Tax Law Archives | Page 44 of 46

18Jun 2019 by Pat Geddie

Making a Voluntary Disclosure to the IRS- Everything You Wanted to Know But Were Afraid to Ask

By Anthony Diosdi On November 20, 2018, the Internal Revenue Service (“IRS”) issued a Memorandum discussing the rules for all voluntary disclosures (foreign and domestic) after the expiration of the final Offshore Voluntary Disclosure Program (“OVDP”). The Memorandum is broken down into multiple parts: background and overview, IRS Criminal Investigation (“CI”) procedures; civil processing, case development, and civil resolution framework, each of which are discussed in detail below. This article will also discuss the significant hazards of making a voluntary disclosure to the IRS.BackgroundIn 2009, the IRS opened the initial OVDP to provide a uniform mechanism to U.S. citizens and tax residents who had not otherwise disclosed foreign bank accounts, foreign situs assets and income that was used to pay for such assets. After the expiration of the 2009 OVDP,…

17Jun 2019 by Pat Geddie

Cryptocurrency and Taxes

Tax Law

With investments in Bitcoin, Ripple, Ethereum, and other types of cryptocurrency increasing significantly in 2017 and 2018, many new investors should be aware of the tax implications of their investments. Cryptocurrency taxes may seem complicated, so many investors file to address them on their returns. This can result in future liability, however, so you want to make sure you understand how to file taxes based on crypto investments. The IRS is paying more and more attention to taxes on digital assets, and so should tax filers. All Crypto Sales and Trades are Taxable If you sell cryptocurrency for a profit, convert it to U.S. dollars, or spend cryptocurrency in any manner, you need to report it on your tax returns. Failure to do so can result in tax fraud allegations…

14Jun 2019 by Pat Geddie

The IRS’ Own Regulation is Successfully Used Against them in Two Willful FBAR Penalty Cases

Tax Law

By Anthony Diosdi IntroductionIn 1970, Congress enacted what has commonly become known as the Bank Secrecy Act (“BSA”), as part of the Currency and Foreign Transactions Reporting Act. This was codified in Title 31 (“Money and Finance”) of the United States Code. The purpose of the BSA was to prevent money laundering by requiring the filing of reports and the retention of records where doing so would be helpful to the U.S. government in carrying out criminal, civil, tax, and regulatory investigations. One of the most important provisions of the BSA was Title 31 of the United States Code Section 5314(a) which provides in relevant part that: The Secretary of the Treasury (“Secretary”) shall require a resident or citizen of the United States or a person in, and doing business…

14Jun 2019 by Pat Geddie

Facing an FBAR Penalty? Better Make Sure Your Attorney Understands Administrative Law

Tax Law

By Anthony Diosdi In a recent blog, I discussed two cases, Colliot v. U.S., No. 1:16-cv-01281 (W.D. Tex. May 16, 2018) and U.S. v. Wahdan, 325 F.Supp.3d 1136 (D. Colo. 2018). These two cases are extremely important in FBAR litigation. The attorneys in Colliot and Wahdan successfully utilized arguments based in administrative law to mitigate massive FBAR penalties assessed by the IRS. Let’s take a step back and revisit these cases and the collision of 31 U.S.C. Section 5321(a)(5) and its regulation 31 C.F.R. 1010.820(g), the latter of which allows for the IRS to assess a willful FBAR penalty of up to $100,000. The IRS issued the regulation under a prior statutory rule that capped willful FBAR penalties to the greater of $25,000 or an account balance of $100,000. No…

11Jun 2019 by Pat Geddie

Time’s Up: Tolling Events That Extend the IRS’ Ability to Collect on You

Tax Law

By Kerrin N.T. Liu Will this ever end? This will be a familiar question for those unlucky enough to be collected upon by the Internal Revenue Service (“IRS”). Most taxpayers will be relieved to hear that generally, there is a 10 year statute of limitations on IRS collections. See I.R.C. Section 6502. The 10 years are calculated from the date the tax was assessed. Subject to certain exceptions, once that 10 years is up, the IRS must stop its collections efforts against the taxpayer. However, as with many things in taxation, relief is not as simple as it seems. An unsuspecting taxpayer may unwittingly extend the statute of limitations, allowing the IRS to continue to collect far beyond the 10 years after assessment. Even worse, the IRS has no…

