California Tax Law Blog

The Top 20 Tax Havens in the World

The Top 20 Tax Havens in the World

| Jul 23 | OVDI Program, Tax Law Blog | No Comments
Top Tax Havens in the World

To view and share the full infographic, click here.  We only ask that if you share the image, you credit the source.

In recent months, more and more countries have been in the news as their statuses as tax havens change.  But it can be tricky to keep up with these constant developments and fluctuations, so our tax professionals decided to compile a handy infographic ranking some of the top tax havens in the world.

We analyzed data from around the globe, and whittled our search down to the top 20 havens used by Fortune 500 companies.  We looked at the top tax havens for capital tax versus the top tax havens for corporate tax, and found some interesting discrepancies — and similarities — between the two lists.  In both cases, Malta had the highest tax rate at 35%, while many of the lowest tax rates were associated with islands, such as the Cayman Islands and the Channel Islands.

We also examined the top 30 countries with the most money held offshore, and found that Bank of America has the most tax haven subsidiaries by a wide margin.  Businesses like Medtronic and United Technologies landed on the opposite end of the spectrum.

Russian Banks to Begin Complying with FATCA

Russian Banks to Begin Complying with FATCA

| Jul 18 | OVDI Program, Tax Law Blog | No Comments
stock-footage-flags-of-usa-and-russia-waving-in-the-wind-against-blue-sk...

For those of you who follow international matters, it is an understatement to say that there has been tension between the United States and Russia over the past several decades. But surprisingly, it seems like there is something that the two nations can agree on: taxes.

Just ahead of the July 1st FBAR filing deadline, Russian President Vladimir Putin agreed to allow banks within Russia to send account information directly to the United States. Federal Law No. 173-FZ is not an intergovernmental agreement that the U.S. is used to entering into with other countries, but at this point, the IRS will celebrate this action by Russia as a victory.

Amid its crisis involving Ukraine, the United States halted talks with Russia earlier this year. The two nations were attempting to come to terms on a Model 1 IGA that would involve the mutual sharing of account information between Russia and the U.S. According the U.S. officials, those talks have still not restarted.

Some of the larger Russian banks are listed below. Though keep in mind, this listing is not exclusive. Russia has thousands of banks and under this new law; every one of them is authorized to avoid the adverse affects of FATCA themselves by handing over specific account information of American taxpayers.

Potentially Affected Banks

  • Sberbank
  • Vneshtorgbank
  • Alfa-Bank
  • Rosbank
  • MDM-Bank
  • Bank of Moscow
  • International Industrial Bank
  • International Moscow Bank
  • Raiffeinsenbank Austria

Once again, this listing is non-exhaustive. If you have undeclared accounts in any bank in Russia that have exceeded $10,000, you must file an FBAR or risk having your information sent to the IRS. Once that happens, you will be facing an IRS Criminal Investigation and could potentially find yourself in federal prison.

Possible Penalties for Willful Failure to Report Foreign Bank Accounts

In addition to the possible prison-time, the penalties for the willful failure to file are enormous and have been called draconian. At 50% of the unreported account balance for each year that has gone unreported, you could be looking at owing more than two-times the amount of money that even gave rise to the penalty in the first place.

Luckily for the American taxpayer, the IRS recently modified their Offshore Voluntary Disclosure Program. Under the new terms, a 5% of the undisclosed foreign account or offshore income generating asset penalty is paid by those whose failure to file wasn’t willful. By participating in the streamlined program, not only can you avoid some of the insanely high penalties but you can also stay out of jail. The decision to enter the streamlined program versus the Offshore Voluntary Disclosure Program should only be made with qualified criminal defense counsel as the legal definition of willfulness is not what the public might think it is.

Though the terms of the Offshore Voluntary Disclosure Program are relatively taxpayer-friendly, the steps to participate aren’t as easy to navigate as one would hope. It is in your best interest to consult an experienced tax attorney who has helped clients time and time-again participate in the program and avoid federal prison. Contact the Tax Law Offices of David W. Klasing today and let us help you get right with the government, keep as much of your money in your pocket as possible and keep you out of prison.

