Offshore Voluntary Disclosure Program Changes

June 26, 2014 by Christin Bucci

The Offshore Voluntary Disclosure Program (OVDP) has been recently updated. Our Fort Lauderdale and Miami tax attorneys can assist you during your disclosure process and advise you on the best course of action for you situation. Not to mention that FATCA goes into effect July 1, 2014. In light of the Modified 2012 Offshore Voluntary Disclosure Program (2014 OVDP) and the Financial Account Tax Compliance Act (FATCA) deadlines, it is clear the IRS is cracking down on offshore tax evasion. One major change to the program is the increase in the Miscellaneous Title 26 offshore penalty from 27.5% of the total account assets to 50% of the total account assets.

The miscellaneous offshore penalty increases to 50% if the taxpayer has or had an undisclosed foreign financial account or established with the help of a facilitator where either the facilitator or the financial institution has been public identified as being under investigation or cooperating with the an investigation.

The July 1, 2014 Deadline Is Quickly Approaching

August 4, 2014 triggers the 50% increase so taxpayers have to enter the OVDP before July 1, 2014! The only way to avoid this increase is to enter the OVDP before July 1, 2014.

Once your bank goes public, you will be subject to the 50% penalty. This is because the IRS has determined that, once a bank goes public, your disclosure is no longer "voluntary." Higher penalties, including the 50% penalty, will be imposed and possible jail time may apply. Also, this penalty is just one penalty that will be imposed in conjunction with other penalties that add up quickly.

The way to minimize the risk of higher penalties and possible jail time is to contact an experienced and qualified tax attorney to help analyze and assess your international tax compliance issues. Our international tax lawyers can help you take the necessary steps to properly apply to the OVDP and begin the process of becoming tax compliant.

Is Your Bank on the List?
Located on the IRS website is a list of financial institutions and facilitators that have been "publicly identified"
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners Investment Network AG, Swisspartners Wealth Management AG, Swisspartners Insurance Company SPC Ltd., and Swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates.

Don't wait! This list will grow and once your financial institution or facilitator is added, it will be too late. If you have an account or other assets in any of these institutions, the 50% penalty will be imposed. You should contact a tax attorney and begin discussing your situation as soon as possible.

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IRS Commissioner's Remarks at Conference Hint at OVDP Changes

June 12, 2014 by Christin Bucci

Koskinen.jpgSpeaking at an International Tax conference recently, the commissioner of the Internal Revenue Service implied that changes might be in the works for the agency's offshore voluntary disclosure program (OVDP). The changes, if created, would be an important breakthrough for certain expats, who have been living (and banking) overseas for years, or even decades, since the changes potentially would allow them to come into compliance without facing the same sort of punitive penalties imposed on US citizens whose non-compliance was willful.

At the conference, Commissioner John Koskinen touted the success of the 2012 OVDP and the previous OVDPs before it. The OVDPs have yielded more than $6 billion in taxes, interest, and penalties from 43,000 voluntary disclosures. The IRS has received considerable negative feedback, however, on one element of the disclosure program: its uniform approach to penalizing taxpayers, regardless of whether their noncompliance was willful or not.

Now the agency is considering whether a change in focus and penalty structures might improve the OVDP. The IRS is assessing whether prior OVDPs failed to take into adequate consideration US citizens, mostly Americans living abroad, who were not compliant but whose noncompliance was not willful.

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Florida Man Hit with Record Tax Penalty on Swiss Bank Account

June 9, 2014 by Christin Bucci

751px-American_Cash.JPGA jury in Miami recently found that a Coral Gables man could owe civil penalties of $2.24 million for a secret Swiss bank account he held, Bloomberg reported. This sum is noteworthy due to its large size. What makes it especially significant is that the account in question only held $1.5 million in it. The taxpayer's lawyers described the 150% penalty as record-setting in terms of percentage.

Carl Zwerner, a specialty glass importer, opened a Swiss bank account in the 1960s. Unfortunately for Zwerner, a new federal law in 2004 raised the penalty for failing to file a Report of Foreign Bank and Financial Accounts, or FBAR. The new law stated that, for each year a taxpayer willfully failed to file his FBAR, he could face a penalty of 50% of the balance of the foreign account(s) in question. The jury in Zwerner's case concluded that he willfully failed to submit FBARs in 2004, 2005 and 2006. Because the taxpayer's account balance hovered just near $1.5 million during that period, that meant his penalty amounted to just under three times $750,000, or nearly $2.25 million.

