tag:blogger.com,1999:blog-1519969502186924526.post4426515886983827369..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: Comments on the Warner Sentencing Oral Argument (9/22/14)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger58125tag:blogger.com,1999:blog-1519969502186924526.post-88335550587766792222015-07-24T12:18:14.596-05:002015-07-24T12:18:14.596-05:00gottaloveUStax1,
I understand. One additional c...gottaloveUStax1,<br /><br /><br />I understand. One additional consideration. If the taxpayer checked the foreign account question yes, he probably was income tax compliant with respect to the account even though he may not have read or understood the instructions about the need to file the FBAR. If the taxpayer is U.S. tax compliant, there will be no FBAR penalty even if he or she did not file. The IRS will just not reach the willfulness issue or the nonwillfulness for that matter.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-1613919474630124542015-07-24T11:33:26.685-05:002015-07-24T11:33:26.685-05:00It is a not uncommon situation among expats (since...It is a not uncommon situation among expats (since they almost always have a foreign account), many of whom answered the question on the tax form without ever researching the underlying rule as to what else was required. In particular, in the years before 2009, most people living abroad (including many tax preparers working with Americans) had never heard of FBARs.gottaloveUStax1noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-3026949089640643492015-07-24T09:29:04.604-05:002015-07-24T09:29:04.604-05:00Darn,
You ask a good question. Like much of life...Darn,<br /><br />You ask a good question. Like much of life's events, different constructions can be put on them. A yes answer would be consistent with willfulness and might be consistent with confusion which is not willfulness (unless the yes answer would indicate willful blindness which some court might equate to willfulness). <br /><br />I would argue that the yes without the FBAR establishes (1) the taxpayer was honest in answering the question and (2) the taxpayer neglected to follow through the implications of the answer (maybe did not even read that part). Then I would marshal the facts that support the taxpayer's nonwillfulness.<br /><br />Still, thanks for asking that question. I had not heard it before.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-73413812985126964442015-07-22T21:58:41.111-05:002015-07-22T21:58:41.111-05:00I see a lot of talk about answering "no"...I see a lot of talk about answering "no"... but what if the TP answered "yes"? I.e., is that proof of non-willfulness, as you are telling the government "hey, I have an offshore account in XYZ bank, not hiding anything"? Or it actually makes you more willful as then, likely, you should know about the FBAR...?Darnnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-71945428409930588372015-01-02T12:30:02.506-06:002015-01-02T12:30:02.506-06:00If I were in his shoes (this is not legal advice, ...If I were in his shoes (this is not legal advice, I'm not a lawyer) I would go through the streamlined process unless and until I hear otherwise. I would not at all be surprised if at some point the IRS ssays oops we goofed you're in OVDP adn must either opt out or pay 27.5%. <br />I am basing the previous statement on past experience with the IRS.Guestnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-16532454862638816052014-12-28T11:13:24.954-06:002014-12-28T11:13:24.954-06:00this TP is somewhere in the middle, as TP had sent...this TP is somewhere in the middle, as TP had sent in the Rule 24 letter but hadn't heard anything from IRS. IRS had actually asked for some additional information, at which point the new Streamlined came in. TP provided additional information and sent in letter asking to withdraw into SFOP (all prior to July 1). IRS never responded at all, either accepting TP into OVDP (generally supposed to happen within 45 days) or responding to the withdrawal letter, so TP is in limbo. TP's situation is benign (TP feels that was mistake to enter into OVDP but did so on basis of FBAR ambulance chaser advice that quiet disclosure would be aggressively pursued.) TP is inclined to simply assume streamlined is permissible, although not really sure.gottaloveUStax1noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-16493440819440033612014-12-27T16:21:03.991-06:002014-12-27T16:21:03.991-06:00As I recall, the taxpayer was stuck with OVDP only...As I recall, the taxpayer was stuck with OVDP only if he had sent the detailed OVDL letter. Otherwise, at least I recall, the taxpayer could go to Streamlined.