Failure to Deposit Penalty Relief

The IRS has issued interim guidance for taxpayers who are unable to get a bank account or make other arrangements for depositing their federal tax obligations by electronic funds transfer and thus, subject to a penalty for failure to deposit under section 6656.

For unbanked taxpayers who are timely in meeting their tax deposit obligations, the IRS will not impose or will update the failure to deposit penalty if a taxpayer can show that they made reasonable efforts, but were unable to get a bank account during the period at issue. To request penalty relief under this guidance, the taxpayer must include a signed statement that explains the taxpayer's attempt to get a bank account, and must include any cooperating documentation (denied account applications, correspondence from bank, etc.).

To help avoid processing delays, please include “unbanked taxpayer” or a statement about being unable to get a bank account in the subject line or at the beginning of the request for relief from the penalty

This guidance does not apply to situations in which the taxpayer can obtain a bank account, but chooses not to maintain a bank account. Such cases will continue to be handled on a case-by-case basis.

Have A Tax Problem?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid - 888-882-9243.

Last-Minute Reminder: Report Certain Foreign Bank and Financial Accounts to Treasury by June 30

The Internal Revenue Service would like to reminded everyone who has one or more bank or financial accounts located outside the United States, or signature authority over such accounts that they may need to file an FBAR by next Tuesday, June 30.


FBAR Requirements

FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department. The form must be filed electronically and is only available online through the BSA E-Filing System website.

Who needs to file an FBAR? Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014 generally must file. For more on filing requirements, see Current FBAR Guidance on IRS.gov. Also see the one-hour webinar explaining the FBAR requirement.

The FBAR filing requirement is not part of filing a tax return. The FBAR Form 114 is filed separately and directly with FinCEN.

FBAR filings have surged in recent years, according to data from FinCEN. FBAR filings exceeded 1 million for the first time in calendar year 2014 and rose nine of the last 10 years from about 280,000 back in 2005.


FATCA Requirements

FATCA refers to the Foreign Account Tax Compliance Act. The law addresses tax non-compliance by U.S. taxpayers with foreign accounts by focusing on reporting by U.S. taxpayers and foreign financial institutions.

In general, federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax returns. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and generally requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938 Statement of Special Foreign Financial Assets.  Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions of this form for details.

The FATCA Form 8938 requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR Form 114.  A brief comparison of the two filing requirements is available on IRS.gov.

U.S. Income Tax Obligations

U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2014, may have a U.S. tax liability and a filing requirement in 2015.

A filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit, that substantially reduce or eliminate their U.S. tax liability. These tax benefits are not automatic and are only available if an eligible taxpayer files a U.S. income tax return.

The filing deadline is Monday, June 15, 2015, for U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, and for those serving in the military outside the U.S. and Puerto Rico, on the regular due date of their tax return. To use this automatic two-month extension, taxpayers must attach a statement to their returns explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for details.

Nonresident aliens who received income from U.S. sources in 2014 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 15 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

FBAR filings have surged in recent years, topping the one-million mark for the first time during calendar-year 2014. The FBAR requirement is separate from the requirement to report specified foreign financial assets on a U.S. income tax return using Form 8938. A brief comparison of the two filing requirements is available on IRS.gov.

Need Help With Your

US Reporting Requirements?

 Contact the Tax Lawyers at

Marini & Associates, P.A.  

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243

IRS No Longer Is Sending The Necessary "Closing Letter" for Form 706's?

During my 32 year career at the Internal Revenue Service, I saw numerous changes in the tax laws. Most of these were designed to reflect changes in income, deductions, or credits implemented by Congress. There were also a number of new forms and devices created to assist the IRS in gathering information about US taxpayers, their domestic accounts, and more importantly, to expose and report the income from overseas accounts.

There were also a few administrative changes which, to those of us who worked in the examination area, seemed to have no purpose other than to annoy and make life a little bit more difficult for taxpayers. 

Again, the IRS has come up with one of these "annoy the taxpayer" changes of which we should all be aware. For those of us who file federal estate tax returns (forms 706, 706NA), the modus operandi was always the same. We would file an estate tax return it with the IRS, the IRS would review the tax return and either accept it as filed or choose it for examination. In every case, however, at the end of the IRS processing, an IRS "closing letter" would be automatically sent to the estate notifying the estate that the IRS had reviewed the return, and this was the final amount of the estate's liability. 

