Canadian Man Sentenced to Prison for IRS Tax Fraud Scheme

According to the DoJ, a Canadian man who led a multi-million dollar tax fraud conspiracy was sentenced on August 28, 2018 to 60 months in prison.
 

According to documents filed with the court and evidence introduced at a related trial, Daveanan Sookdeo, 46, formerly of Ontario, Canada, promoted a scheme in which Canadian citizens filed false tax returns with the Internal Revenue Service (IRS) that fraudulently sought nearly $10 million in income tax refunds. 

After the participants in the scheme received their tax refunds, they travelled to the United States where they opened bank accounts at various financial institutions to deposit the refund checks.  The coconspirators then moved the money back to Canada by wire transfers and other means.  The fraudulent tax filings resulted in actual losses to the government of over $3.5 million dollars.

Sookdeo profited from the scheme by charging his coconspirators an upfront fee for the false documents used in the scheme, as well as a percentage of any tax refunds obtained through the scheme.  Sookdeo worked with Ronald Brekke, a coconspirator in California, to prepare fraudulent Forms 1099-OID that participants in the scheme attached to their false income tax returns. Sookdeo also personally filed nine false tax returns and obtained a tax refund check in the amount of $73,662.25.

Sookdeo Was Arrested in Trinidad and Tobago in 2017

and Later Extradited to the United States. 

In May 2018, Sookedo pleaded guilty to conspiracy to defraud the United States and to commit theft of government funds, and filing a false claim against the United States.

In addition to the term of Imprisonment, Sookdeo Was Also Ordered to Serve 3 Years of Supervised Release and Pay Restitution to the IRS in the Amount of $3,553,303.

Sookdeo is the fifth Canadian citizen to be convicted, and the second to be sentenced, for his role in this scheme.

Have a Tax Problem?

 

 

Contact the Tax Lawyers atMarini & Associates, P.A. 

 

 for a FREE Tax Consultation Contact us at: 

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







 

Transnational Database Exchange Triggers Transfer Pricing Audits

According to Margaret Kent, TransferPricingConsortium.com & Robert Feinschreiber, Charles River Associates, until now, tax administrations had lacked sufficient databases to undertake comprehensive country-by-country transfer pricing audits.  Now, as of end of June 2018, tax administrations are ready to begin these audits and assessments in earnest against MNCs. The transfer pricing implementation rules cast a long shadow – they target ownership of trusts, foundations, and tax haven arrangements.  Here are 10 examples – a partial list -of database issues a tax administration might look to for the MNC:

 

1.       The group’s “footprint.” Where do the activities of business take place?

2.       Has the enterprise shifted low-risk activities into a high-tax jurisdiction?

3.       How important are related-party revenues compared with total revenues?

4.       How does the company’s key financial ratios differ from those of the industry?

5.       Do the company’s results differ from industry market trends?

6.       Do the company profits compare with the company’s activities in the jurisdiction?

7.       Does the company have high profits in low tax jurisdictions?

8.       Has the company shifted its intellectual property from actual activities?

9.       Does the company make us of dual resident entities, entities with no tax residence, or stateless entities?

10.   Do current activities and entities substantially differ from past activities? 

 

 

 Need International Tax Help? 



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

 

 

 

 

 

Understanding IRS Tax Audits - Part II

On July 24, 2018 we posted Understanding IRS Tax Audits - Part I where we discussed that careful advance preparation can help reduce the scope of a tax audit or examination and can lead to a more favorable outcome. Although a thorough understanding of the underlying facts and applicable law is a must, understanding IRS procedures is critical to preserving a taxpayer’s rights.

Understanding IRS Tax Audits - Part II

We have summarize below and in Parts I & III some of the more important IRS procedural rules and guidelines governing civil IRS examinations and audits, including: how returns are selected for examination; a brief description of the types of civil examinations; an explanation of the tools available to IRS examining agents and revenue agents; dispositions in IRS audits or examinations and, if necessary, where to seek relief from an unfavorable result in an examination or audit.

Interacting with the IRS Agent

When possible, the taxpayer’s representative, not the taxpayer, should interact with the agent. Indeed, in most cases, the meetings should take place at the representative’s office, not the taxpayer’s place of business. Direct contact between the agent and the taxpayer (or taxpayer’s employees) should be minimized. Agents are trained in interviewing techniques designed to elicit information. They will ask open ended questions, and will listen carefully to the responses. Taxpayers who meet with an agent should be careful to answer only the question asked.