Inventor Sentenced to Prison for Hiding Money in Offshore Accounts!!

Inventor Sentenced to Prison for Hiding Money in Offshore Accounts!!

| Jul 09 | FBAR Compliance and Disclosure, Tax Law Blog | No Comments
Desai

Yesterday, the Department of Justice announced that Ashvin Desai was sentenced to six months in federal prison and six months and one day of home confinement. This sentence was doled out even after, according to Desai, the IRS sought collection of a $14,229,744 penalty against him! Desai is a recent example of how the IRS has expanded its reach overseas to bring tax evaders to justice and collect taxes on hidden offshore income generating assets.

Ashvin Desai owns a medical device company that services urological and gynecological medical professions. In October of 2013, Desai was convicted for failing to report his family’s foreign bank accounts on income tax returns and failing to file a Report of Foreign Bank and Financial Accounts (FBAR) for tax years 2007-2009. He failed to disclose accounts that he held in Dubai and India both under his name and the names of family members. Tax attorney David W. Klasing says that although these countries are not “traditional” tax havens, we should expect to see more prosecutions coming as a result of funds being held in Asia and the Middle East. He explains that Congress implemented the Foreign Account Tax Compliance Act (FATCA) to “encourage” foreign banks and countries disclose U.S. taxpayers with overseas accounts by having U.S. banks withhold 30% of all payments to institutions that fail to comply with FATCA standards. “With nearly 100 countries agreeing to comply with FATCA, we’re going to start seeing people prosecuted for failure to disclose accounts in a variety of different countries.”

Its Not Always Just ‘Failure to Disclose’

Failure to disclose only made up a portion of Desai’s errors. Desai also failed to disclose $1.2 million in interest income from his overseas accounts. Furthermore, he funneled funds directly overseas by having customers wire funds directly overseas, at times directing up to $1.1 million per year into his offshore accounts while he only reported $115,810.91 on his U.S. income tax return. Klasing explains that Desai manifested several signs of intentional failure to file an FBAR. “The court harped on the fact that he did not want his Indian bank statements to be sent to his home address. This is just one thing that courts have found to be indicative of willful non-disclosure of foreign accounts.”

In light of FATCA and the wide agreement among foreign countries to disclose foreign account holders to the IRS, Klasing recommends that U.S. taxpayers with overseas account seek counsel of a qualified criminal tax defense attorney. Recent changes in tax law have made the process of coming clean and avoiding prison time increasingly difficult to navigate. At The Tax Law Offices of David W. Klasing, we have all of the accounting, planning and compliance capabilities of a traditional CPA firm but operate as a Tax Law Firm. Our Tax Attorneys and CPA’s can help you bring yourself back into tax and foreign information reporting compliance so that you do not serve time in prison and also strive to reduce the financial aspects of doing so.

Taiwan and China Agree to Hand Over American Account Info

Taiwan and China Agree to Hand Over American Account Info

| Jul 01 | OVDI Program, Tax Law Blog | No Comments
aa-China-chinese-and-american-flag-on-street-w-white-house-in-background

As we have previously reported, foreign countries have been lining up to enter into agreements that will provide the United States government with foreign account information of American account holders. It seems like every day the United States is bragging about a new foreign territory that has agreed to turn over this potentially damaging information. It should come as no surprise that today is like any other day.

On June 23rd the United States announced that it has come to an agreement with Taiwan regarding the recording of American held foreign accounts in the country. It is interesting to note that the agreement reached between the United States Taiwan was a Model 2 agreement, which only requires Taiwan to report information to the United States, and does not require the US to reciprocate in the sharing of information. It is unknown why Taiwan didn’t enter into a Model 1 agreement but one possibility is that it wanted to stay in conformity with similar agreements entered into by Hong Kong and Japan.