With the new reporting requirements of the Foreign Account Tax Compliance Act coming online soon, many other taxpayers could find themselves in Zwerner's shoes as institutions across the globe -- including Swiss banks -- are disclosing account holder information to the IRS.

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Recent Treasury Notice Regarding 'Transition Period' Not a Delay of FATCA Implementation

June 8, 2014 by Christin Bucci

calendar-2015.jpgThe U.S. Department of the Treasury recently announced that the current and next calendar years will be a "transition period" for complying with the Foreign Account Tax Compliance Act's requirements. The creation of this transition period should not be seen as a postponement of FATCA's obligations, but rather as a time when affected entities can seek to implement policies that bring them into full compliance. Thinking that the new announcement has delayed the requirements imposed by the FATCA is erroneous and dangerous.

In early May, the US Treasury Department issued Notice 2014-33. That notice announced publicly that the years 2014 and 2015 would serve as "a transition period" for purposes of the Internal Revenue Service's enforcement of the implementation of FATCA. With the deadline for FATCA compliance looming, the Treasury Department saw the benefit of a transition period to facilitate an orderly adjustment to the new rules. The transition period applies to FATCA's withholding, reporting, and due diligence requirements.

While some might read that description of "transition period" and see a postponement of the extensive duties triggered by FATCA, this perspective is mistaken. The Treasury notice is not a delay, but rather fosters an opportunity for obligated entities to ramp up to full compliance over time. The new transition period does not give obligated entities the option to sit on the sidelines until 2016, however. The notice requires entities to make reasonable efforts to come into compliance this year. Entities not making such good-faith efforts can face IRS enforcement as early as this year.

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US, Australia Strike FATCA Agreement

May 6, 2014 by Christin Bucci

australian-flag-graphic.pngThe U.S. Department of the Treasury has added the name of yet another nation -- Australia -- to its growing list of countries with which the US has reached an accord regarding the reporting of offshore accounts to the Internal Revenue Service, according to The newly completed intergovernmental agreement (IGA) makes Australia one of nearly four dozen countries that promised in writing to report assets to American tax authorities as the US attempts to eradicate the use of foreign accounts to evade tax liability domestically.

Australian governmental leaders and banking authorities cheered the signing of the agreement. The requirements originally imposed by the US's passage of the Foreign Account Tax Compliance Act (FATCA) on foreign financial institutions were "onerous," according to Australia's Financial Services Commission. Without the agreement, Australian institutions would have been subject to the FATCA's withholding requirements, would have been required to report information on US accountholders directly to the IRS, and would have had to close the accounts of accountholders who did not provide certain tax-related information to the IRS.

The IGA helps Australian institutions shed some of those burdens. "It is significant for the financial services industry in reducing red tape and will save hundreds of millions of dollars in compliance costs," Financial Services Commission chief John Brogdon stated. These reductions and savings stem largely from the IGA's simplification of the due diligence requirements created by the FATCA.

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Federal Court Rejects Bankers' Challenge to New Disclosure Requirements Triggered by FATCA

April 30, 2014 by Christin Bucci

1099 int.jpgThe passage of the Foreign Account Tax Compliant Act (FATCA) created a broad new system for foreign institutions to report to the IRS about their American accountholders. In order to secure the cooperation of those foreign financial institutions, however, the US also had to agree to make its institutions provide expanded disclosures to foreign tax authorities, as well. To this end, the Treasury Department passed new regulations mandating the reporting of interest earned by foreign accountholders to their countries' governments. Two US banking organizations sought to defeat these expanded new disclosure requirements by suing, but a federal district court recently rejected their claims.

Two years ago, the IRS issued a series of new regulations governing the reporting obligations of domestic banks with regard to accounts held by non-resident accountholders. The new regulations were necessary to ensure the US remained in compliance with the treaties it signed as part of the FATCA initiative to root out the use of offshore accounts to evade US taxes. In exchange, the US agreed that its banks would make certain disclosures to foreign taxing authorities. The regulations require American institutions to report the amount of interest earned by accountholders who are not US residents and apply to any account that earns more than $10 in interest in a year.

