IRS Recovers $4.7 Billion for U.S. Taxpayers as Part of New Initiatives

According to DoJ, the Internal Revenue Service provided the regular quarterly update to the Strategic Operating Plan, outlining key milestones in criminal investigations, improvements to taxpayer services and advancements in digital modernization that have transformed agency operations while protecting billions of taxpayer dollars.

The IRS has now recovered $4.7 billion from new initiatives underway. This includes: 

• More than $1.3 billion from high-income, high-wealth individuals who have not paid overdue tax debt or filed tax returns, 
• $2.9 billion related to IRS Criminal Investigation work into tax and financial crimes, including drug trafficking, cybercrime and terrorist financing, and 
• $475 million in proceeds from criminal and civil cases attributable to whistleblower information.

The IRS also announced new results from the focus on high-income non-filers who have not filed taxes since 2017. 

The IRS Has Now Collected An Initial $292 Million
From More Than 28,000 Non-Filers, An Increase
of $120 Million Since September 2024.

These are cases where IRS has received third party information, such as through Forms W-2 and 1099s, indicating these people received income between $400,000 and $1 million or more than $1 million, but failed to file a tax return. The non-filer program ran sporadically since 2016 due to severe budget and staff limitations that did not allow these cases to be pursued. With additional funding, the IRS had the capacity to resume this core tax administration work earlier this year.

“The IRS continues to show dramatic progress on a wide array of the agency’s transformation efforts, producing real-world improvements to help taxpayers and businesses while also taking important steps in the law-enforcement and compliance arena to protect billions from ongoing schemes, ensure high-income individuals file returns and pay their taxes and penalties, and battle everything from terrorist financing to drug traffickers,” said IRS Commissioner Danny Werfel.

Assistance from whistleblowers

Whistleblowers continue to provide valuable contributions in both criminal and civil cases. Whistleblower information has led to successful criminal investigations, prosecutions and the collection of tax, fines, penalties, interest and other amounts. 

In FY24, the IRS paid awards totaling $123.5 million to whistleblowers for aiding in the collection of $474.7 million in proceeds on cases that included unreported/underreported income, hidden offshore assets, overstated deductions, general allegations of tax fraud and abusive international transactions.

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In Landmark Bitcoin Case Investor Gets 2 Years For Tax Fraud

On September 13, 2004, we posted Early Bitcoin Investor Pleads Guilty to Filing Tax Return that Falsely Reported His Cryptocurrency Gains, where we discussed the first public indictment of an individual who underreported the capital gains from a nearly $4 million legal sale of bitcoin and his Guilty plea on   September 12, 2024. 

Now according to Law360, Frank Richard Ahlgren III was sentenced to two years in federal prison On December 12, 2024. He was also ordered by a Texas federal court to pay more than $1 million in restitution to the Internal Revenue Service for the lost tax dollars.

The Prison Sentence Is Just Shy of The 27 Months Prosecutors Requested When They Argued In A Sentencing Memo That It Would Serve As A Needed Warning To Virtual Currency
Users It Said Were "Watching This Case."

Ahlgren was indicted in February and accused of making false returns for 2017 through 2019 and violating structuring laws. He was held without bail as a flight risk, and in September he pled guilty to filing a false return for 2017. In October of that year he sold 640 bitcoins for $5,800 each, reaping gains after buying the bitcoins two years earlier for less than $500 each.

Instead of reporting the true gains on his returns, he claimed he had bought the bitcoins in 2015 for much higher prices. While the highest amount any of the bitcoins traded for in 2015 was $495, Ahlgren claimed he had paid up to $9,400, prosecutors said in a sentencing memo.

Prosecutors also accused Ahlgren of selling bitcoins for $650,000 in 2018 and 2019 and failing to report the sales at all. From 2017 through 2019, he either underreported or didn't report the sale of $4 million worth of bitcoins, the DOJ said. He took sophisticated steps to hide the transactions on the bitcoin blockchain, or public ledger, including disguising his identity using mixers and meeting someone in person to exchange bitcoins for cash.

Ahlgren, who blogged about the virtual currency, knew how to hide transactions on bitcoin's blockchain and exploited the anonymity the system provides, prosecutors said.

"Ahlgren will serve time because he believed his cryptocurrency transactions were untraceable," Acting Special Agent in Charge Lucy Tan of an IRS criminal investigation unit in Texas said in a statement.