There are generally two types of intergovernmental agreements (IGA’s). First and more common, the Model 1 agreement is essentially a pact to swap information. The agreement sets forth the plan whereby both countries will share certain financial account information with each other. The second type of agreement, also known as a Model 2 agreement, only requires the country that the United States has negotiated with to supply information about US account holders.

The United States also announced last week that they had reached an agreement regarding foreign account disclosures with Chinese officials. Though the agreement is not official as of yet, the Department of the Treasury has stated that “agreements in substance” will be recognized and financial institutions within China will not face any of the negative consequences that come with FATCA noncompliance.

There are Now 80 Foreign Countries and Jurisdictions that Cooperate with the IRS

The addition of China and Taiwan to the list of foreign jurisdictions cooperating with United States government brings the total count to 80. This is bad news for American taxpayers that have foreign accounts that they have not yet disclosed government. Beginning on July 1, financial institutions from the 80 countries that have agreed to work with the United States will begin to send detailed information about accounts held by Americans to the Department of the Treasury. If it is discovered that a taxpayer has control over a foreign account but has not disclosed its existence to the federal government, a criminal investigation maybe opened and that taxpayer may be subject hefty penalties and the possibility of imprisonment.

If you were a taxpayer that has in account overseas and you have not yet disclosed its existence to the federal government, hope is not lost. As we recently reported, the federal government has an established program to help you come clean about your foreign accounts. It is in your best interest to contact an experienced tax attorney who can analyze the specific faxing your case to determine what the best plan of action should be.

What Should You Do if You Have Bank Accounts in Taiwan or China?

If you ignore this warning and the government determines that you have willfully failed to file the necessary documentation to disclose foreign account, you will face penalties that could well exceed the amount of money in your foreign account. Further, if you have willfully evaded paying income tax on the growth of the money in your foreign account you can potentially spend years in federal prison. The experienced tax professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting US taxpayers in their attempts to come clean with the Government. We have helped our clients avoid lengthy prison sentences as well as dodge penalties that could greatly exceed the amount of money in the account that gave rise to the penalty itself. But if you have an undisclosed foreign account, you must act fast. If the government learns of your undisclosed foreign account before you enter the Offshore Voluntary Disclosure Program, you will not be eligible for the significantly decreased penalties and prison avoidance provisions of the program. Contact the Tax Law Offices of David W. Klasing today for a free consultation.

False Security Offered by Non-Willful Offshore Voluntary Disclosure Filing Option

False Security Offered by Non-Willful Offshore Voluntary Disclosure Filing Option

| Jul 01 | FBAR Compliance and Disclosure, Tax Law Blog | No Comments
images

On June 18th, the IRS announced a slew of amendments to the 2012 Offshore Voluntary Disclosure Program (OVDP). These amendments include a very attractive option to make your disclosure and receive a minimal penalty of only 5% of the account values that gave rise to your violation if you can demonstrate that you were not willful in your failure to disclose your foreign accounts on your Report of Foreign Bank and Financial Accounts(FBAR). DON’T BE FOOLED!

Not so Fast

As tempting as this offer seams, proving that you were not willful in disclosing your accounts and paying taxes is not so simple. Many laypersons assume that they can simply argue blind ignorance of the law, or that they were hiding the money for other non-tax purposes. If you want to make your non-willful argument based on one of these arguments, GOOD LUCK! If you succeed, then you will subject to the 5% penalty. However, if you certify that your violation was “non-willful” and the IRS later determines that you are willful, then you will be subject to the full gamut of civil and criminal liability which includes a life altering buffet of monetary penalties and prison time!

