Preliminary Introduction For TaxConnections Global Internet Tax Summit, September 21-25, 2015
The most recent IRS push to close “the Gap” between collected U.S. tax revenue and the total tax revenue which should be reported by U.S. citizens and alien residents of the United States has focused on offshore income concealed in foreign or offshore accounts.
U.S. citizens are liable for U.S. taxation on all income realized globally, regardless of the foreign jurisdiction in which their funds are deposited in foreign accounts. U.S. citizens are not only liable for U.S. tax on such foreign sources of income, they are required to report all funds in excess of $10,000.00 on deposit in foreign accounts over which they have “signature authority” even if they only have a nominal “financial interest” in the Read More
Continued from Part I
The Risks Associated With Making A Quiet Disclosure
What happens if the IRS disagrees with Joan, Tommy, or Trevor’s explanation for filing late FBARs? In other words, what if the IRS believes that their failure to file FBARs was not inadvertent or accidental, but instead willful?
This could result in any one of a number of “parade of horribles,” the most serious of which is a referral to Criminal Investigation. While that is generally the exception and not the rule, taxpayers should be mindful of the fact that, unlike OVDP, a “quiet disclosure” does not guarantee immunity from prosecution. Read More
The environment that taxpayers with unreported offshore bank accounts find themselves in today is downright frightening. Some have likened it to “McCarthyism,” the term that has its origins in the period of U.S. history known as the “Second Red Scare.” Beginning in 1950 and lasting until 1956, “McCarthyism” was characterized by heightened political repression against communists, as well as a campaign spreading fear of their influence on American institutions and of espionage by Soviet agents.
Originally coined to criticize the anti-communist pursuits of Republican U.S. Senator Joseph McCarthy (Wisconsin), “McCarthyism” soon took on a broader meaning. The term is now used more generally to describe reckless, unsubstantiated accusations, as well as demonized attacks on the character or patriotism of political adversaries. Read More
A tax crime is complete on the day the false return was filed.
It is a federal crime for anyone to knowingly and willfully file an income tax return that he or she knows to be false in some material way. 26 U.S.C. § 7207 provides:
Any person who willfully delivers or discloses to the Secretary any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both. Any person required pursuant to section 6047 (b), section 6104(d), or subsection (i) or (j) of section 527 to furnish any information to the Secretary or any other person who willfully furnishes to the Secretary or such other person Read More
I am a U.S. citizen and reside in Canada. I have filed U.S. returns annually, however I may have omitted some income or computed income incorrectly and omitted one or more international information returns. Can I rectify the issues with the streamlined program?
The Streamlined Foreign Offshore Procedure (“SFOP”) is extended to amended returns for the 3 year period. The amended return feature is important as filing omissions such as the failure to include items in income or file various international information returns can come now under SFOP without having to demonstrate a reasonable cause defense. The 2012 program did not have the amended return(s) feature. It is also extended to those who previously filed as a “quiet disclosure” outside of any program. Read More
Certain findings and recommendations by the Government Accountability Office (GAO) about offshore tax evasion and the IRS efforts to combat it have many taxpayers worried. The GAO is an independent, nonpartisan agency that works for Congress and is often referred to as the “congressional watchdog.” It investigates how the federal government spends taxpayer dollars and makes recommendations as to how a governmental agency can be more efficient and effective.
Recently issued GAO report, Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion, provides key information about the IRS’ offshore voluntary disclosure initiatives. More importantly, however, GAO indicates its review of IRS data shows that the IRS is missing what appear to be rampant “quiet disclosure” and “new account” filings.
“Quiet Disclosures” / “New Account” Filings
With a “quiet disclosure”, taxpayers quietly amend past tax returns and FBARs reporting previously unreported income and accounts. With “new account” filings, taxpayers report the existence of any offshore accounts as well as income from the accounts on the current year tax return, without amending any prior years’ returns. They often also disclose the existence of the accounts by filing FBARs for the current calendar year making it appear as if the account was just newly opened.
GAO takes the IRS to task for not finding enough “quiet disclosures” and “new account” filings which lose billions of Read More