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-2471217731377535342014-12-23T12:45:51.890-06:002014-12-23T12:45:51.890-06:00I know of one situation where taxpayer had filed d...I know of one situation where taxpayer had filed disclosure letter but had not yet heard back from IRS on acceptance, etc.. When Streamlined came out, TP sent a letter asking to withdraw into Streamlined (prior to July 1). IRS didn't respond to the letter but also didn't ever send any correspondence indicating acceptance into the program. TP is assuming ability to go directly to streamlined although somewhat worried. Any thoughts, Jack or others?gottaloveUStax1noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-31507385348164557602014-12-19T11:44:01.026-06:002014-12-19T11:44:01.026-06:00For those applying to transition from OVDP to stre...For those applying to transition from OVDP to streamlined, that if your request is denied it's an indicator that you should probably not opt out.<br />What about someone whose transition request is approved, could someone like that consider opting out? I am thinking of account size in which the optout nonwillful penalty could be significantly lower than 5%. Would this be allowed? Would it anger the IRS? Would the criteria for nonwillfulness be different under transition than under optout? My guess is that they shouldn't be, but would they differ in practice? Or would the IRS in such a situation be expected to do a much more thorough going over facts with a fine tooth comb?Guestnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-11771000656983487322014-12-19T11:39:31.227-06:002014-12-19T11:39:31.227-06:00I am not Jack but believe that once you enter OVDP...I am not Jack but believe that once you enter OVDP your only choices are pay the penalty or opt out. (The penalty may be 5% for those still able to transition.) <br />I haven't read any procedures for withdrawing from OVDP nd going to streamline in cases in which you do not qualify for transition.Guestnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-22592289147951086442014-12-12T15:42:11.274-06:002014-12-12T15:42:11.274-06:00Jack, any updates on your clients who withdrew fro...Jack, any updates on your clients who withdrew from OVDP to enter SFOP (submitted disclosure letter, but hadn't yet filed 1040s). Did they ever get a notice that they in fact were being audited?anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-81041019088132579682014-09-27T15:41:03.075-05:002014-09-27T15:41:03.075-05:00I think is way out of line of the IRS. What is the...I think is way out of line of the IRS. What is the point of offering a voluntary disclosure program if the fine is going to be the same as if you got caught. If someone like Carl Zwerner can only get 2 years, then for someone how came into compliance on their own free will should only get one year at most. If willful people that come forward get treated the same as people still hiding, why would they even bother coming in. They will just take their chances. I know I would.Blackseal1234noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-58137767654750499412014-09-27T13:42:15.219-05:002014-09-27T13:42:15.219-05:00Jack, I believe most banks WILL be FATCA compliant...Jack, I believe most banks WILL be FATCA compliant, but in a way that reduces compliance burden and risk. In other words, FATCA requires reporting on US persons. If there are no US persons with accounts there is nothing to report. Or, if only US persons who are local residents are allowed to open accounts, but just non-interest bearing accounts and no stocks, bonds, funds or interest, the only thing that needs to be reported is account balances, deposits and withdrawals for that small number of accounts.<br /><br /><br />My experiences are as a US person NOT resident in Europe. I have decided not to mention the two banks and countries because I am afraid that if they have too many US accounts they will become fearful of any possible penalties if they make mistakes in reporting, and may close all accounts.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-81797035457416053572014-09-27T12:14:34.549-05:002014-09-27T12:14:34.549-05:00ES,