The IRS and the Department of Justice are not making it easy to satisfy the requirements surrounding a non-willful determination. First, your claim of ignorance is no longer justified. The courts in U.S. V. Williams have determined that making a “conscious effort to avoid learning about reporting requirements,” is evidence of willful behavior. Furthermore, there is an expectation that a person with a foreign bank account read the information specified by the relevant tax forms, especially since the inclusion of references to the FinCEN Report 114, and previous FBAR form and the information sought by form 8938. Tax Attorney David W. Klasing is concerned about the meaning of the Williams case. He explains that, “The case that causes the most concern is Williams.  Williams was a very sophisticated tax cheat who went to great lengths to cheat on his taxes.  According to one source, “the Fourth Circuit focused on an overall intent of Williams to evade taxes. “Willfulness may be proven through inference from conduct meant to conceal or mislead sources of income or other financial information” and it “can be inferred from a conscious effort to avoid learning about reporting requirements.” [citing United States v. Sturman, 951 F.2d 1466, 1476 (6th Cir 1991)]. In addition, the Fourth Circuit noted that “willful blindness” may be inferred where “a defendant was subjectively aware of a high probability of the existence of a tax liability, and purposefully avoided learning of the facts that point to such a liability.” [citing United States v. Poole, 640 F3.d 114, 122 (4th Cir 2011)].”

In U.S. v. McBride, the court confirmed that the “willful” conduct includes the careless disregard of whether one has the right to act. What does this mean? This means that even though were you not aware of your obligation to disclose and pay taxes on your foreign accounts, the mere act of choosing not to find out can be seen as willful by the courts! Still want to try your luck?

The IRS has offered some people a wonderful option to reduce their penalties, but this program is not intended for everyone with overseas accounts who is willing to roll the dice. The IRS has taken the predictable route of disclosing willful failure to report overseas accounts and added a much less certain option with the “non-willful” option. The IRS is looking to several indicators to determine if your failure to disclose your offshore account was willful or not. Such indicators include: holding an account in a country with strict secrecy law (e.g. Switzerland), holding your account under a trust, and moving your funds to a different institution after publication that your prior banks is under investigation. These are just some of the indicators that the IRS is considering.

What About if You Have Been Using a Tax Preparer or Accountant?

If you have been using a professional tax preparer for the last 4 years claiming that your actions are non-wilful is incredibly risky. All the IRS has to do is call up the previous preparer and ask questions like:

  • Did you ask your client about foreign accounts or foreign income generating assets?
  • Did your organizer ask about these items?
  • Did you engagement letter ask about these items?
    • What answers did you receive???

Your preparer is in a position that in order to keep his or her licenses they have to meet their due diligence obligations under circular 230 due diligence requirements (see) Http://www.irs.gov/pub/irs-utl/pcir230.pdf and thus they are required to inquire into these issues. They have no attorney client privilege and must answer the IRS’s questions honestly or face tax perjury charges. If you lied to your preparer that will be sufficient to show willful conduct and expose you to all of the criminal and civil sanctions available to the government which can end your existence as you know it. Do not be penny wise and pound foolish!!! Do not make a willfulness determination on your own. Do not rely on anyone other than a seasoned criminal defense attorney as the definition of willfulness emanates from all the underlying tax centered criminal law and legal precedent in existence.

Claiming “non-willful” conduct is no easy feat, and may or may not be for you. Ultimately Klasing thinks that a minority of taxpayers will be able to take advantage of the non-willful determination and pay a reduced penalty, but not everyone will. At The Tax Law Offices of David W. Klasing, our tax attorneys and CPA’s have the experience and expertise to help you determine which filing program is right for you. They can help walk you through the process and eliminate criminal liability which helping you keep your hard earned money by minimizing monetary penalties.

Online Poker Players With More Than $10,000 in Accounts Must File an FBAR

Online Poker Players With More Than $10,000 in Accounts Must File an FBAR

| Jul 01 | FBAR Compliance and Disclosure, Tax Law Blog | No Comments
social-gambling-gateway-to-real-money-gambling

When most taxpayers and tax professionals think about the Foreign Account Tax Compliance Act or the Bank Secrecy Act, they think of bank accounts that Americans may be using to shelter funds from U.S. taxation. And though this is normally the case, the Internal Revenue Service is beginning to widen the scope of what an “account” is, under the law.