Absent having been served an administrative summons, a taxpayer has the right to refuse to be interviewed. Although, historically examining agents have been reluctant to press for taxpayer interviews, examining agents have become more aggressive in seeking taxpayer interviews and using summonses to compel them. If interviewed pursuant to a summons or otherwise, the taxpayer has a right to counsel and may assert appropriate privileges.

Care should be taken to create a complete record of all information provided to the examining agent. Maintain a detailed record of all documents and records provided to the examining agent. Maintain a record of any oral communication with the agent whether in person or by telephone. Confirm any material oral agreements in writing.

How Agents Gather Information

During the examination, the agent may request various types of documentation to verify items of income and expense on the return, including records, such as receipts, invoices, books, and worksheets. Revenue agents may also review prior or subsequent tax returns or the returns of related taxpayers.

Generally, agents have broad powers to compel production of relevant information. Nevertheless, certain types of information may be subject to privilege or otherwise not subject to compelled production. Once provided, the privilege is likely to have been waived. For example, an agent may ask to see invoices to substantiate a deduction claimed for professional services, such as accounting or legal fees. The descriptions of the services provided could contain information leading to another adjustment. If the descriptions of the services may be privileged, the taxpayer may be able to withhold the actual invoices in favor of some other proof of payment, or may be able to provide redacted invoices.

There has been much discussion about whether tax work papers can be so compelled. Tax work papers prepared in connection with the preparation of the tax return can be reviewed. However, audit accrual work papers, which may reflect opinions and estimates related to questionable items on the return, present a more complex question. Agents are cautioned in the Internal Revenue Manual to exercise restraint in this area, but the Service is becoming more aggressive, particularly where listed transactions are involved.

Keep in mind that the taxpayer’s books and records may contain confidential information of another taxpayer, such as IP or the terms of a contract. The taxpayer may be under a contractual obligation to keep this information confidential. If the agent can not be convinced to accept redacted documents, the taxpayer may want to decline to produce the document unless an administrative summons is issued compelling its disclosure.

An agent will typically request documents and other information by issuing an Information Document Request (Form 4564). Initial requests at the beginning of an examination are typically fairly broad with subsequent requests focusing on specific issues. Keep careful track of IDR requests and items produced. Always maintain a duplicate copy of any documents that are provided and include a transmittal letter with any response describing the documents produced.

If a taxpayer fails to produce requested items, the Service can summons a taxpayer or third party for books, records or testimony. Agents are directed to make an attempt to obtain information informally before issuing a summons. Agents are instructed to consider issuing a summons when a taxpayer fails to make requested records available within a reasonable period of time; where the records submitted are known or suspected to be incomplete and the examining agent believes that additional records containing relevant and material matter may be in the possession of the taxpayer or a third party; and when the examining agent is in doubt as to the availability of pertinent records and wishes to obtain oral testimony as to what records may exist and their location.

When an administrative summons is issued, the summoned person must personally appear at the time and place specified with any requested items. The summoned person has the right to counsel, the right to assert the attorney-client privilege, and the right to raise the self-incrimination privilege under the 5th Amendment. The IRS can issue administrative summonses to third parties believed to hold relevant information. Notice of summons issued to a third party must be given to the taxpayer within 3 days of the date on which service is made to the third party and no less than 23 days before the summons return date. This is to allow the taxpayer sufficient time to file a petition to quash.
If a summoned party ignores the summons or otherwise fails to fully comply, the Service may bring legal proceedings to enforce the summons in federal district court. A court will generally enforce a summons if there is a legitimate purpose for the examination; the information demanded may be relevant to that purpose; the information is not already in the possession of the Service; the information or document is not privileged and the Service has complied with the applicable administrative requirements of the Code and regulations.

To be continued... Understanding IRS Tax Audits - Part III

Have a IRS Tax Problem? 

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

DC Rejects Challenge to Mutual Collection Process in U.S./Canada Treaty

A district court in Retfalvi v. U.S. (DC NC 8/15/2018) 122 AFTR 2d ¶2018-5144 , granted the government's motion to dismissed a taxpayer's refund suit for failure to state a claim where the taxpayer paid and then sought to recover from IRS an amount he paid based on his Canadian tax liability and Canada's collection assistance request under the U.S. - Canada Treaty.

The U.S. - Canada Income Tax Convention includes Article 26A, which is entitled "Assistance in Collection" and allows each state to request the assistance of the other in collecting revenue claims from their own citizens who are living within the other country. Specifically, Article 26A obligates each sovereign to undertake to lend assistance to each other in the collection of taxes referred to in paragraph 9, together with interest, costs, additions to such taxes and civil penalties, referred to in Article 26A as a "revenue claim."

