California Tax Law Blog

Croatia and U.S. To Begin Sharing Account Information

Croatia and U.S. To Begin Sharing Account Information

| Mar 26 | OVDI Program | No Comments
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If prompted to name off a commonly known tax haven, Americans would likely spout off Switzerland, the Cayman Islands, or Luxembourg. It is possible that a very large number of countries could be identified before one asserted that Croatia is a potential hiding-place for offshore funds. Nonetheless, the United States and the Croatian government recently announced a new information-sharing agreement that will bring financial intuitions in Croatia into compliance under the domestic FATCA laws. This may be a cause for concern for any American with an account with a foreign institution in Croatia that has not been declared to the IRS.

Details of the New Agreement with Croatia

The agreement, which was announced last week, is just another milestone in the U.S. government’s attempt to establish a worldwide presence in the arena of financial information collection. Since Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010, the State Department has been quick to use its international political power to encourage countries to voluntarily share information with the IRS. In short, Uncle Sam wants to know what you are doing with any significant amount of money whether it is within the U.S. or without.

Kenneth Merten (U.S. Ambassador to Croatia) and Croatian Finance Minister Boris Lalovac effectuated the agreement and according to the announcement, Croatia will also be sharing information with tax authorities across the European Union. This is consistent with Croatia’s recent admission into the EU back in 2013. In order to comply with both the FATCA requirements and similar standards of the EU, Croatia will adopt information-sharing policies outlined by the Organization for Economic Cooperation and Development (OECD), of which the United States is also a member.

Under Croatia’s new procedures, financial institutions in Croatia will be required to provide American account information to the Croatian taxing authority who will then relay that information to the IRS. The agreement between the nations is reciprocal in that the IRS will collect and disseminate information regarding financial information of Croatian citizens back to their domestic Finance Ministry.

For Americans with foreign accounts, news of another country entering into an information-sharing agreement represents an escape route that is progressively getting more and more narrow. Soon, no nation will be without some type of agreement with the United States with regard to foreign account identification. Some taxpayers think that finding a country with weak diplomatic relations with the U.S. is a solid strategy to avoid foreign account detection. But alas, even strong tension between the United States and Russia did curb advice from Moscow to its banks specifically allowing them to comply with FATCA regulations. The truth of the matter is that soon, there will be no jurisdiction where neither the government or the private banks will be willing to keep your financial secrets and when the U.S. government finds out about your hidden account, any evidenced effort to hide your wealth will likely result in a criminal prosecution for willful noncompliance of domestic tax law.

Americans Can Use the OVDP to Avoid Prison

But the story certainly does not have to end that way. The IRS has made an effort to allow for a temporary method to safely disclose your foreign accounts without facing the possibility of incarceration. Further, for those taxpayers whose conduct was not willful, the IRS is willing to reduce some of the fines and penalties associated with the violation of the Foreign Bank Account Reporting laws. The Offshore Voluntary Disclosure Program has been a way for thousands of Americans to come forward and come clean without fear of draconian penalties or the real possibility of a lengthy stay in a federal prison.

Though, the OVDP has several strings attached to it. First, you cannot already have an open investigation or examination with regard to any tax issue. Thus, if a country (like Croatia) has passed along information to the IRS regarding your foreign account, there is a pretty substantial chance that you will be disqualified from the program. This means that time is of the essence to file an application to be a part of the program and be accepted while you can. Second, when applying for the OVDP, there are particular documentation requirements that must be met, declarations that must be made, and evidence that must be included in order to ensure the timely and accurate processing of your application. The application should be completed and reviewed by an experienced tax attorney to make ensure accuracy and completeness.

The tax law professionals at the Tax Law Offices of David W. Klasing have years of experience in assisting taxpayers come clean about their foreign accounts. When time is of the essence and the process is detail-oriented, the best advocate to have in your corner is David W. Klasing and his team of tax professionals. Contact the Tax Law Offices of David W. Klasing today at 800-805-9718 or online for a reduced-rate consultation.