In a ruling handed down on June 4th, a Federal Court for the Northern District of California found that “financial accounts” that are subject to foreign reporting statutes aren’t limited to traditional banks1. In fact, it seems that under the ruling, any “digital construct” that holds money could require the filing of an FBAR. This includes online accounts held for the purpose of foreign online gambling.

Mr. Hom’s Gambling Activities

In 2006 and 2007, John Hom gambled online through digital poker sites such as PokerStars.com (based in the Isle of Man) and PartyPoker.com (based in Gibraltar). In order to play, Hom would transfer money into an account with a service called FirePay (based in the U.K.), which would then send those funds to his chosen gambling sites where they would be placed into an account directly with the respective digital poker service. Because Hom played with two different poker sites, he had three accounts: the FirePay account, the PokerStars account and the PartyPoker account.

During a routine audit of Hom’s taxes, the I.R.S. determined that the numbers didn’t add up and they opened an FBAR audit and discovered that he had not filed FBAR’s for the accounts until 2010. The I.R.S. assessed penalties for $30,000 ($10,000 per account) for 2006 and a $10,000 penalty based on his 2007 PokerStars account.

Hom argued that the online gambling accounts weren’t “foreign” because it is possible that the gambling services were holding his money in a U.S. account. It is true that all three of the online gambling services had bank accounts in the United States and therefore a real possibility existed that Hom’s money was actually being kept in a U.S. bank. But the federal court ruled that it was irrelevant where his money was actually being kept. They court said in its’ ruling that the account at issue is not the bank account where the gambling services kept their money, but rather the fact that the account that Hom kept his money may have been a “digital construct” but was controlled by foreign corporations and therefore were considered “other accounts” under the Bank Secrecy Act.

What Does this Mean for Americans Who Gamble Online?

This federal court ruling plainly states that any American that has had a balance of $10,000 or more in an online gambling account must file an FBAR before June 30th. Further, if you have gambled online in previous years and failed to file an FBAR, it is in your best interest to seek the advice of an experienced tax attorney. The penalty for the willful failing to file an FBAR is 50% of the highest account balance for each year that you failed to file. There is also possible prison time for a taxpayer that is found to have willfully not filed an FBAR.

As we reported last week, the terms of the Offshore Voluntary Disclosure Program have changed. The government has made it easier to come clean and get current on your FBAR disclosures. But you must act fast. If the government finds out about your foreign accounts before you enter the voluntary disclosure program, you won’t be allowed to enter and will be looking at hefty penalties and possibly time in a federal prison.

The tax professionals at the Tax Law Offices of David W. Klasing have valuable experience in assisting taxpayers participate in the Offshore Voluntary Disclosure Program and avoid steep fines and jail time. But time is not on your side. FBAR’s for this year must be submitted by June 30th and foreign countries will start sending the I.R.S. American account information beginning on July 1st. If you have or have had money in a foreign account (including an online gambling account) contact us today for a free consultation.

1 United States v. Hom, 13 AFTR 2d 2014-XXXX, (N.D. Cal, 06/04/2014)

Eight More Jurisdictions to Share American Account Info with I.R.S.

Eight More Jurisdictions to Share American Account Info with I.R.S.

| Jun 30 | OVDI Program, Tax Law Blog | No Comments
FATCA

The United States announced last week that it has come to agreements with eight more foreign jurisdictions with regard to FATCA reporting. This is important news as we approach the July 1st implementation date provided by FATCA. Taxpayers that have accounts in these eight jurisdictions that may have thought that their secret account was safe need to act quickly to disclose before it’s too late.

There are two types of agreements under FATCA. First, the “Model 1” agreement allows for the sharing of account information between the countries. In these countries, there are laws that require the disclosure of the necessary information to the foreign government who will then act as a middleman to deliver the information to the United States. Under the “Model 2” agreement, the foreign banks will send American account information directly to the Internal Revenue Service. The new jurisdictions that have agreed to participate are listed below.