Stuart M. Goldberg, acting deputy assistant attorney general of the DOJ's Tax Division, said Ahlgren had earned his sentence when he lied to his accountant about the gains and failed to pay his taxes. 

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FINCEN Advises That Entities Are Not Currently Required to File BOI Reports

In an Alert entitled "Impact of Ongoing Litigation – Deadlines Stay – Voluntary Submissions Only FinCEN has stated that:

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Need Help Filing Your BOI Report?

     Contact the Tax Lawyers at

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or Toll Free at 888 8TAXAID (888-882-9243)

 

IRS Criminal Investigation Release It's 2024 Report Boasting A 90% Conviction Rate

The Internal Revenue Service Criminal Investigation (IRS-CI) released its Fiscal Year 2024 (FY24) Annual Report today that details significant cases involving crimes ranging from tax fraud to cybercrime, enhanced domestic and foreign partnerships and investigative statistics from FY24 that took place from Oct. 1, 2023, to Sept. 30, 2024.

This year’s report highlights several firsts for the agency:

• the first sentencings tied to syndicated conservation easement schemes, 
• the first indictment and guilty plea of a U.S. taxpayer solely for not paying taxes on gains from cryptocurrency sales, 
• the first time Treasury agencies have led a task force and public outreach series to combat fentanyl trafficking, and 
• a historic financial settlement by the world’s largest cryptocurrency exchange for violating anti-money laundering and sanctions laws.

In FY24, IRS-CI initiated more than 2,667 criminal investigations, obtained 1,571 convictions, and reclaimed its 90% conviction rate. The agency’s investigative work identified over $9.1 billion in fraud from tax and financial crimes, obtained court orders totaling $1.7 billion in restitution to the IRS and seized criminal assets totaling approximately $1.2 billion.

Other significant items in this year’s annual report include:

• IRS-CI extended the agency’s international footprint by launching a new attaché post in Nassau, Bahamas, and a Cyber attaché post in Singapore.
• The International Training Team delivered more than 30 trainings to over 930 participants from more than 70 countries. These trainings play a critical role in global partnerships and investigations.
• Combatting cybercrime continued to be a focus for the agency. In FY24 alone, IRS-CI initiated 111 new cybercrime investigations, and defendants in these cases continue to receive prison sentences averaging more than five years.

The report also includes case examples for each U.S. field office, details about the specialized services provided by IRS-CI, and additional statistics about the agency for FY24.

IRS-CI is the law enforcement arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money laundering, public corruption, healthcare fraud, identity theft and more. IRS-CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code. The agency has 20 field offices located across the U.S. and 14 attaché posts abroad.

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DOJ Files an Appeal of The Nationwide Injunction Against CTA - What To Do?

On December 4, 2024 we posted STOP BOI Filings (for now) - Texas DC Issues Nationwide Injunction Against The CTA And Its Impending January 1, 2025 Filing Deadline, where we discussed that the Texas District Court Issued a nationwide injunction against the enforcement of the CTA and BLI reporting requirements in Top Cop Shop, Inc. et al. vs. Garland.

The government filed its notice of appeal of the decision of the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop Inc. v. Garland on December 5, 2024. 

Litigation is currently split between courts ruling on the act’s constitutionality. In March the U.S. District Court for the Northern District of Alabama granted summary judgment for the National Small Business Association in National Small Business United v. Yellen, turning aside arguments that the CTA could be viewed as a proper exercise of congressional authority under the commerce clause, Congress's taxing power, or Congress's power to oversee foreign affairs and national security.

More recently, the government has successfully defended the CTA in district court. In Community Associations Institute v. Yellen, the U.S. District Court for the Eastern District of Virginia on October 24 denied the group's injunctive and declaratory relief motion attempting to prevent enforcement of the CTA.

In Firestone v. Yellen, No. 3:24-cv-01034, the U.S. District Court for the District of Oregon in September denied a request for a preliminary injunction against the CTA from seven individuals challenging the constitutionality of the law. The court found that the plaintiffs were unlikely to prevail. Both of those cases are also on appeal to the Fourth and Ninth Circuits, respectively.

While The Recent Injunction Brings Hope To Some Hoping To Avoid This Reporting, It Creates Uncertainty For Everyone Else.

Some lawyers are suggesting that it is unclear whether this injunction will still be in effect by the reporting deadline of December 31, 2024. 

Therefore, Filing The Reports By Year-End,
Or At Least Being Ready To Do So, Appears To Be
Advisable In The Face Of Such Uncertainty.