When do tax violations turn into tax crimes?

When do tax violations turn into tax crimes?

| Mar 25 | Tax Law Blog | No Comments
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When do tax violations turn into tax crimes?

Tax avoidance is the method of organizing your finances in accord with the legal usage and interpretation of the United States tax code. As the famous quote by Judge Learned Hand accurately states, “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” However there can be a very fine line between legal tax avoidance, as stated by Judge Learned Hand, and illegal tax fraud or tax evasion. It can take the experience, knowledge and training of a dedicated tax professional to delineate between aggressive tax avoidance strategies and those practices that cross the line into tax crimes.

However understanding the types of things that IRS agents look for when determining whether a tax crime has been committed can help you avoid serious civil or criminal tax consequences. If the recommendations of your accountant or tax preparer make you feel ill at ease, seek a second opinion. Remember, it is the taxpayer who is ultimately responsible for and liable for the information that is contained in his or her tax return.

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International Data Exchange Service is Now Active – Bad News for Taxpayers with Undeclared Accounts

International Data Exchange Service is Now Active – Bad News for Taxpayers with Undeclared Accounts

| Mar 17 | Tax Law Blog | No Comments
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International Data Exchange Service is Now Active – Bad News for Taxpayers with Undeclared Accounts

We all know the feeling of having to schedule an undesirable trip to the dentist, doctor, or the DMV. In fact, most of us push off these unwelcomed events as long as possible. But alas, the day eventually arrives. For Americans with overseas accounts that have yet to be declared, that day is today. The IRS recently announced that their gateway protocol allowing foreign banking institutions to transmit American account information directly to the IRS is officially active and ready to be used. This news gives any American with a secret foreign bank account a very good reason to contact an experienced tax attorney. The difference could be between freedom and federal prison.

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Self-Described Tax Fraud Queen Re-Sentenced to 21 Years in Prison

Self-Described Tax Fraud Queen Re-Sentenced to 21 Years in Prison

| Mar 10 | Criminal Tax Representation, Tax Law Blog | No Comments
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Tax crimes typically carry stiff and severe penalties. We have previously reported cases where tax criminals face several years in prison, but this particular case is one of the longer sentences that we have seen. A Tampa woman has been re-sentenced to a lengthy prison sentence on various weapon and tax-related charges.

Rashia Wilson, the self-proclaimed Tax-Fraud Queen, was sentenced to 21 years in federal prison stemming from weapon charges that she previously pled guilty to. Further, her sentence included time for substantial tax fraud activity.

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IRS Official: No Further Guidance on the Term “Non-Willful”

IRS Official: No Further Guidance on the Term “Non-Willful”

| Mar 03 | Criminal Tax Representation, OVDI Program | No Comments
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When a taxpayer who has failed to report the existence of a foreign bank account for one or more tax years has decided to come forward, every step of the process can be nerve-racking. Determining the method by which you will disclose your previous omissions to the government, filling out the sometimes-onerous documentation, and making several certifications prior to admission into the program leave many taxpayers bewildered, confused or frustrated.

The streamlined offshore disclosure program is advantageous for taxpayers as there is a single penalty of 5 percent (of the foreign account balance) that is due if admission into the program is granted. A taxpayer would likely prefer this program over the standard Offshore Voluntary Disclosure Program because although the OVDP protects against criminal prosecution, it requires a taxpayer to pay more penalties and fees associated with the non-disclosure.

