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IRS States Abusive Trust Tax Evasion Schemes

Trust Tax Evasion Schemes
Accessing The Offshore Funds

How do taxpayers involved in these schemes enjoy the fruits of their abusive scheme since their funds are offshore? There are several methods to repatriate the taxpayer’s funds to the U.S. All of these methods, at some point, involve the opening of foreign bank accounts. Two examples are described below:

  • A bank account is opened in the tax haven country and a debit or credit card is issued from the account. These cards are used by the taxpayer in the U.S. to withdraw cash and to pay for everyday expenses. Since the cards are issued by banks located in tax haven countries, it is very difficult for the IRS to trace these transactions back to the taxpayer.
  • An International Business Corporation (IBC) is established. Funds are transferred from the foreign trusts to the IBC via foreign bank accounts. Fraudulent loans are set up from the IBC to taxpayers and funds are wired back to the taxpayers in the U.S. Because loans are generally not taxable, the repatriation of funds is not reported on a U.S. tax return. In addition, because the ownership of IBCs is documented with bearer shares and IBCs are located in tax haven countries, it is very difficult for the IRS to prove that fraudulent loans are actually the taxpayer’s income.


IRS Estate And Gift Tax Frequently Asked Questions

IRS: Estate And Gift Tax FAQs

The FAQs on this page provide details on how tax reform affects  Estate and Gift Tax. Visit the Estate and Gift Taxes page for more comprehensive estate and gift tax information.

Making large gifts now won’t harm estates after 2025

On November 26, 2019, the IRS clarified that individuals taking advantage of the increased gift tax exclusion amount in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. The IRS formally made this clarification in final regulations released that day. The regulations implement changes made by the Tax Cuts and Jobs Act (TCJA), tax reform legislation enacted in December 2017. Here are some questions and answers on the new law and regulations.

Q. What are gift and estate taxes?

A. Gift and estate taxes apply to transfers of money, property and other assets. Simply put, these taxes only apply to large gifts made by a person while they are alive, or large amounts left for heirs when they die.

Q. How are gift and estate taxes figured?

A. In general, the Gift Tax and Estate Tax provisions apply a unified rate schedule to a person’s cumulative taxable gifts and taxable estate to arrive at a net tentative tax.  Any tax due is determined after applying a credit based on an applicable exclusion amount.  A key component of this exclusion is the basic exclusion amount (BEA).  The credit is first applied against the gift tax, as taxable gifts are made.  To the extent that any credit remains at death, it is applied against the estate tax.

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Tax Time Guide: Make Protecting Tax And Financial Information A Habit

Tax Time Guide: Make Protecting Tax And Financial Information A Habit

WASHINGTON – The Internal Revenue Service urged people to continue practicing proper cybersecurity habits by securing computers, phones and other devices. Scams and schemes using the IRS as a lure can take on many variations, so practicing personal information security is vital.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

The IRS works with the Security Summit, a partnership with state tax agencies and the private-sector tax industry, to help protect taxpayer information and defend against identity theft. Taxpayers and tax professionals can take steps to help in this effort by doing things like minimizing cybersecurity footprints, staying vigilant in protecting personal tax and financial information and being aware of common scams and schemes.

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Tips To Help Taxpayers Spot And Avoid Tax Scams

Tips To Help Taxpayers Spot And Avoid Tax Scams

Tax season is also busy season for savvy criminals. Scammers impersonating the IRS either over-the-phone, by email or in-person can steal money from people. All taxpayers should stay vigilant against these schemes.

Here are some tips to help people recognize and avoid tax-related scams.

Email Phishing Scams
The IRS does not initiate contact with taxpayers by email to request personal or financial information. Generally, the IRS first mails a paper bill to a person who owes taxes. In some special situations, the IRS will call or come to a home or business.

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IRS Form 8300: Understand How To Report Large Cash Transactions

IRS Form 8300; Reporting Cash To IRS

Although many cash transactions are legitimate, the government can often trace illegal activities through payments reported on complete, accurate Forms 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business PDF. Here are facts on who must file the form, what they must report and how to report it.