Remember that this injunction it’s only a preliminary injunction and not a permanent one, which can be overruled and return the status quo prior to the ruling, requiring reporting by December 31, 2024.

On the other hand, many Americans are hoping for a favorable outcome from an eventual higher court ruling, striking down this law as unconstitutional. There are also those Americans who are hoping that the Trump Administration will prevent enforcement of the CTA and/or request Congress to remove it.

Until then remember there are hefty penalties of $500 per day up to $10,000, as well as criminal penalties, can apply for compliance failures. 

The preliminary injunction only delays enforcement of the CTA until a court issues a final ruling on the merits of the constitutionality of the CTA or an appeals court overturns the injunction. 

Need Help Filing Your BOI Report?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
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or Toll Free at 888 8TAXAID (888-882-9243)

 

 

TC Holds That FBAR Penalties Are Not Taxes and Are Not Subject to Collection Due Process Rights

In Jenner v. Commissioner, 163 T.C. No. 7 (2024), the United States Tax Court ruled on the applicability of Collection Due Process (CDP) requirements to Foreign Bank Account Reporting (FBAR) penalties. The case, decided on October 22, 2024, involved Stephen C. Jenner and Judy A. Jenner as petitioners against the Commissioner of Internal Revenue.

The Jenners were assessed FBAR penalties for allegedly failing to timely file foreign bank account reports from 2005 to 2009.

The Treasury's Bureau of the Fiscal Service informed the Jenners that funds would be withheld from their monthly Social Security benefits to satisfy these debts. 

The Jenners requested a CDP hearing, which was denied by the IRS.

The Tax Court held that FBAR penalties are not subject to the requirements of I.R.C. §§6320 and 6330. The court ruled that it lacked jurisdiction in this case.

The Tax Court's decision was based on several key factors:

• Nature of FBAR Penalties: The court determined that FBAR penalties are not taxes imposed by the Internal Revenue Code.
• Scope of CDP Requirements: Sections 6320 and 6330 of the Internal Revenue Code, which govern CDP rights, apply specifically to unpaid taxes.
• Jurisdiction: Since FBAR penalties are not taxes, the Tax Court concluded it did not have jurisdiction over the case.
• Collection Mechanism: The court noted that the collection mechanism for FBAR penalties is not lien or levy, which are the methods typically subject to CDP procedures. 
• Query can the IRS execute a levy on their Social Security Income without first going the District Court to obtain an FBAR judgment? 

This ruling clarifies the distinction between tax penalties and FBAR penalties in terms of procedural rights. It emphasizes that FBAR penalties, while administered by the IRS, are not subject to the same collection due process protections as tax liabilities under the Internal Revenue Code. 

The decision limits the avenues for contesting FBAR penalty collections and underscores the separate legal framework governing these penalties compared to regular tax assessments.

You have to also ask yourself whether this District Court has the power to enjoin the government from enforcing the CTA, in that it only has jurisdiction over the parties who filed. So, is in enjoining the enforcement against everyone except the parties, within this District Court's jurisdiction?

Do You Have Undeclared Offshore Income?

 

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STOP BOI Filings (for now) - Texas DC Issues Nationwide Injunction Against The CTA And Its Impending January 1, 2025 Filing Deadline

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in favor of the plaintiffs in the case of Texas Top Cop Shop, Inc. et al. vs. Garland. 

In so ruling, “[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. 

It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.” 

The Court Went Further And Ruled That This Is A
Nationwide Injunction, Applying Against Enforcement Of
The CTA And Its Impending January 1, 2025 Filing Deadline.

The Court stated: “…the CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

The CTA required that an estimated 32.6 million existing business entities disclose their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network before 2025. The government argued that the law’s function, to crack down on anonymous shell companies and deter money laundering, terrorism financing, and other illicit economic activity, falls within Congress’s regulatory duties.

But the CTA still fails to pass muster, even if anonymous corporate operations can be regulated by Congress, because the Constitution’s Commerce Clause can’t be leveraged to compel the disclosure of information for law enforcement purposes, the court’s opinion said.

We note this is a preliminary injunction, and we urge reporting companies to pay attention for additional updates and proceedings in this and other cases which could modify or change this order.

You have to also ask yourself whether this District Court has the power to enjoin the government from enforcing the CTA, in that it only has jurisdiction over the parties who filed. So is in enjoining the enforcement against everyone except the parties, within this District Court's jurisdiction?

Need Help Filing Your BOI Report?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)