The Florida Bankers Association and the Texas Bankers Association challenged the new regulations, arguing that they were extremely onerous and economically harmful. The US District Court for the District of Columbia disagreed. The new regulations' benefits were many, including offering a strong deterrent against the use of offshore accounts to evade US taxes. The court stated a significant portion of the gap between what US taxpayers owed and what they paid stemmed from the current system's reliance on self-reporting and taxpayers' use of offshore accounts as tax evasion vehicles. In order to minimize the reliance on self-reporting and close the gap, the US government entered into several treaties governing the exchange of certain information about foreign accountholders. "Reciprocity is the key to success in such treaties," the court stated. In other words, US institutions had to share accountholder information with foreign countries in order for the treaties to work, and the regulations were the technique for mandating that disclosure of information.

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James Gandolfini's Passing Makes Plenty for the IRS

January 2, 2014 by Christin Bucci

James Gandolfini was a beloved actor in Hollywood, most notably for his lead role as Tony Soprano in the popular gangster series, "The Sopranos," on HBO. The event of his sudden death over this past summer from a heart attack, affords us the opportunity to glean lessons from his estate planning, or as many suggest, lack thereof.

A plethora of articles have been written detailing the ways in which Mr. Gandolfini could have done much better - estate planning wise. We borrow here from some of their analysis as well explain some simple estate tax avoidance strategies to prevent the IRS from taking your hard-earned money after you pass. While, many people avoid planning their estate or drafting a will because of some existential anxiety, this should be a wake up call.

Upon viewing his estate plan, it seems that neither Mr. Gandolfini nor his financial advisors anticipated his sudden and tragic untimely passing. Perhaps, his will was a rushed disposition to protect his year-old daughter while still providing for his sisters, and new wife. I say this because as the estate stands and before Mr. Gandolfini's heirs receive any money, the IRS will have taken nearly half. Forbes reports that the IRS and state tax collectors will likely get $30 million off the top of Gandolfini's $70 million probate estate. Unfortunately for his heirs, much of these taxes could have been easily avoided by consulting with an informed estate-planning attorney.

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If You Have Foreign Accounts In The State Of Israel, It Is Time To Get IRS Compliant

November 25, 2013 by Christin Bucci

If you are a U.S. taxpayer, the Internal Revenue Service makes it their business to know all about you. Until now, however, there was still a lot of information to which they had little access. For instance, if you had monies in offshore accounts, you may have left no apparent trace. As in most arenas, technology has changed everything. The near instant transfer of information online has enabled a true global economy. Now, the U.S. Government need not sniff you out. They have decided to hold the Foreign Financial Institutions, who manage your monies, financially responsible if they don't report you to the IRS. Shifting the financial burden, with the click of a mouse, has changed everything.

The Foreign Account Tax Compliance Act, or FACTA, was enacted in 2010 to require that Foreign Financial Institutions report to the IRS information about United States citizens and Green Card holders that hold foreign accounts and assets. FACTA represents both the pinnacle and commencement of the valiant efforts of the United States government to prevent tax evasion, and recover the tax monies owed them from Foreign Financial Institutions and U.S. Citizens dealing in foreign assets or holding foreign accounts. If you have foreign assets or foreign accounts, it's time to make a date with your neighborhood tax lawyer!

The Israeli government has showed its intent to comply with FACTA by setting up a special committee to check obedience, led by Frieda Israeli, and including many other members of Israeli government from the Israeli Securities Authority, the Israel Tax Authority, the Securities Markets, and the banking sections of regulatory bodies within the Finance Ministry and the Justice Ministry. To create a climate of compliance and enable FACTA, the U.S. is negotiating entry into Intergovernmental Agreements with other countries, including Israel. While the terms of the final deal with Israel have not yet been reached, these Agreements help compliance by setting up the model for information exchange between Foreign Financial Institutions and the IRS.

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Identity Theft

November 18, 2013 by Christin Bucci

Have you been the victim of an identity theft crime? You are not alone. Identity theft has become the number one national consumer complaint, and Florida has the highest rate of identity theft in the United States. The Department of Justice has acknowledged identity theft as the number one for profit crime. Our tax attorneys are experienced and knowledgeable in dealing with identity theft victims and their recovery. There are important deadlines that the victims of identity theft must meet in order to avoid responsibility of the debt or penalties.

