I wonder if any other scholars are working on this.<br /><br />(Within the EU the closest approximation is with the UK's assertion of domicile or continued tax residence but as you must know for most countries (other than France and Switzerland and others with wealth taxes) it is only income and not foreign assets that need to be reported, except perhaps to the extent that those foreign assets represent income never declared for tax in the first place.)<br /><br />I'm trying to deal with this on a comparative-law basis but there really isn't anything to compare with the exorbitance (from a European standpoint) of US claims of jurisdiction. Not just for tax but for information. But you knew that already.Punktlichnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-35999942239910495822014-06-17T20:37:27.749-05:002014-06-17T20:37:27.749-05:00Jack if you would allow me to say the following......Jack if you would allow me to say the following.....<br /><br />I found a wonderful lawyer from Jacks list, Abkins firm, i spoke with them they were courteous, to the point and extremely fair, very knowledgeable. Of course stupid me spoke with her for an hour and then just picked another schmuck from the internet. If i have to do it all over again i would go with her. I am still kicking myself for not listening to her.<br />Talk to her and see what she has to say.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-43995944102049347742014-06-17T12:39:56.870-05:002014-06-17T12:39:56.870-05:00i think the worst father of the year still's f...i think the worst father of the year still's for me.. i have had thoughts of ending it all for me and my family which includes my 2 kids.. the thought of financially being ruined still haunts me..Desi bnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-35459308856802034052014-06-17T12:13:17.749-05:002014-06-17T12:13:17.749-05:00I have not had clients with material "onshore...I have not had clients with material "onshore" problems such as you describe. I take it that you have an unreported onshore schedule C business that will have to be reported on the amended return. I just have not encountered that situation, but have in some few cases had the IRS question other items elsewhere on the return other than the foreign account reporting. In most cases, because of the quality of diligence and presentation on the returns by the preparers my clients use, the IRS does not seem to be terribly interested in questioning the reporting. In this regard, I do tell clients that the amended return is an actual return and everything for which there is a not a reportable position needs to be corrected on the amended returns. Everything. So, at least by the time the preparers we use is through, we have really in some ways already done the audit work for the IRS. So the IRS's spending much time routinely on all submissions would be a huge waste of resources.<br /><br /><br />Bluntly stated, if there are clearly good adjustments the IRS would correct on the Schedule C, then the Schedule C submitted in the OVDP process was improperly prepared and that could create a whole separate range of problems. For example, if the taxpayers claims improper expenses on Schedule on the amended return in the OVDP, he could conceivably have just committed a crime for which he could be kicked out of OVDP and punished criminally and civilly for the original crimes and the crimes in the process. Submitting a bad return in the process is just incredibly stupid. So, if you are going to submit any schedule C in the process (whether amended or original Schedule C), you would be well advised to take positions you can reasonably claim.<br /><br /><br />So to answer your question, I have not seen a whole lot of income tax exposure with respect to the returns we submit.<br /><br /><br />Because of our quality process in filing the OVDP amended returns, the opt out "audit" has focused exclusively on the facts related to the application of the FBAR penalty. There has been no income tax audit.<br /><br /><br />Finally, I do understand that part of the process in moving the case administratively to opt out is to have an analysis of the audit potential of the returns and the FBARs so that a decision is made as to the scope of the opt out audit. Like I say above, apparently because of the quality of the returns we submit, the scope has been limited to the FBAR penalty issues.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-26256915459135477992014-06-17T11:36:08.600-05:002014-06-17T11:36:08.600-05:00Jack i have a question i was wondering if i should...Jack i have a question i was wondering if i should opt out or not, my lawyer states since i have been filing a schedule C for the past 8 years i should avoid opting out. He states that the IRS is asking for all schedule C expenses, bank statements, credit card statement to prove expenses in an opt out and if the irs decides to omit those expense i can get more penalties in an opt out then just paying the 27.5% fine.<br />I am wondering if you have seen the same with your clients and if your advice would be similar to that of my lawyer.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-59417980672627948242014-06-17T11:19:28.458-05:002014-06-17T11:19:28.458-05:00Desi B i am in the same situation and i in a haste...Desi B i am in the same situation and i in a haste joined ovdi i think i should have avoided but what can i do now.<br />I just have a new born kid and i should get the worst father of the year award by the IRS, i have been a total zombie, the joy of having a new baby has dissipated from my life.<br />Yesterday was the worst day when my wife cried and told me that i was being a bad husband/father and you know i am sad to say she's right.<br /><br /><br />All i can say is that life is short just pick one attorney and follow the process, get it done rather then ignoring is what i would say.<br />You and I are not the kind of people who can ignore things like this. We are the one who follow the rule otherwise it would haunt us for the rest of our lives.<br /><br /><br />Sadly a horrible father :(Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-9644733505509247222014-06-16T21:34:22.321-05:002014-06-16T21:34:22.321-05:00My understanding is that the IRS frowns upon quiet...My understanding is that the IRS frowns upon quiet disclosures, because the taxpayer is "trying to slip in under the radar". If one files an explanation for the delay in filing FBARS on the FBAR itself, is that still considered a quiet disclosure? In my case, during two brief visits (less than 2 weeks each) over a 5 year period after my mother passed away in 2007, I was given to understand by overseas relatives (not intentionally) that my wife and I didn't have more than $10K as our share of accounts owned jointly owned with them (overseas relatives).<br /><br />On my third visit earlier this year, I finally was able to get time to unravel the accounts owned, and turns out the value of the assets (including shares traded on a stock exchange) which me and my wife own and should be declared on the FBAR is around $90K. I must admit though that part of the delay in getting this information until this year, was because I didn't have time to get this information during previous two visits, combined with my mistaken understanding that only overseas assets in cash which can be fully repatriated to the US in $ should be reported on the FBAR. <br /><br />Could the above facts be considered a reasonable excuse for a<br /> non-willful FBAR penalty if I do end up with a quiet disclosure for previous year FBARS and amended 1040s? In any case, I will be filing the 2013 FBAR before June 30. We owe about $3k in taxes total for the last 6 years combined. I did get an extension for filing my 1040, and am deferring a decision on my quiet disclosure until the IRS announces their modifications to OVDP, per your blog entry of 6/4/14. Because Mr. Koskinen states "very near future", I am assuming that the IRS will announce something soon after July 1. Mr. Townsend, what are your thoughts about the timing for this announcement? Thanks for this blog, the most informative and useful that I have found that doesn't try to scare everyone into OVDP.svtrnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-35348661676669116242014-06-16T18:22:42.519-05:002014-06-16T18:22:42.519-05:00So the fact that one (negligently/unknowingly) ans...So the fact that one (negligently/unknowingly) answered 'No' to the "Do you have interest in foreign accounts...." question for multiple years - can that by itself constitute material criminal risk in the eyes of IRS?RajNILnoreply@blogger.com