Model 1 Jurisdictions

Antigua and Barbuda
Belarus
Georgia
St. Kitts and Nevis
St. Lucia
St. Vincent and the Grenadines

Model 2 Jurisdictions

Paraguay

In addition to the Model 1 and 2 agreements that have been made with the above jurisdictions, the Ukrainian Ministry of Finance expressed their willingness to sign an Inter-Governmental Agreement. This would send American account information within the Ukraine to the I.R.S.

These additions create a 10% increase in participating jurisdictions and bring the current list of FATCA participants to 78. This means trouble for Americans who may have money in a bank account of any of the above nations.

As we have previously reported, the mandatory reporting under FATCA takes effect on July 1st. That means that Americans that have foreign account information have very little time to come clean about their accounts without facing severe penalties. If you are deemed to have willfully failed to report, there is a 50% penalty imposed based on the highest balance in the foreign account for each year that the account when unreported. This scheme can create a total penalty that is two or three times the amount of your foreign account.

Last week, we reported that the I.R.S. is trying to make it easier for taxpayers to come clean about foreign accounts by establishing new guidelines for its Offshore Voluntary Disclosure Program. This includes a very low one-time penalty rate. But taxpayers will not qualify for the program if their account information is given to the I.R.S. through FATCA reporting. That means that voluntarily disclosing your foreign accounts as soon as you can, may be your only saving grace.

The experienced tax professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers come clean with the government and keeping them away from draconian government penalties and even jail time. But the window to safely voluntarily disclose is quickly closing. If you have or have had money in an undisclosed foreign account, contact us today for a free consultation before it’s too late.

Bitcoin Users Beware: You May Need to File an FBAR Before June 30th

Bitcoin Users Beware: You May Need to File an FBAR Before June 30th

| Jun 27 | FBAR Compliance and Disclosure, Tax Law Blog | No Comments
bitcoins_3

Most Americans have heard of the Internet currency, Bitcoin. But what is it? Bitcoin is a decentralized currency, which means that a bank or any particular government does not control it. It is freely traded online and much like centralized foreign currency, has a conversion rate and therefore a value in U.S. Dollars. Earlier this year, the IRS announced that for the purposes of income tax, Bitcoins and other virtual currency are not currency at all, but are property instead.

A person can purchase Bitcoin from a company that works as a Bitcoin exchange. Some of these companies will exchange tangible, flat currency for Bitcoin and others will exchange only various types of other virtual currency. A person transfers money to a Bitcoin exchange company and an account is opened. Their Bitcoin balance resides in that account. Further, when they want to “cash-out” their Bitcoins, the currency that the customer receives in exchange for their Bitcoins is also housed in that account until withdrawn.

Earlier this month, Rod Lundquist, a senior program analyst for the Small Business and Self-Employment Division of the IRS, announced that Americans would not need to file an FBAR for their Bitcoins held in foreign exchanges this year. Many Bitcoin owners and some tax professionals stopped listening, and quite frankly, stopped caring about possible further reporting implications when they heard this. But there is still a very real possibility that such a mistake could cost American taxpayers serious amounts of money in penalties.

Beware: If you have a Bitcoin Exchange Account, You May Need to File an FBAR 

Bitcoin owners and many tax professionals advising American taxpayers may not have noticed the potential loophole that the IRS may use to penalize American Bitcoin customers.

It is obvious that the Bitcoins themselves do not need to be reported via FBAR, but what about currency that Bitcoin exchange customers have sitting in their exchange accounts? We can safely assume that other virtual currencies that were received in return for Bitcoins need not be reported as they are virtual currency as well, but flat currency like U.S. Dollars or Euros that have been exchanged but not yet withdrawn are another story.

