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Monthly Archives: April 2018

IRS' $173 Million IRS Tech Team Failed on Tax Day?

According to Forbes, not even 1,500 highly compensated tech employees at the IRS could keep the website running on Tax Day, the most important day of the year for taxpayers and the IRS.

Although tax season is busy throughout March and April, it all comes down to one day. This year, on April 17, when millions of taxpayers tried to file their 2017 tax returns on IRS.gov, they were halted by a system-wide computer failure, receiving the following notice:

“Planned outage: April 17, 2018 – December 31, 9999… We apologize for any inconvenience. Note that your tax payment is due although IRS Direct Pay may not be available.”

How could the website go down on the biggest day of the year? It certainly wasn’t for a lack of payroll.

To Read More ...

Have a Tax Problem?
 


Contact the Tax Lawyers at
Marini & Associates, P.A.
 
 
 for a FREE Tax Consultation Contact US at 
or Toll Free at 888-8TaxAid (888 882-9243). 





 

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All That You Wanted to Know About Form 706NA – Part II

We previously posted All That You Wanted to Know About Form 706NA - Part I, where we discussed that in the area of estate tax compliance, many of us have prepared Form 706’s, the estate tax return for US citizens and domiciliaries.  To be sure, this form is quite voluminous and can take a while to fill out but there are very few mysteries beyond schedule E; what percentage of an asset might be includable in an estate, the value of an annuity, what debts and expenses are deductible, the calculation of the marital deduction, and the generation-skipping tax computation. The Form 706NA, however, preparation of the tax return for the estate of the nonresident alien owning property in the United States, can present a more daunting task.  
Based on my 32 years of experience as a senior attorney at the International office of the IRS, I am revealing some of the strange and exotic problems that I came upon while auditing roughly 1,500 estate tax returns and preparing about 300 of the same in the last few years.

 
As I pointed out, one of the critical areas for each estate is to focus on is the decedent’s citizenship and domicile. To assist the IRS in reaching a conclusion, it is best to include the death certificate (required) as well as the birth certificate, passport, and any documents revealing the fact that the decedent expatriated from one country. This information may well be beneficial in avoiding an IRS examination. The problem is that once the IRS examines a tax return for one issue (i.e. citizenship or domicile), it opens the door for the IRS to examine a number of other issues that they might not have otherwise addressed. Kind of like opening Pandora's box. 

After we get through the information about the decedent himself, we reach an area of the return, Part III, General Information.Most of it is pretty obvious but… The first area of major concern may be whether the decedent died intestate. Many people who have assets in several countries have country specific wills, for instance one for the United States and one for say Canada, England etc. If the decedent did die testate, one should always include the US will. If there are other wills, go through them carefully before you submit them to the IRS because they make contain data which would create questions or problems with the IRS. In the alternative, many folks have a Universal Will which covers the disposition of assets in all countries. Because of the difference of rules from country to country, such a universal will may create problems with assets passing to a surviving spouse or a charity. 

Question two addresses debt obligations  or other property located in the United States. One of the major problems that I saw as an auditor was that people will value the house or condominium in the United States allocating no value to the contents. In most cases this is not a big deal but in the case of an expensive property, I, as the auditor always requested (summoned if the estate did not cooperate) a copy of the insurance policy plus the floater. Generally I found nothing specific but from time to time, I found an art collection worth several million dollars, an automobile collection worth over million dollars, and an extensive collection of rare China worse close to $1 million. If the client is wealthy or as expensive real estate in the United States, obtain a copy of the insurance floater before you prepare the 706NA to avoid great embarrassment. 

Question five relates to whether the decedent owned jointly held property in the United States. If the taxpayer plans to include 100% of the value of the asset, then this question should pose no problems. Two potential problems come to light: if the decedent came from a community property jurisdiction, is one half of the value of the asset excluded by operation of law in the foreign country? If one wishes to exclude a portion of an asset from a decedent in a non-community property jurisdiction, Section 2040 of the IRC places the onus again, of proving contribution on the surviving co-tenant. This can sometimes be a very difficult task, especially if the property is been held for a substantial number of years and many records/canceled checks etc. have been destroyed over the years. 

Question six asks whether the decedent had ever been a US citizen. If the answer to the initial question is yes but at the time of death, the decedent is no longer a US citizen, it is necessary to include in the paperwork sent to the IRS some evidence that the decedent properly expatriated from the United States. Based on the timing, if this happened shortly before death, it could raise the issue of expatriation to avoid tax. Again, getting this information before preparing the return is a good way to avoiding embarrassment at  the examination.

Have a US Estate Tax Problem?

 

Estate Tax Problems Require

an Experienced Estate Tax Attorney
 
 
 
Contact the Tax Lawyers at
Marini & Associates, P.A.
 
 
 for a FREE Tax Consultation Contact US at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243).