It is so easily overstated and overlooked, but very important to remember that anyone can be a victim of identity theft. Anytime that you give your personal identifying information you are susceptible to becoming a victim. Most of the time the identity thief simply needs a name, date of birth and Social Security Number.

One common misconception is that the victims of identity theft are irresponsible with their personal information, but investigations have revealed massive schemes where victims' personal information was leaked without any wrongdoing from the victim. Employees at hospitals, insurance offices, doctor's offices, attorney's offices, and even accountant's offices has been found guilty of stealing private information. In other circumstances, the government inadvertently leaked private identifying information online.

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South Florida Taxpayers Beware of Dangerous Phone Calls Alleging to be the IRS!

November 13, 2013 by Christin Bucci

Beware if you receive a phone call from the Internal Revenue Service asking for a payment for unpaid taxes! The IRS usually does not contact people by phone to obtain payment for past due taxes. In fact, the IRS has now officially issued a warning to people not to respond should they receive a call from someone representing themselves as the IRS.

If this happens to you, it is more than likely a scam attempt by very creative and resourceful characters, who want to steal your money. Life in the identity theft capital of the United States - Florida - isn't all sunshine and retirement, these days.

I tell you as a Florida tax attorney who has spoken all over the United States about identity theft, just hang up the phone. The IRS will not call or e-mail you! Don't be tricked into to giving your personal identify information such as name, date of birth and especially Social Security number. These scammers will be convincing, often times they will already be armed with some of your private information - the last four digits of your Social Security number or email address but do not let your guard down. These criminal callers are informed about some details of your life that may mislead you into trusting them.

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Fort Lauderdale Tax Attorney, Christin Bucci, speaks on Identity Theft at 2013 ABA Midyear Meeting

November 1, 2013 by Christin Bucci

Have you been the victim of identity theft? It's not just you. Just ninety miles away from a national epicenter of identity theft, Tampa, Florida, our ABA renowned Florida tax attorney, Christin Bucci, was invited to speak on the tax refund identity theft epidemic which is sweeping the nation. Ms. Bucci was chosen as a panelist and joined several other panelists including the National Identity Theft Coordinator from IRS' Criminal Investigation Division, Michael J. DePalma, and the Department of Justice Tax Division Representative, Larry John Wszalek, to discuss this issue.

The conference was a huge success! Attorneys from all over the country descended upon Orlando, Florida at the end of January 2013, while Ms. Bucci laid bare the simple scheme used by identity thieves to steal legitimate tax refunds from taxpayers- and the resultantly complex undertaking it is to fix the problem with the IRS. It typically goes like this:

Using stolen private Social Security Numbers, birthdays, full names and addresses of persons, a fraudulent tax return is filed with the IRS, reporting fictitious wages, and withholding, and claiming a tax refund. As Congress has statutorily mandated the IRS give speedy refunds to taxpayers, the refunds are typically sent out to taxpayers in the form of an untraceable debit card. Before the taxpayer even becomes aware that their identity has been compromised, the refund monies to which the legitimate taxpayer is entitled, have already been stolen!

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IRS Takes Down Florida Doctor Who Hid $35 million in Foreign Bank Accounts

October 30, 2013 by Christin Bucci

Thursday, October 24, 2013 was a sad day for the international medical community, as one of their own, psychiatrist, Dr. Patricia Lynn Hough, was convicted by a jury in Ft. Myers, Florida of conspiracy to defraud the Internal Revenue Service by hiding upwards of $35 million dollars in offshore accounts at UBS and other foreign banks. She and her husband are doctors who owned two medical schools in the Caribbean, which sold for $35 million dollars in April 2007. Shortly thereafter, the money from the sales disappeared and was traced by the IRS to offshore accounts.

The unabashed nature of her fraud is compelling considering the psychiatric profession from which she stems. While, I am not a doctor - but a tax lawyer - it certainly sounds like a hint of megalomania - no doubt about it.