Thanks for correcting the number. It should ...ES,<br /><br />Thanks for correcting the number. It should be $50,000 and I have made that correction.<br /><br />JackJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-83354832009132013692014-09-27T10:26:33.095-05:002014-09-27T10:26:33.095-05:00Thanks Jack, as you always tell us, "if these...Thanks Jack, as you always tell us, "if these are the facts….then….etc" We all have other facts. I only mentioned this rental one because it is the biggest for me, I feel. Here is a quick more: I also thought at 24% I would owe nothing to IRS, however over the 8 OVDP years my accountant came up with me owing $10K. Apparently had to do with my foreign tax credit being allowed for just a minor fraction only given not sure what (other US credits I had I think?) Also, there is other undeclared income I had no clue I had to declare, this is about $3K annually my previous employer was putting into a retirement fund, tax deductible there, had no clue would be taxable here. As for FBARS, I checked NO under assumption I did not have to, as my one and only foreing account (checking) was always below $10K, opened about 30 years ago while I lived there! Learned through OVDP CPA my retirement fund was indeed too an "account" (balance $200K at highest), this fund had no account number and by Social Security Adm. rules in the country, they had to release authority to the fund by certifying I was 65, otherwise the fund cannot disburse. Then, there were mother's accounts with my signature authorized from years ago, no idea I had to report them, balance at highest about $100K. The total highest aggregate in OVDP is $600K given the condo value at highest in 2007, penalty $174K. Under SDOP transition at 5% it is $11K (as no condo or signature authority accounts are included.)RONnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-1414829504757659212014-09-27T08:12:55.849-05:002014-09-27T08:12:55.849-05:001. mitigation guidelines authorize the imposition...1. mitigation guidelines authorize the imposition of a penalty lower than the statutory maximum.<br />2. 4.26.16.4.5.6 FBAR Wilfulness Penalty Amount - Mitigation Inapplicable (>$100K always 50% of 6-30 balance) but only if your UBS client does not meet the threshold conditions for mitigation (see IRM 4.26.16.4.6.1).<br /><br />- I assumed that your client passed the 7 criteria threshold set out by the IRMs.<br />- I assumed your examiner did not grant in writing mitigation (left it to interpretation) for year 1 and 2. If she did and avoided that determination I think it is important to correct this and show that all the years were mitigated and not the egregious max. wilful statutory penalties asserted except for year 3 .<br /> <br />My point in general I was trying to make is that for expats vs. homelanders the max. and 6/30 balance are two very different numbers and mitigation for all the years a very important factor.<br /> <br />The question now is how much discretion can your examiner use or avoid to use, hence me mentioning to you the argument of bias and mischaracterisation . I had conversations about this topic last year with Caroline and Larry if an examiner can treat a client as inapplicable for mitigation when he clearly is and I had the impression that they agreed with my pov. that even if mitigation is at the discretion of the examiner but if your client fulfils 100% of the named criteria it should be mentioned in the assessment that your client has received mitigated and not max. wilful penalties for all the years involved regardless if it makes a difference in $ terms or not.<br />Now the procedure should have been that your examiner did submit the FBAR case file to a SB/SE Counsel Area FBAR Coordinator (Counsel). This Counsel should have rendered his advice to her within 45 days and prepared a written memorandum of review of the FBAR case (unfortunately this is a sealed document so forget submitting a Freedom of Information Act (FOIA) request). This Counsel next to the Appeals FBAR Coordinator will also assist the National Office of Appeals which receives the FBAR administrative file which should contain in your case : 1. summary memorandum expl. the FBAR violations 2. Form 13535 related statue memorandum signed by the designated Program Manager 3. FBAR issue work papers 4. Letter 3709 for pre-assessment 5. Your protest 6. IRS Counsel Opinion memo for FBAR penalties > $10K.<br /> Your case is classified as ``Appeals pre-assessment`` and an Appeals Coordinated Issues (ACI) case, which means they cannot be resolved by any field manager who may try to do so without first “coordinating” with the National Office. <br />Since you mentioned that SOL extensions are coming up ..... if no statue extension is secured the FBAR penalty can be assessed and you will be given post-assessment appeals rights with one little caveat which is FBAR penalties > $100K cannot be compromised by Appeals without approval of DOJ (see 31 USC §3711 (a)(2) and 31CFR §902.1(a),(b).