Bitcoin exchanges aren’t banks but they may covered under the Bank Secrecy Act and therefore may require disclosure of accounts that hold more than $10,000 in flat, tangible currency. A Federal Court in California ruled only a few weeks ago in United States v. Hom, that accounts set up for foreign online gambling such as PartyPoker.com and PokerStars.com are considered commercial financial banking institutions under the Bank Secrecy Act and the cash balances therein must be reported. The resemblances between an account that an American places money into to buy online poker chips and an account that money is placed into to purchase Bitcoins are shockingly similar. And remember, the IRS did not say that Bitcoin exchange accounts were not foreign bank accounts, but rather that Bitcoin (as a commodity) did not need to be reported. If you have a Bitcoin exchange account, you may need to file an FBAR before June 30th.

There are several Bitcoin exchange companies worldwide, but Mt. Gox, a Japanese Bitcoin exchange was among the largest. In 2013, Mt. Gox was handling over 70% of the world’s Bitcoin transactions. A massive security breach caused the company to go bankrupt in early 2014. Thousands of customers cashed out of the exchange and it would not be hard to believe that as customers exchanged their Bitcoins for centralized currency, there was a period of time where their exchange account had in excess of $10,000, which could give rise to the requirement to file an FBAR.

I’ve Purchased Bitcoins, What Should I do?

The deadline to file an FBAR is June 30th and if you have been using Bitcoins, it would be in your best interest to file an FBAR for accounts that have had in excess of $10,000 in tangible, flat currency. The cost of filing is relatively low considering the penalty for failing to file. If the government determines that you willfully failed to file an FBAR, there is a penalty of 50% of the highest account balance for each year that you fail to file. The penalty has been called “draconian” by some taxpayer rights groups, but is nevertheless completely legal and enforceable.

The tax professionals at the Tax Law Offices of David W. Klasing are experienced helping taxpayers stay on top of their obligations to file FBAR’s and assist those who have failed to file, get right with the government. The intricacies of the FBAR requirements are sometimes confusing and we are here to help. But time is running out. Contact us today for a free consultation.

Switzerland Relaxing Disclosure Privacy Laws

Switzerland Relaxing Disclosure Privacy Laws

| Jun 24 | FBAR Compliance and Disclosure, OVDI Program, Tax Law Blog | No Comments
Swiss Federal Council

Recently, we have extensively discussed the enactment of laws such as Foreign Accounts Tax Compliance Act (FATCA) designed to bully foreign banks into assisting the IRS ferret out U.S. payers avoiding taxes by stashing money in foreign accounts.  On Monday, June 23rd, 2014, the Swiss Federal Council took a large step towards compliance with FATCA as well as agreements with many other countries by revising its Tax Administration Assistance Act of 2014.

This revision “includes a provision that envisages a procedure with, in exceptional cases, deferred notification of persons entitled to appeal, as well as more precise specifications regarding group requests.”  Meaning that the revision allows for a person to be notified only AFTER information has been disclosed to a requesting country’s authority in urgent cases, or if information would compromise an ongoing investigation.

What does this mean for you?  If the IRS is investigating your Swiss bank, your Swiss bank can now disclose your information to the IRS before letting you know that someone has requested the information.  David W. Klasing says that according to the 2012 Offshore Voluntary Disclosure Program (as amended in 2014), someone is subject to criminal liability for failure to report offshore accounts to the IRS and can be criminally subject to 3 to 5 years in prison and 150% of the account value among other civil and criminal penalties including the cost of prosecution.  However, in order to save themselves from this punishment a person must make their noisy declaration of accounts voluntarily.  With this revision to Swiss law, you may have zero notice that you or your banks are being investigated, but your information can be disclosed to the IRS.

This revision moves Switzerland further into compliance with the Organization for Economic Cooperation and Development standard for disclosure of financial information.

This is further concrete evidence that the available time to make an effective voluntary disclosures is getting short especially with the 27.5% FBAR penalties going to 50% for banks under current criminal. Klasing recommends that those with offshore accounts voluntarily disclose them before the IRS finds out.  With recent information sharing agreements and todays legislative revision by Switzerland as an example of changes to bank secrecy laws worldwide, it is increasingly getting easier for the IRS to find you.