This closing letter, other than simply notifying the estate that the IRS was finished with its review, is necessary to show banks, brokerage houses, real estate companies etc. that the estate had filed a tax return with the IRS, the IRS had reviewed the documentation, and was now satisfied that all tax problems had been resolved between the IRS and the estate. Often these bankers, brokerage houses, realtors, etc. refuse to release funds relating to the estate until they receive a copy of the closing letter to prove to them that the IRS has in fact reviewed this tax return and approved these final numbers. 

Now however, the IRS has changed its methodology. It will no longer automatically send out estate tax closing letters. For all tax returns filed after June 1, 2015, the estate must send, more than four months after the filing of the tax return, a letter to the IRS requesting a closing letter. Why this change was implemented no one knows. For most of us who operate within this venue, it will be another nuisance which many of us will initially forget and eventually get used to filing.

For form 706 filers, the sending of this letter should not create much of a problem since all 706's list the Social Security number of the taxpayer in the upper right-hand corner. The problem will come for people who file form 706-NA's, the estate tax return for nonresident aliens. Most of these nonresident aliens do not have Social Security or tax identification numbers. The tax returns are filed leaving the upper right-hand corner space empty and the IRS eventually assigns a tax identification number to the estate. In almost every case, unless there is some type of correspondence from the Service, the estate does not learn the assigned ID number until the estate receives the closing letter.

The issue then becomes, for nonresident alien estates is how to request an IRS closing letter if you have no tax identification number or SSN to refer to?

Virtually all the computerized records at the IRS are kept by SSN or tax ID numbers. To try to correspond with the IRS in areas where there is no such number is to initiate a long, frustrating dialogue. This new requirement of the request for closing letters will present a new challenge in terms of patience for those of us whose primary function is filing 706 NA's. 

Why did the IRS implement this change? 

Only The Shadow knows and he isn't talking :)

Have a US Estate Tax Problem?

 

Estate Tax Problems Require 

an Experienced Estate Tax Attorney

Contact the Tax Lawyers at

Marini & Associates, P.A.

 for a FREE Tax Consultation Contact US at

www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243).

Robert S. Blumenfeld  - Estate Tax Audit Counsel
Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

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OVDP Penalty Increased To 50% For 27 Foreign Banks

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. HSBC India
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15. Finter Bank Zurich AG (effective 5/15/15)
16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17. MediBank AG (effective 5/28/15)
18. LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15) 
20. Rothschild Bank AG (effective 6/3/15)
21. Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
    
23. Berner Kantonalbank AG (effective 6/9/15)
24. Bank Linth LLB AG (effective 6/19/15)
    
25. Bank Sparhafen Zurich AG (effective 6/19/15)
26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
27. Privatbank Von Graffenried AG (effective 7/2/15)

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.



In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

“With each Additional Agreement, 
the world where criminals can hide their money 
is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

Taxpayers who had undeclared income from one of these 25 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 25 Banks Delivering Names to the IRS?

Do You Value Your Freedom?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243

More Swiss Banks Cave and Turn Over Names to the DOJ Bring the Total to 25 Banks!

We have previously posted Thursday, June 11, 2015, 2 More Swiss Banks Cave and Turn Over Names to the DOJ Bring the Total to 23 Banks! that the Department of Justice DoJ announced on June 9, 2015 that two banks, Société Générale Private Banking (Suisse) SA (SGPB-Suisse) and Berner Kantonalbank AG (BEKB), have reached resolutions under the department’s Swiss Bank Program.    

Now the Department of Justice DoJ announced on June 9, 2015 that
that two more banks, Bank Linth LLB AG (Bank Linth) and Bank Sparhafen Zurich AG (BSZ), have reached resolutions under the department’s Swiss Bank Program.

“The days of safely hiding behind shell corporations and numbered bank accounts 

are over,” 
said Acting Assistant Attorney General Caroline D. Ciraolo 
of the Department of Justice’s Tax Division.

“As each additional bank signs up under the Swiss Bank Program, More and More Information Is Flowing  to the IRS Agents and Justice Department Prosecutors going after  Illegally Concealed Offshore Accounts and the Financial Professionals who help U.S. Taxpayers Hide Assets Abroad.”