Paul Retfalvi, originally from Hungary, moved to Canada in '88 and in '93 became a Canadian citizen. Later he found a job in the U.S. and remained there to practice medicine on an Hl-B visa. In 2006, he sold two condominiums in Canada and declared the proceeds on both Canadian and U.S. tax returns. The Canadian Revenue Agency (CRA) completed its audit on these two transactions, and, on Oct. 3, 2011, because Mr. Retfalvi chose not file an appeal with the Canadian Tax Court, the liability was finally determined, resulting in a Canadian tax assessment.

Mr. Retfalvi did not pay the amount owed to Canada, and thereafter the CRA sent IRS a Mutual Collection Assistance Request pursuant to Article 26A of the US-Canada Income Tax Convention. IRS sent Mr. Retfalvi a "Final Notice-Notice of Intent to Levy," demanding that he pay the current amount owed to Canada, which totaled $124,287.

On Dec. 22, 2016, Mr. Retfalvi paid the assessment. On Feb. 24, 2017, he filed a refund claim with IRS, which it rejected on June 15, 2017. On Sept. 14, 2017, Mr. Retfalvi filed suit for a refund, challenging the constitutionality of Article 26A.

  Mr. Retfalvi contended that:

1. Article 26A violated the U.S. Constitution's Origination Clause because it was a bill to raise revenue that did not originate in the House of Representatives;
2. Article 26A was invalid because it was not self-executing;
3. Article 26A violated the Taxing Clause of the Constitution (which provides that Congress shall have the power to lay and collect taxes) because (a) Congress has the exclusive authority to lay and collect taxes; (b) Congress cannot use its taxing power to levy or collect taxes of a foreign country; and (c) it purports to amend the Internal Revenue Code;
4. IRS is not authorized to assess and collect taxes imposed by Canadian laws;
5. Article 26A denied taxpayers due process;
6. Article 26A denied taxpayers equal protection of the law under the Fifth Amendment (i.e., protection that was available to taxpayers who had taxes assessed under the Code); and
7. Article 26A created an impermissible sub-classification of U.S. taxpayers (because it did not apply when the taxpayer could demonstrate that the revenue claim related to a tax period in which the taxpayer was a citizen of the requested State).

The district court rejected all the arguments put forth by the taxpayer.

The court concluded that Article 26A did not violate the Origination Clause for at least two reasons: (1) it was not a bill; and (2) it did not impose a tax, increase a tax, or decrease a tax that was created to fund the government generally.

The district court rejected Mr. Retfalvi's argument that the U.S. Constitution, Article I, section 8 grants Congress the exclusive power to "lay and collect taxes" and so prohibit the President from entering into a treaty concerning taxes. The court said that because the Constitution granted the President the power to enter into treaties, the President may use his treaty powers to dispose of U.S. property. Accordingly, the district court reasoned that although the Taxing Clause provides that "Congress shall have power," this language did not grant Congress exclusive power.

Further, the court found that Article 26A did not amend Code Sec. 6201 and Code Sec. 6301 by authorizing IRS to assess and collect taxes that were not imposed by the Code and treating a Canadian revenue claim as an assessment under U.S. law. Accordingly, Article 26A and the Code do not conflict.

To the extent that Mr.Retfalvi contended that Article 26A was invalid because it was not self-executing, the court reasoned that a treaty is not self-executing if the agreement would achieve what lies within the exclusive law-making power of Congress under the Constitution. And, Article 26A does not infringe on any of Congress's exclusive power and is self-executing.

Mr. Retfalvi claimed that Article 26A, by precluding the U.S. from reviewing the validity of Canada's revenue claim, violated due process because it denied him administrative and judicial review available under Code Sec. 6213 and Code Sec. 6330. Here, Mr. Retfalvi was provided with the right to file an appeal with the Canadian Tax Court. Mr. Retfalvi failed to plausibly allege that the procedures afforded to him under Canadian law violated the Due Process Clause.

In addition, the district court also rejected Mr. Retfalvi's argument that Article 26A denied him equal protection because he was not provided with the same administrative and judicial remedies available to taxpayers with U.S. tax liabilities.

The court noted that the Fifth Amendment Due Process Clause contains an equal protection guarantee which forbids arbitrary differentiations among groups of persons who are similar in all aspects relevant to attaining the legitimate objectives of legislation. Mr. Retfalvi failed to plausibly allege that Article 26A treated him differently from others with whom he is similarly situated.

Have a Tax Problem?