Who Must File

Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file a Form 8300. By law, a “person” is an individual, company, corporation, partnership, association, trust or estate. For example, dealers in jewelry, furniture, boats, aircraft or automobiles; pawnbrokers; attorneys; real estate brokers; insurance companies and travel agencies are among those who typically need to file Form 8300.

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Looming Transfer Pricing Exams & IRS Preparedness Measures (Part 4 of Series): “TPEP Resolution Phase & Takeaways”

Transfer Pricing Exams & IRS Preparedness Measures

In this fourth article in our Looming Transfer Pricing Exams & IRS Preparedness Measures series, we briefly summarize the IRS’s Transfer Pricing Examination Process (TPEP) Resolution Phase, which is the final phase of the TPEP’s three phases, and we list extrajudicial taxpayer courses of action such as Appeals.

The goal of the Resolution Phase is to reach agreement on the tax treatment of each transfer pricing issue examined. Important parts of the Resolution Phase include the IRS’s presentation of the issue and its resolution, case closing, and when necessary, issuing a Revenue Agent Report with adjustments, penalties (if the taxpayer failed to timely provide documentation), and tax liability.

The TPEP instructs the issue team to provide the taxpayer an opportunity to agree or disagree with the findings for each transfer pricing issue developed during the examination. For a transfer pricing issue to be resolved, there must be an open discussion between the issue team and the taxpayer in three areas: 1) factual development, 2) the law(s) that applies to the facts, and 3) each party’s interpretation of the law(s). The issue team should meet with the taxpayer to discuss all issues and determine whether a “principled resolution” can be reached. If a field resolution is not reached, the issue team will finalize the Notice of Proposed Adjustment (“NOPA”) and Economist Report.

The TPEP discusses options that the taxpayer can pursue, including Appeals,[1] and when a tax treaty country is involved, U.S. Competent Authority (CA) requests, Accelerated CA Procedures to cover subsequent taxable years, and Simultaneous Appeals Procedures whereby Appeals works jointly with the Advance Pricing and Mutual Agreement (APMA) Program and the taxpayer prior to APMA’s consultations with the foreign CA(s). Taxpayers may request CA assistance after receiving a NOPA and are not required to wait until the conclusion of an examination to file a CA request. If APMA accepts a CA request, it will assume jurisdiction over the transfer pricing issues. Otherwise, the case remains under the jurisdiction of the issue team.

We invite you to read our article Six Time-Tested TPEP Takeaways where we share pertinent insights that are even more important today than a few years ago when the TPEP was still hot off the press.

Stay tuned for the next blog post in this series, where we discuss the IRS’s April 2020 transfer pricing guidance, Transfer Pricing Documentation Frequently Asked Questions (FAQs).

If you have any questions or would like more information on the issues discussed in this article, please contact the authors:

Guy Sanschagrin, Principal in Charge of Transfer Pricing and Valuation Services, WTP Advisors (Minneapolis, MN, USA)

Doug Schwerdt, Transfer Pricing and Valuation Specialist, WTP Advisors (Houston, TX, USA)


Read Blog Post Part 1 in this Series

Read Blog Post Part 2 in this Series

Read Blog Post Part 3 in this Series


[1] The TPEP reaffirms that the IRS requires 365 days to remain on the statute of limitations for taxpayers to request Appeals consideration.

Skating On Thin Ice: IRS Does Not Recognize Organization’s 501(c)(3) Status

IRS Does Not Recognize Organization’s 501(c)(3) Status

Various 501(c)(3) organizations may pursue charitable activities or operate to pursue altruistic purposes. However, what if such activities or purposes do not fall within the Internal Revenue Code’s requirements for charitable organizations? Besides jeopardizing the ability of donor taxpayers to deduct contributions, the organizations may find that they are taxable and have certain filing requirements other than annual Form 990 filings. In a recent Private Letter Ruling, the Internal Revenue Service highlighted that “charitable” organizations, such as hockey organizations, that ultimately take care of their own members may not be so charitable for tax purposes.