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Fraudulent Tax Preparation Scheme Results in 15-year Prison Sentence for Both Husband and Wife

Fraudulent Tax Preparation Scheme Results in 15-year Prison Sentence for Both Husband and Wife

| Mar 03 | Tax Law Blog | No Comments
income tax fraud handcuffs

The vast majority of accountants and tax preparers are honest, hard-working individuals who strive to recommend what appears to be sound decisions for their clients. However, there are some unscrupulous tax preparers who will attempt to exploit taxpayers and the tax system despite their professional standing, the duty that is owed to their client, and the deterrent effect of an IRS investigation and potential criminal prosecution. Tax preparer schemes can take many forms. However, the civil and criminal consequences are rarely limited to tax preparers because the tax payer is ultimately responsible for the contents of his or her tax return filings. In nearly all instances of tax preparer fraud the taxpayers will, at minimum, have to correct errors. Many times this means that the defrauded taxpayer will have to pay back taxes which may include significant fines and penalties. If it is believed that the taxpayer willfully participated in the scheme, criminal prosecution of the taxpayer may also occur.

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Nevada Consultant Headed to Federal Prison

Nevada Consultant Headed to Federal Prison

| Mar 02 | Criminal Tax Representation | No Comments
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One of the great aspects of American government is the level of generosity and inclusion that the government garners toward nonprofit groups around the country. In fact, the feds will spend big bucks helping small up-and-coming organizations. But with every good and honest attempt to better society, there are folks that aim to take advantage of the system. Michael Stickler is one of those folks.

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What actions do FATCA lawyers recommend after receiving a letter from your foreign bank?

What actions do FATCA lawyers recommend after receiving a letter from your foreign bank?

| Feb 26 | Tax Law Blog | No Comments
offshore money handcuffs

If you are an American citizen or green card holder and hold an interest in or signature authority over foreign financial accounts, chances are you will eventually receive a rather unnerving letter from your bank or financial institution. While the wording of the letter will vary based on your financial institution, the jurisdiction the account is located in, the model of intergovernmental agreement (IGA) in effect, and the basis for the problem the general message set forth is nevertheless typically very similar. That is, the message is typically along the lines that the foreign financial institution has identified your account(s) to the United States and that the IRS is likely to soon be in possession of your identity and account information.

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Should I participate in the Offshore Voluntary Disclosure Program if I haven’t received a letter from the IRS?

Should I participate in the Offshore Voluntary Disclosure Program if I haven’t received a letter from the IRS?

| Feb 24 | Tax Law Blog | No Comments
handcuffs with computer

Receiving a letter from your foreign financial institution or the IRS regarding undisclosed accounts can expose a taxpayer to significant civil and criminal liability. Depending on the facts and circumstances present the individual could face severe civil fines and penalties or exponentially more severe criminal penalties. For instance penalties for non-compliance with the Banking Secrecy Act (BSA) due to a failure to file Report of foreign Bank and Financial Accounts (FABR) via FinCEN Form 114 can be severe. Civil consequences for the failure to disclose a foreign financial account with a balance, that at any time during the tax year, exceeds $10,000 and the taxpayer has an interest in the account or signature authority over the account can include a fine of $10,000 per an undisclosed account per a year. If the violation was perceived as being willful by the IRS agent, penalties can easily eclipse the balance of the accounts and your matter may be referred to the Criminal Investigation Division of the IRS.

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Why it’s important to have a tax attorney by your side when facing an IRS criminal investigation

Why it’s important to have a tax attorney by your side when facing an IRS criminal investigation

| Feb 12 | Tax Law Blog | No Comments
formal meeting

If your tax compliance issue has been referred to the Internal Revenue Service’s Criminal Investigation Division, you are probably already aware that you face extremely serious consequences. However if you were expecting or relying on your tax preparer to testify on your behalf or to explain your actions, your reliance is misplaced. Your original tax preparer will be unable to represent you in a criminal tax proceeding because it would represent a conflict of interest. You original accountant may, in fact, be facing tax preparer penalties that can be imposed by the IRS and referral to the IRS Office of Professional Responsibility (OPR). Faced with defending against tax preparer penalties and the potential loss of his or her license, your tax preparer will not be able to defend you.  They also are most likely the first witness the government would call against you in a subsequent criminal prosecution.  Worst of all, they do not have attorney client privilege and anything conveyed to them can be legally compelled as detrimental testimony against you.

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