 

 

Contact the Tax Lawyers atMarini & Associates, P.A. 

 

 for a FREE Tax Consultation Contact us at: 

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







 

IRS to Introduce New Tax Transcript as of 9/23/18!

On August 22, 2018, the IRS announced in IR-2018-171 that it is moving to better protect taxpayer data, in a new format for individual tax transcripts that will redact personally identifiable information from the Form 1040 series. 

This new transcript replaces the previous format and will be the default format available via Get Transcript Online, Get Transcript by Mail or the Transcript Delivery System for tax professionals as of September 23. Financial entries will remain visible, which will give taxpayers and third-parties the data they need for tax preparation or income verification.

Additionally, based on stakeholder feedback, the IRS also has created a new Customer File Number that lenders, colleges and other third parties that order transcripts for non-tax purposes can use as an identifying number instead of the taxpayer’s SSN.

“We believe the change we are announcing today will better protect taxpayer data from unauthorized disclosure and theft.” said Acting IRS Commissioner David Kautter.

As the IRS has made inroads, criminals need more taxpayer details to better impersonate their victims, making the tax transcript a sought-after document. Criminals attempt to pose as taxpayers accessing their own account or as tax preparers or third parties requesting client information.

The following information will be provided on the new transcript:

• Last 4 digits of any SSN listed on the transcript: XXX-XX-1234
• Last 4 digits of any EIN listed on the transcript:  XX-XXX-1234
• Last 4 digits of any account or telephone number
• First 4 characters of the last name for any individual
• First 4 characters of a business name
• First 6 characters of the street address, including spaces
• All money amounts, including balance due, interest and penalties

On September 23, the IRS also will post an updated Form 4506-T and Form 4506T-EZ, Request for Transcript of Tax Return, that will have a new Line 5b for a 10-digit Customer File Number. Legitimate third parties with a need for income verification or tax data often request taxpayers complete a Form 4506-T.

As of September 23, third parties or taxpayers can create any 10-digit number, except for the taxpayer’s SSN, for use as an identifier. The Customer File Number listed on the 4506-T automatically will be posted and visible on the requested tax transcript, allowing the third party to match the document to the taxpayer. A Customer File Number can be, for example, a loan account number Line 5b is an optional line, intended for those third parties that request high volumes of transcripts.

There is no change in the process for students seeking income verification through Free Application for Federal Student Aid (FAFSA) or disaster victims seeking FEMA assistance. Nor will business tax transcripts change.

Have a Tax Problem?

 

 

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

 

 for a FREE Tax Consultation Contact us at: 

www.TaxAid.com or www.OVDPLaw.com

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





You Don't Send Me Flowers Anymore - Jail Time for Tax Fraud

According to the DoJ, a Pennsylvania couple that owned and operated an internet floral business were sentenced to prison today for failing to pay over employment taxes to the Internal Revenue Service (IRS) and for filing fraudulent personal and corporate tax returns

Andrew Bassaner (aka Andrew Bunchuk) was sentenced to 42 months in prison, and his wife and business partner, Vicki Bunchuk, was sentenced to 6 months in prison.  The defendants were convicted in February 2018 following a jury trial.

According to the evidence introduced at trial, Andrew Bassaner and Vicki Bunchuk owned and operated Florist Concierge Inc. (FCI).  For tax years 2010 through 2012, Bunchuk, aided and assisted by Bassaner, filed fraudulent corporate and personal income tax returns with the IRS.  They diverted funds from FCI, which they falsely deducted as business expenses on FCI’s corporate returns and did not report as income on their personal returns. The expenses included over $200,000 in personal expenditures such as luxury cars, the down payment on a multimillion-dollar house, tickets to sporting events, and home repairs.

In addition, Bassaner and Bunchuk filed fraudulent employment tax returns for FCI that falsely classified its employees as independent contractors.  Based on this fraudulent classification, Bassaner and Bunchuk claimed not to owe employment taxes on the wages paid to those individuals.

 Have a Criminal Tax Problem?

 

 

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 for a FREE Tax Consultation Contact US at 

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



 

Manafort Found Guilty On Tax Fraud & Failure to Report Offshore Financial Accounts (FBAR)

On March 13, 2018 we posted More Charges Against Ex-Trump Campaign Chair Including Offshore Account Violations! where we discussed that President Donald Trump's former campaign chairman, Paul Manafort, and an alleged co-conspirator have been indicted on charges of conspiracy against the United States, money laundering and bank records charges tied to close to a decade of secret lobbying on behalf of Russia-associated Ukrainian officials.