11Jun 2019 by Pat Geddie

The “Nuts and Bolts” of Contesting an FBAR Penalty Through Either the Tucker Act or Little Tucker Act

Tax Law

By Anthony Diosdi In 1970, Congress enacted what has commonly become known as the Bank Secrecy Act (“BSA”), as part of the Currency and Foreign Transactions Reporting Act. This was codified in Title 31 (“Money and Finance”) of the United States Code. The purpose of the BSA was to prevent money laundering by requiring the filing of reports and the retention of records where doing so would be helpful to the U.S. government in carrying out criminal, civil, tax, and regulatory investigations. One of the most important provisions of the BSA was Title 31 of the United States Code Section (“U.S.C”) 5314(a) which provides in relevant part that: The Secretary of the Treasury (“Secretary”) shall require a resident or citizen of the United States or a person in, and doing…

11Jun 2019 by Pat Geddie

Is the APA Still Relevant in FBAR Penalty Litigation?

Tax Law

By Anthony Diosdi The Administrative Procedure Act (“APA”) governs the way in which federal administrative agencies may establish regulations. The APA also provides that federal agencies such as the Internal Revenue Service (“IRS”) may not take final actions that are arbitrary and capricious. When a person is injured by a wrongful agency act (i.e. the agency took an action which was arbitrary and capricious), the individual might consider suing the government agent responsible for the harm as well as the principal, the agency. In private law, the principal is indeed liable for the acts of an agent, and enterprise liability, the liability of an employer for the acts of its employees, is the norm. Enterprise liability, however, is not the case when the principal is the government. “Sovereign immunity,” the…

07Jun 2019 by Pat Geddie

Is Constructive Knowledge Enough to Assess a Willful FBAR Penalty?

Tax Law

By Anthony Diosdi As reported in the August 27, 2018 edition of Tax Notes International, the Southern District of Texas’ decision of U.S. v. Flume, No. 5:16-cv-73 (S.D. Tex. 2018), “bucked the trend” and rejected constructive knowledge as sufficient to support a government position that a foreign account holder’s conduct was willful when failing to file an FBAR informational return.In Flume, the foreign account holder was a U.S. citizen living in Mexico. He had interests in Mexican and Swiss foreign accounts. The individual in this case reported his Mexican accounts on his U.S. tax returns, but did not report his Swiss accounts. The IRS assessed willful FBAR penalties against the taxpayer based on the assertion that he told the taxpayer about the duty to file FBAR informational returns as far…

07Jun 2019 by Pat Geddie

Can a Representative of an Estate be Forced to Defend Against an FBAR Penalty in Court?

Tax Law

By Anthony Diosdi It’s no secret, any U.S. person that has a financial interest in one or more foreign financial accounts with an aggregate value that exceeds $10,000 must file a FinCEN 114 (“FBAR”) with the IRS. It’s also no secret that the IRS has been aggressively pursuing U.S. taxpayers that have failed to disclose foreign financial accounts on FBAR informational returns. The Jobs Act of 2004 Permits the IRS to assess a penalty up to $10,000 for a nonwillful violation of the FBAR rules and a penalty up to $100,000 or 50 percent of the value of the undisclosed account for a willful violation of the FBAR rules. These FBAR penalties are assessed per year and undisclosed account. Given the way FBAR penalties are calculated, these penalties can be…

04Jun 2019 by Pat Geddie

A Brief Discussion of the New Business Interest Expense Limitation Rules

Tax Law

By Anthony Diosdi Internal Revenue Code Section 163(j) operates to prevent U.S. and foreign owned companies from eroding the U.S. income tax base through deductible interest payments to tax exempt related parties. The rule used to applied when a debtor’s debt-to-equity ratio exceeded 1.5 to 1 and its total “net interest expense” exceeded 50 percent of its “adjusted taxable income.” In this case, it would result in the disallowance of the portion of its “related party tax-exempt interest.” However, disallowed interest could potentially be carried forward.The 2017 Tax Cuts and Jobs Act modified Section 163(j) interest expense provisions in several significant ways, most notably eliminating the 1.5 to 1 ratio requirement. The new interest limitation rules under Section 163(j) provides that the deduction allowed for business interest expense in any…