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

Bank Linth, one of the largest regional banks in Eastern Switzerland, was founded in 1848.  It is headquartered in Uznach, Switzerland, which is approximately 35 miles southeast of Zurich.  Bank Linth provided private banking and asset management services to U.S. taxpayers through private bankers based in Switzerland.  It opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations.

Bank Linth’s cross-border banking business aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts.  Bank Linth provided this assistance to U.S. clients in a variety of ways, including the following:

• Opening and maintaining accounts in the names of sham entities;
  
• Providing U.S. taxpayers with numbered accounts that hid the taxpayers’ identities;
  
• Facilitating U.S. taxpayers’ withdrawal of cash from undeclared accounts; and
  
• Agreeing to hold bank statements and other mail relating to accounts rather than sending them to U.S. taxpayers in the United States.
  

On several occasions, Bank Linth opened accounts for U.S. taxpayers through an external asset manager, and one of these accounts was opened in the name of a sham foundation.  In that instance, Bank Linth knowingly accepted and included in account records forms provided by the directors of the sham foundation that falsely represented the ownership of the assets in the account for U.S. federal income tax purposes.

In accordance with the terms of the Swiss Bank Program, Bank Linth described in detail the structure of its banking business, including its management and supervisory structure, and provided the names of management and legal and compliance officials.  Bank Linth further provided detailed and specific information related to its illegal U.S. cross-border business, including the bank’s misconduct, policies that contributed to that misconduct and the names of the relationship managers overseeing the bank’s U.S.-related business.  Bank Linth also obtained affidavits from bank employees regarding the bank’s conduct and related matters.

Since Aug. 1, 2008, Bank Linth held 126 U.S.-related accounts, with over $102 million in assets.  Bank Linth will pay a penalty of $4.15 million.

BSZ was founded in 1850 and has its sole office in Zurich.  BSZ knew that U.S. persons had a duty under U.S. law to report their income to the Internal Revenue Service (IRS) and to pay taxes on that income, including all income earned in accounts that BSZ maintained in Switzerland.  Despite this knowledge, BSZ opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Treasury, as required by U.S. law.

After Aug. 1, 2008, U.S. persons opened 32 U.S.-related accounts at BSZ, and only one of them provided a Form W-9 to BSZ upon opening an account.  In most cases, the U.S. persons who opened accounts at BSZ during this period had been required to close their accounts at other Swiss banks, and BSZ knew or had reason to know that most of these accounts were likely not declared to the IRS. Moreover, 22 of the U.S.-related accounts opened during this period were funded by transfers from banks that were or are the targets of Justice Department criminal investigation.

Two relationship managers at BSZ were responsible for managing most of its U.S.-related accounts in the period since Aug. 1, 2008, and one of those managers directly reported to BSZ’s chief executive officer.  BSZ relationship managers assisted U.S. persons in executing waiver forms that directed the bank not to acquire U.S. securities in their accounts.  BSZ knew that the purpose and effect of these forms was to avoid disclosing the identities of the U.S. persons to the IRS.

Until 2012, BSZ provided its U.S. clients with an option for hold-mail agreements, even though it understood that providing these agreements upon request could allow U.S. persons to keep evidence of their accounts outside of the United States in order to conceal assets and income from the IRS.  One U.S. client told his BSZ relationship manager by email that the hold-mail fee was “cheap insurance against having my dealings with you come to the attention of the government revenue authorities.”

BSZ also offered travel cash cards to its clients, including U.S. persons.  A client could instruct BSZ to load up to 10,000 Swiss francs, U.S. dollars or euros from his or her BSZ bank account onto a travel cash card.  The client could then use the card for purchases or remit unused balances back to the BSZ account.  U.S. persons’ use of these cards facilitated access to or use of undeclared funds on deposit at BSZ.  One BSZ relationship manager sent a brochure about travel cash cards to a U.S. client who did not wish to transfer money to the United States because of “surveillance” concerns.

In accordance with the terms of the Swiss Bank Program, BSZ described in detail the structure, operation and supervision of its U.S. cross-border business, including the names of relevant individuals and entities.  It also encouraged existing and prior holders of U.S.-related accounts to disclose their accounts to the IRS through the Offshore Voluntary Disclosure Program.

Since Aug. 1, 2008, BSZ held 91 U.S.-related accounts, with over $25 million in assets.  BSZ will pay a penalty of $1.81 million. 
 

Do You Have Undeclared Income from One of these Banks

 Who Are Handing Over Names to the IRS?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243