Using nominee entities and other shell names to conceal their identities, she and her husband, who still awaits trial, flagrantly defrauded the federal government by taking the monies from the sale, and moving them offshore. $35 million is a large amount of money to simply disappear. It is absolutely legal to have offshore accounts, but these accounts must be declared. Dr. Hough, however, failed to disclose any of her offshore holdings, or declare any income from the sale of her medical schools. The evidence also showed that Dr. Hough filed false tax returns understating her income in 2005, 2006, 2007, and 2008.

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Transparency is the New Black: If you are business that deals in credit cards, the IRS now demands you line up the numbers for them!

October 29, 2013 by Christin Bucci

Have you heard of a 1099-K? If your small business accepts credit cards, or even if you have sold some of your wares online and receive credit card income that for whatever reason does not show up similarly on the tax return that you send to the IRS, you are going to find out what a 1099-K is pretty soon.

The IRS has charged credit card companies with sending out a 1099-K to its merchants, with the aim of accounting for the multibillion dollar tax gap - that is, the gap between what the IRS claims they are owed based on their consumer income estimations, and what they actually receive in payment from taxpayers.

These 1099-K's have been termed "mismatch notices," because the numbers usually just don't line up. It is too labor intensive and a general waste of time for the IRS to attempt to do the work themselves, to match credit card income on tax returns to 1099-K reports. This is because many merchants have special arrangements, such as cash-back offers, and other deals where they are paying back out portions of their gross income to consumers. For these reasons and others, marketplace credit card receipts don't always match with credit card income reported on individual and business tax returns.

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Fort Lauderdale Tax Attorney, Christin Bucci, as Amicus Curiae, Petitions for a Writ of Certiorari to Supreme Court of the United States in Fifth Amendment Case Regarding Protections for Offshore Account Holders.

October 23, 2013 by Christin Bucci

Do you think that you are protected by your Fifth Amendment Constitutional right against self-incrimination if you have offshore account holdings? Think again. Assaults on your rights are far reaching when it comes to U.S. citizens with monies in offshore bank accounts. You have no protections left. If this is you, we can help you come forward. The mountain will only get harder to climb if you don't act now. The Supreme Court has recently declined to take up the case which may have helped shield you from exposure. We urge you to address this situation, before the IRS and grand jury come knocking. The Florida tax attorneys at Bucci Law Offices can help.

Amici Curiae, counsel for John and Jane Doe, petitioned the Supreme Court for a Writ of Certiorari, to argue that an individual should be able to assert his Fifth Amendment privilege against self-incrimination in response to grand jury subpoenas that demand a criminal target produce all his foreign bank account information, both known and unknown, to federal prosecutors. The grand jury currently requires that a suspected offshore account holder produce all foreign bank records of his holdings, that he, himself, has not kept, and in so doing, incriminate himself.

The government, in such a case, places the burden of production on the criminal target to make their case against him. Not only is this counter-intuitive to the way a criminal trial normally operates, it is unconstitutional to mandate that a criminal target gather and come forward with evidence that will incriminate him. This is the whole point of the privilege against self-incrimination, that a target need not testify against himself.

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October 14, 2013 by Christin Bucci

Does the IRS owe you money?? As a result of the landmark decision in United States vs. Windsor, and the striking down of the infamous 1996 Defense against Marriage Act (DOMA), same-sex couples that are legally married in any of the fifty states, District of Columbia, U.S. territories, or a foreign country are now eligible to refunds on ALL federal tax provisions that favor married couples who qualify. This comprehensive ruling and resulting IRS policy applies to same-sex marriages regardless of which state the couple lives in or are domicile. If you are legally married to your same-sex partner contact us to capitalize on this exciting news!

Currently, fourteen states (including the District of Columbia) recognize same-sex marriage. These states are California, Connecticut, Delaware, the District of Columbia, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Washington, and Vermont. The above named states have affirmed the right for same-sex couples to marry - whether by Court decision, legislative decision, or popular vote.

A little history on marriage: The regulation of marriage has historically been a right reserved to the states, until the federal government signed DOMA into law in 1996. Once states began to affirm same-sex couples the right to marry, it was DOMA which stood in the way of their national recognition. Same-sex couples that were married in a state where it was legal, were still considered unmarried under national law, where it had become illegal. This created a marriage half-breed, so to speak. These marriages were not given the credit of federal tax benefit by the IRS thanks to DOMA.