If You Need the Assistance of an Attorney Experienced in the Offshore Voluntary Disclosure Program (OVDP)

At the Tax Law Offices of David W. Klasing, we have you the OVDP experience to help you make your disclosure and avoid prison time while minimizing monetary penalties.  Our team of CPA’s and tax attorney’s will work diligently to file your disclosure before penalties increase, but more importantly before the IRS hears about you!!!

BREAKING NEWS: Offshore Account Penalties to Double on July 1st With Start of 2014 OVDP Program 

BREAKING NEWS: Offshore Account Penalties to Double on July 1st With Start of 2014 OVDP Program 

| Jun 19 | OVDI Program, Tax Law Blog | No Comments
TDF 90-22.1

The IRS announced  the 2014 Offshore Voluntary Disclosure Program yesterday.  Per the IRS the 2014 OVDP is a continuation of the program introduced in 2012 with modified terms. The modifications included several changes to the OVDP and other voluntary disclosure programs designed to allowed more people to disclose foreign held accounts by lowering penalties and eligibility requirements.

However, the IRS has lit a fire meant to increase disclosure of your accounts.  The IRS has increased penalties for those guilty of “willful” non-compliance to 50% of highest account balance for the accounts at issue in specified circumstances.  This penalty is up from the former “one size fits all” penalty of 27.5% on aggregate offshore account or tainted asset balances greater than $75,000.

What are the Penalties for “Willfully” Failing to Report Foreign Bank Assets?

What does this mean for you?  If the IRS finds that you “willfully” failed to disclosed foreign financial accounts by failing to file a Report of Foreign Bank and Financial Accounts (FBAR), the IRS will penalize you 50% of the highest account values of your undisclosed foreign accounts with the new 2014 OVDP Program!

Tax Attorney and CPA, David W. Klasing, recommends that holders of undisclosed offshore accounts with unreported income get out of the cold and get an offshore disclosure in front of the IRS before July 1st.  Every day, new countries and banks are signing on to the Foreign Account Tax Compliance Act (FATCA), and the IRS is still aggressively pursuing tax evaders.  Time is running out.  Beginning August 4th, you will be subject to the 50% penalty if:

  1. Your offshore financial institution is announced to be under investigation by the IRS,
  2. Your offshore financial institution is cooperating with the IRS to help them locate tax evaders, or
  3. Your offshore financial institution has been identified in a court approved summons requesting information about U.S. taxpayers holding accounts with said institution.

Waiting to file your Offshore Voluntary Disclosure can lead to penalties almost double the current penalties.  Most of the modifications to the 2012 OVDP (or what is being colloquially referred to as the 2014 OVDP) take effect on July 1st; however, there is still a small window before the penalty increases.  Do not let this small window of time slip past before you face the potential 50% penalty.  After August 4th, you will still be eligible for OVDP if your offshore financial institution has not yet disclosed to the IRS, however, the risk is huge.

The IRS has published a list of banks and promoters whose clients may no longer be eligible for OVDP.  As of June 18th that list consists of:

  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 Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
  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. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates

David W. Klasing counsels that due to the recent wave of countries and financial institutions signing on to comply with FATCA, and all of the information regarding foreign accounts held by U.S. taxpayers becoming available to the government, the above list will continue to grow exponentially.  It seems that U.S. taxpayers are racing against two clocks.

First, U.S. taxpayers must make a noisy disclosure of their offshore assets before their financial institution discloses them.  Secondly, U.S. tax payers should disclose before they become subject to increased penalties.

In a time where federal tax law and penalties are changing so quickly, Klasing recommends that anyone concerned with offshore disclosure consult a qualified professional immediately.  At the Tax Law Offices of David W. Klasing, we have the tax, legal, and accounting expertise to walk you through the disclosure process from start to finished entirely under one roof.  Whether the IRS has already come knocking at your door, or recent news has made you worried about your hard earned assets, we can help you avoid prison time and minimize the impact on your wealth.  Don’t wait until the IRS finds you.  Call us today.

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