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Los Angeles Tax Law Blog

U.S. Department of Justice States its Tax Enforcement Priorities


In her recent testimony before Congress Caroline Ciraolo Acting Assistant Attorney General stated the enforcement priorities for the Tax Division. Among the the four areas of focus is Offshore Tax Evasion. "Combatting the use of foreign bank accounts to evade U.S. taxes has been a longstanding enforcement priority for the Tax Division. Since 2009, when the Tax Division reached a ground-breaking deferred prosecution agreement with UBS, it has publicly charged more than 100 account holders, of which approximately 90 have pleaded guilty, 12 were convicted following trial, and five are fugitives. The Department's enforcement efforts have reached far beyond Switzerland, as evidenced by public actions involving banking activities in India, Israel, Liechtenstein, Luxembourg, and the Caribbean." The accelerated use of Information Exchange Agreements as a result of the Foreign Account Tax Compliance Act (FATCA) has resulted in more and more disclosure of U.S. persons holding offshore accounts. The Swiss are a prime example. "The Swiss Federal Tax Administration told swissinfo.ch that it is obliged by law to inform account holders that it is cooperating with international requests for information in relation to tax investigations. Usually, the account holder's bank would get in touch with its client. This is to give the individual the opportunity to appeal the decision to cooperate with the Swiss courts. But in some cases the bank has lost touch with the client and no longer has an up-to-date address. In such cases the tax authorities notify the account holder via the government's online gazette - sometimes giving the full name of the client and in other instances just the initials and date of birth." The fact is that U.S. taxpayers who maintain undisclosed foreign financial through intermediaries, like trust companies, charitable foundations, and shell companies, may not have received information disclosure warning letters from their offshore financial institution, and will be surprised to find that their information is made available to U.S. authorities. The Swiss disclosure model is not unique and many other "tax havens" can be expected to cooperate as well. What all this means is that the risk of not coming forward is now much greater than ever. Whether through an incidental examination or through information exchanges there is more and more certainty that holders of undisclosed foreign accounts will be found out. We offer a complete service from analyzing methods of disclosure and reporting to submission of the disclosure to the IRS and state taxing authorities. We are skilled at all aspects of voluntary disclosure and can guide you in the correct direction. While Albert Einstein may have been correct when he said,The hardest thing in the world to understand is income taxes." a lack of understanding does not justify acting like an Ostrich and burying your head in the sand hoping that you will not be discovered.

Uses of Suspicious Activity Reports by the IRS

In a recent conference the Director of theFinancial Crimes Enforcemnt Network (FinCen) discussed the use of Currency Transaction Reports (CTR's) and Suspicious Activity Reports (SAR's) which are required to be filed by financial institutions under the Bank Secrecy Act (BSA). The purpose of this note is to illustrate how SARs are used in tax cases by the IRS.

Marijuana and the Tax Apocalypse

As Californians evaluate the potential for legalization of Marijuana it is important to consider the current state of conflict between state and federal laws and regulations regarding the production, distribution and sale of Marijuana. As MillarLaw specializes in tax issues this note will focus on tax and related financial problems. The public policy debate about the social and personal costs versus the potential revenue benefits of legalization are outside the scope of this analysis.

Bad News About Unfiled FBARs, Another Indictment

A recent indictment by the United States Attorney's office in California illustrates the inter-relationship between curency transfer restrictions, (such as those involving Iran), foreign financial account reporting (the FBAR requirement) and the failure to report taxable income (filing of a false tax return ).

Swiss Bank Settlements-What's Next for U.S. Taxpayer's?

The Department of Justice has released the signed Non-Prosecution Agreement NPA) with Swiss bank BSI SA. The Non-Prosecution Agreement is likely the precursor to enhanced enforcement efforts by the DOJ and IRS against those taxpayers who have not yet come forward and disclosed previously unreported offshore accounts. The DOJ has publically stated that it will treat recalcitrant (non-reporters) and/or leavers (those taxpayers who have closed account only t move funds to another offshore bank) as "Willful" and therefore assess maximimum civil and possibly criminal penalties under the Internal Revenue Code (IRC) and the Bank Secrecy Act (BSA).

Warning, Offshore Accounts Holders May Have No Fifth Amendment Protections

In what is becoming an increasingly used attack vehicle, the Department of Justice (DoJ) is using the "required records doctrine" to compel taxpayer's to produce what may be incriminating evidence of ownership or control of foreign financial accounts. The DoJ process involves the issuance of a Grand Jury subpoena for records and then compelled testimony. A case now on petition to the U.S. Supreme Court is illustrative of the governments' position.

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