<br />Just to mention the Alternative Dispute Resolutions (ADR) for the pre-assessment stage but I think they only exist currently on paper :<br /> 1. FTS Fast Track Settlement<br />- mediation by appeals officer<br /> 2. FTM Fast Track Mediation<br /> <br />Lets go through your example :<br />High Balance 6/30 next year balance Level III penalty<br />01 $500,000 $500,000 $250,000<br />02 $500,000 $500,000 $250,000<br />03 $500,000 $0 $ 25,000<br /> <br />lets assume 01 =2007 , 02 = 2008, 03 = 2009<br />2007 : $250K mitigated Level III penalty or 50% max. wilful penalty are identical<br />2008 : $250K `` ``<br />2009 : the greater of 10% of max. or 50% of 6/30 balance = $50,000 not $25,000<br /> <br />That would be $550K in total using Level III for all 3 years involved but I am not sure why you show $525K ?ESnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-63514239134106929852014-09-26T20:16:05.857-05:002014-09-26T20:16:05.857-05:00RON,
As I understand your facts, with a 24% gross...RON,<br /><br />As I understand your facts, with a 24% gross income withholding on rental property, there should be no net U.S. tax due after the foreign tax credit. So there is no U.S. tax underpayment and you can easily certify nonwillfulness as to U.S. tax liability. (OK, I am painting in broad strokes, here, and there can be counter-arguments, but I think at the end of the day the IRS would say nonwillfulness on income tax.) <br /><br />The issue is FBAR. If that is your fact pattern, unless there is some facts that would indicate willfulness on the FBAR, I think that the nonwillfulness certification will fly through for FBAR.<br /><br />So, on the facts presented, go for SDOP.<br /><br />Again, you might consult with a practitioner who can probe to make sure that these are all the relevant facts.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-12182620995330644752014-09-26T17:31:17.272-05:002014-09-26T17:31:17.272-05:00ES
I still don't understand what you are sayi...ES<br /><br />I still don't understand what you are saying. Here is the pattern:<br /><br /> High Balance 6/30 next year balance Level III penalty<br />01 $500,000 $500,000 $250,000<br />02 $500,000 $500,000 $250,000<br />03 $500,000 $0 $ 25,000<br /><br />The agent only gets to Level III based on a determination that the mitigation requirements apply, otherwise the penalty in the final year would be $100,000 per the statute.<br /><br />Help me understand what you are saying.<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-35025583381745432152014-09-26T17:03:11.367-05:002014-09-26T17:03:11.367-05:00USTax and Jack/others: This is copied fromUSTax re...USTax and Jack/others: This is copied fromUSTax response "Intent is distinguished from inadvertence, reliance on incorrect technical advice, honest difference of opinion, negligence or carelessness."<br />QUESTION ON SPECIFIC FACT as follows: Taxpayer does not pay US tax on rental income for 6 years (income about $15K yearly)but does pay tax in country where property is located at 24% of gross income. He does not seek tax advise based on concern that it will be very expensive consultation under belief it may require a sophisticated international tax attorney. Instead he consults tax treaty and thinks that based on the reading tax has to be paid in country where rental is. Title of tax treaty in the other country's language states:"bilateral agreement with the purpose to prevent double taxation" He has never heard of foreign tax credits till entering the OVDPand understands now that tax had to be paid in both countries with tax credit given int he US.<br />Seeking transitional relief under SDOP, would this fact be regarded as "carelessness" and therefore not as/distinguished from "intent" based on the above quote by USTax? IF it were found to be "carelessness" then the findings would be non-willfull?RONnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-21672516059928956732014-09-26T09:51:18.953-05:002014-09-26T09:51:18.953-05:00Jack the answer lies in the details... for Level I...Jack the answer lies in the details... for Level III accounts there would be no difference if and when max. value and 6/30 balance are identical which is btw. typical for an account not used by expats.<br />Example : If you have for both dates a $500K balance than option 1) max. willful would be 50% or $250k but option 2) mitigation Level III would be the greater of 10% of $500K or 50% on 6/30 which again would be $250K.