We also discussed that Special Counsel Robert Mueller unsealed a slew of new tax- and bank fraud-related criminal charges on February 22, 2018 against President Donald Trump’s former campaign officials Paul Manafort and Richard Gates, alleging they filed false income tax returns and failed to report foreign bank accounts.

 The charges against Manafort and Gates, a business associate, include:

• 16 counts related to allegedly false income tax returns, 
• 7 counts of failure to report offshore financial accounts,
• 5 counts of bank fraud conspiracy and
• 4 counts of bank fraud. 

Now according to Law360, a Virginia federal jury on August 21, 2018 convicted former Trump campaign chairman Paul Manafort on some charges of filing false tax returns and lying to banks in order to secure tens of millions of dollars in loans. Paul Manafort was found guilty on 8 counts of filing false tax returns and lying to banks, while the jury deadlocked on 10 more counts. (AP)

Returning guilty verdicts on 8 counts of bank fraud, subscribing to False Tax Returns, and failure to Disclose Foreign Bank Accounts, jurors largely rejected Manafort’s claim that his protege and onetime co-defendant Rick Gates was responsible for false claims about the longtime GOP operative’s finances and a network of offshore bank accounts that were the source of millions of dollars in payments to U.S. vendors to support Manafort’s luxurious lifestyle. The jurors deadlocked on the other 10 counts.

The government at trial elicited testimony from Manafort’s bookkeeper and tax preparers who said he was deeply involved with matters relating to his personal finances, even though Gates was often their point of contact for day-to-day matters. Gates cut a deal with prosecutors to testify against his former boss and admitted that he embezzled hundreds of thousands of dollars from Manafort.

Manafort’s attorneys unloaded on Gates at trial, painting the individual described by multiple witnesses as Manafort’s “right-hand man” as a liar and thief who embezzled money to fund a transnational extramarital affair.

But ultimately, the jury either rejected defense’s claims that Gates’ was too untrustworthy to rely on as a witness, or they decided the remaining balance of evidence was sufficient to prove the government’s claims.

 Do You Have Undeclared Income from Offshore Banks?

 

 

Don’t Want to Wind up like Paul Manafort?  

 

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.com or www.OVDPLaw.com or

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

 

LA Man Pleads Guilty to Not Reporting Over $1 Million Held in Israeli Offshore Accounts

According to the DoJ, a Los Angeles man pleaded guilty on August 20, 2018 in U.S. District Court for the Central District of California to willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR), which would have disclosed his foreign bank accounts.

 

According to court documents, Ben Zion Birman, of Los Angeles, California held offshore accounts in Israel at Bank Leumi Le-Israel B.M. from 2006 to 2011. Birman willfully failed to file with the Department of Treasury an FBAR for calendar year 2010, despite having over $1 million in Bank Leumi accounts.  

 

In an effort to further hide his money, Birman instructed Bank Leumi to hold bank mail from delivery to the United States, and obtained access to his offshore funds through the use of “back-to-back” loans, which were designed to enable borrowers to tap their concealed accounts.  These lending arrangements permitted Birman to have funds issued by Leumi’s U.S. branch that were secretly secured by funds in his undeclared accounts in Israel.

 

In December 2014, Bank Leumi entered into a deferred prosecution agreement after the bank admitted to conspiring from at least 2000 until early 2011 to aid and assist U.S. taxpayers to prepare and present false tax returns by hiding income and assets in offshore bank accounts in Israel and other locations around the world.  Under the terms of the deferred prosecution agreement, Bank Leumi paid the United States a total of $270 million and continues to cooperate with respect to civil and criminal tax investigations. (Go to our blog post 148 Offshore Banks & Now Financial Advisors Are Turning Over Your Names To The IRS - What Are Your Waiting For?  to see the extent of the cooperation by these 148 Offshore Banks, including Bank Leumi; who are providing unredacted client files for the U.S. taxpayer-clients who maintained accounts at their Banks or Financial Instruction.)

 

“The Department of Justice is Committed to Vigorously Investigating and Prosecuting Offshore Account Holders who Maintain Undeclared Accounts and Willfully Ignore their

U.S. Reporting and Tax Obligations,”

 

said Principal Deputy Assistant Attorney General Zuckerman.

 

Birman faces a maximum sentence of five (5) years in prison, as well as a period of supervised release, restitution and monetary penalties. Birman's sentencing is scheduled for December 10, 2018. 

 

Do You Have Undeclared Income from an Offshore Bank?

 

 

Is Your Name Being Handed Over 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.com or www.OVDPLaw.com or

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