501(c)(3) Organizations, Generally

Generally, charitable organizations must meet certain requirements to be exempt for federal tax purposes.[1] First, the organization must operate for limited purposes (e.g., religious, charitable, scientific, testing for public safety, literary, or educational purposes). Second, individuals must not privately benefit from the net earnings of the organization. Finally, the organization must not engage in substantial propaganda or lobbying activities, and the organization must not participate in (or intervene in) any political campaign for or against a political candidate.[2]

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Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

A jury recently convicted Marcin Stanislaw Garbacz, a Roman Catholic priest, of 50 counts of wire fraud, nine counts of money laundering, one count of interstate transportation of stolen money and five counts of making and subscribing a false tax return.  For the tax return years 2013 through 2017, the defendant had unreported income totaling $235,818 and income tax due totaling $46,008.  As a result, the district court ordered tax-based restitution to the IRS of $46,008 under the Mandatory Victims Restitution Act.  United States v. Garbacz.

The recent case of United States v. Garbacz reinforces the fact that the federal government often prosecutes tax violations, even violations involving relatively small amount of unpaid tax such as that involved in the case—some $46,008 over the course of five years.  The case also illustrates the restitution provisions at when federal convictions involve amounts owed to the IRS.

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IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

The Internal Revenue Service has started sending letters to taxpayers that may need to take additional actions related to Qualified Opportunity Funds (QOF).

Taxpayers who attached or indicated they attached a Form 8996 to their return may receive Letter 6250, Self-certifying as Qualified Opportunity Fund (QOF). This letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.

To correct a 2018 self-certification as a QOF, these taxpayers should file an amended return or an administrative adjustment request (AAR). If an entity that receives the letter fails to take action to self-certify as a QOF, the IRS may refer its tax account for examination. Investors who made an election to defer tax on eligible gains invested in that entity may also be subject to examination for an invalid election.

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Treasury Warns Against Taking Deductions Related To PPP Funds

Treasury Warns Against Taking Deductions Related To PPP Funds

As many practitioners and taxpayers know, the Paycheck Protection Program was created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which Congress enacted in March. The PPP program provides loans that can be forgiven tax free if portions of the proceeds are spent on items such as payroll.

However, immediately after Congress passed the CARES Act, questions arose whether expenses funded with PPP loans would be deductible if the loans were forgiven. Soon after, the IRS issued Notice 2020-32, 2020-21 IRB 837, which stated that expenses funded with the forgiven PPP loans would not be deductible—avoiding a double tax benefit to businesses.  But that Notice still did not answer the question that many practitioners raised: would expenses funded with a PPP loan be deductible if the loan was not forgivable until a subsequent year?

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IRS: Limits On Retirement Plans Differ Depending On Plan

Limits On Retirement Plans Differ Depending On Plan

A contribution is the amount an employer and employees (including self-employed individuals) pay into a retirement plan.

Limits On Contributions And Benefits

There are limits to how much employers and employees can contribute to a plan (or IRA) each year. The plan must specifically state that contributions or benefits cannot exceed certain limits. The limits differ depending on the type of plan.

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IRS Alerts Taxpayers On Section 965 Transition Tax

IRS Alerts Taxpayers On Section 965 Transition Tax


IRS is working to alert potentially impacted taxpayers about new tax filing and tax payment obligations arising under recently revised Internal Revenue Code section 965.[1] An overview of section 965 is discussed below.

What is section 965?

Section 965 requires United States shareholders (as defined under section 951(b)) to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States. Very generally, a specified foreign corporation means either a controlled foreign corporation, as defined under section 957 (“CFC”), or a foreign corporation (other than a passive foreign investment company, as defined under section 1297, that is not also a CFC) that has a United States shareholder that is a domestic corporation. Section 965 allows U.S. shareholders to reduce the amount of the income inclusion based on deficits in earnings and profits with respect to other specified foreign corporations. The effective tax rates applicable to income inclusions are adjusted by way of a participation deduction set out in section 965(c). A reduced foreign tax credit applies to the inclusion under section 965(g). Taxpayers may elect to pay the transition tax in installments over an eight-year period.

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