<br />Do you follow me so far ? Which means since the examiner seems not to have written on his determination specifically what it was that both options would be possible here but again since your client fulfills all 7 criterias for mitigating lower I would like to know how she could avoid recognizing this important fact. If she did and avoided that determination I think it is important to find that out .ESnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-42073938006599701612014-09-26T09:11:36.492-05:002014-09-26T09:11:36.492-05:001. I am not convinced. They did assert 2 50% pen...1. I am not convinced. They did assert 2 50% penalties, which, at least for those years, is as egregious as it comes. The 10% penalty is a mitigation given that it is less that the statutory alternative maximum of $100,000. But that is faint mitigation at best.<br />2. Another commentor noted that the FBAR penalty is an Appeals Coordinated Issue, so that the decision being made outside the local Appeals Office may be just in another Appeals Office. I am skeptical and am very dubious of an impartial review and decision making by unnamed and secret process in which there is no ability to interact. If this goes to litigation, between FOIA and discovery, we will learn ex post facto about the process, but at least in litigation we will face the decision makers and more importantly the decision makers will face us. This is a credibility case in the final analysis. <br />3. The Form 872s given before opting out are not null and void. The process required FBAR statute consents for all years. The IRS takes the position that, unlike Form 872s where the statute has to be open when the Form 872 is signed by both parties, the FBAR consents are like general waivers of statutes of limitations and are open for all years stated in the consent, whether or not the year was open when the consent was signed.<br />4. As I read your question it is whether those using QD, QQD or GF will not get an appeal. I don't think that is right. (BTW, I am not sure what you mean by QQD, but assume that it is a variant of QD, quiet disclosure.)<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-83460572074846372602014-09-26T08:09:51.628-05:002014-09-26T08:09:51.628-05:00In my case, I'm concerned about GF because I l...In my case, I'm concerned about GF because I learned about FBAR this year and had an accountant prepare my FBAR for 2013. Wouldn't the IRS assume that I have been informed by my accountant that I need to bring past years into compliance as well. So if I choose GF, couldn't this potentially be used against me in determining willfulness? Have you ever had a case of a GF that was audited - if so, what happened?Tostreamlineornotnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-67956519335550983222014-09-26T06:43:58.810-05:002014-09-26T06:43:58.810-05:00I think you are not so far off with your assumptio...I think you are not so far off with your assumption that we are seeing an erosion of basic procedural due process.<br />1. The trend away from voluntary compliance as the primary purpose of civil tax penalties<br />2. The bias in favor of asserting penalties<br />3. The lack of clear standards in some penalties<br />4. The fact that some penalties are disproportionate both in amount and severity<br /><br />This view leads not to a policy based on the deterrent value of<br /><br /> penalties, but rather a policy that says that penalties most likely to <br />be imposed should be high because the cost of asserting and defending <br />them will be offset by the proceeds of the penalty.Notamusednoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-88854931549465257162014-09-26T06:23:14.072-05:002014-09-26T06:23:14.072-05:00With regards to your appeal .....Jack correct me i...With regards to your appeal .....Jack correct me if I am wrong but is it not in the National Office, Appeals which develops the settlement guidelines (to ensure resolution on a consistent basis nationwide) in “coordination” with the Examination function. IRS Counsel works with both functions to develop Coordinated Issue Papers (CIP). These CIPs are developed after hundreds of hours of meetings and attorney work to craft settlement guidelines “including addressing the hazards of litigation.” Appeals Settlement Guidelines (ASGs) are guidelines written by Appeals and reviewed by the Office of Chief Counsel to assist Appeals “in coordinating issues of broad impact or importance for cases coming from the offshore initiative.Anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-66136827194000330992014-09-26T05:57:34.623-05:002014-09-26T05:57:34.623-05:00The Supreme Court held that filing a nonfraudulent...The Supreme Court held that filing a nonfraudulent amended return after filing a false or fraudulent return does not start the running of the <br />statute of limitations on assessment. Once the false or fraudulent return is filed, the IRS can assess tax at any time, and the taxpayer cannot reinstate <br />the general 3-Year SOL by filing an amended returnAnonnoreply@blogger.com