 

Robert S. Blumenfeld  - 
 Estate Tax Counsel
Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

 

 

 

Read more at: Tax Times blog

British Solicitor & US Lawyer Found Guilty For His Participation In Tax Fraud Scheme Involving Swiss Bank Accounts!

According to DoJ a federal jury found MICHAEL LITTLE guilty of charges that he participated in an 11-year tax fraud scheme in which he advised and helped an American family to defraud the Internal Revenue Service by hiding approximately $14 million in overseas Swiss bank accounts and by other means, failed to file his own personal tax returns, and assisted in the filing of false tax returns. 
The three-week-long trial concluded on April 10, 2018 and Michael Little is scheduled to sentence on September 6, 2018.


“Michael Little Assisted an American Family in Evading Taxes on $14 million in Undeclared Offshore Inheritance Money." 
  according to US Attorney Geoffrey S. Berman. 
 
Over the course of a decade, he helped the family illegally funnel millions of dollars of inheritance from Swiss bank accounts into the United States, in order to avoid IRS detection.  
 

 
“Especially at This Time of Year, This Case Serves As a Reminder That Failure to Pay One’s Fair Share of Taxes

CAN RESULT IN A FELONY CONVICTION.”
 

According to the allegations contained in the Complaint, Indictment, and the evidence presented in Court during the trial:
 
  • LITTLE, a British attorney who resides in England and is licensed to practice law in New York, was a business associate of the patriarch of the Seggerman family, an American family residing in the United States. 
    • In August 2001, after the patriarch died, LITTLE and a lawyer from Switzerland (the “Swiss Lawyer”) met with his widow and adult children at a hotel in Manhattan, and advised them that the patriarch had left them approximately $14 million in overseas accounts that had never been declared to U.S. taxing authorities. 
    • LITTLE and the Swiss lawyer also advised the various family members on steps they could take to continue hiding these assets from the IRS. 
    • In particular, LITTLE discussed with the family members various methods by which they could bring the money into the United States from the Swiss accounts while evading detection by the IRS. 
    • Among other means, he advised family members that they could bring money back to the United States in small increments, or “little chunks,” through means such as traveler’s checks, or by disguising money transfers to the United States as being related to the sales of artwork or jewelry.  
    • Various members of the Seggerman family agreed to work together with LITTLE and the Swiss Lawyer to repatriate the offshore funds.

  • In accordance with the plan he orchestrated, LITTLE assisted in opening an undeclared Swiss account for the purpose of holding and hiding the widow’s inheritance funds.  LITTLE also enlisted the assistance of a New Jersey accountant to prepare false and fraudulent tax returns and to keep falsified accounting records for a corporate entity in the United States, controlled by the widow and used to receive inheritance funds repatriated from the Swiss account.
    • Between 2001 and 2010, LITTLE caused over $3 million to be sent surreptitiously from the undeclared Swiss account to the United States corporate entity for the widow’s benefit. 
    • LITTLE also worked with the New Jersey accountant to establish a sham mortgage that allowed another Seggerman family member to access approximately $600,000 of undeclared inheritance funds held in a Swiss account.
In or about 2010, LITTLE became aware of an IRS criminal investigation into the scheme.  In an attempt to cover up his involvement, LITTLE communicated with a tax attorney and the accounting firm that had prepared the widow’s individual tax returns.  LITTLE provided false information to the tax lawyer and the accounting firm about the nature of the transfers from the Swiss account to the United States, claiming that the transfers represented “pure gifts” from a non-U.S. person who had “absolutely no relationship” to the widow. 
  • Based on LITTLE’s misrepresentations, the accounting firm filed inaccurate tax returns for the years 2001 through 2010, which categorized the transfers of over $3 million to the widow as foreign gifts.
    •  
  • LITTLE has been a lawful permanent resident of the United States, also known as a green card holder, since 1972. 
    • As a lawful permanent resident, he had an obligation to file annual tax returns reporting his worldwide income to the IRS. 
    • In or about 2005, LITTLE was admitted to the New York State Bar as an attorney.  Between 2005 and at least late 2008, LITTLE resided full time in New York City, where he worked and earned hundreds of thousands of dollars of income as an attorney representing clients. 
    • During the period of 2001 to 2010, LITTLE also earned other legal fees, along with hundreds of thousands of dollars more in fees for his work on behalf of the Seggerman family. 
    • LITTLE failed to file any tax returns with the IRS between 2005 and 2010. 
    • He further failed to file, for years 2007 through 2010, annual Reports of Foreign Bank and Financial Accounts (“FBARs”) in connection with foreign bank accounts he controlled, which held in excess of $10,000 each year.
 

LITTLE, 67, who resides in Hampshire, England, was convicted of:

  • Obstructing and impeding the due administration of the internal revenue laws,
  • Failing to file personal income tax returns from 2005 to 2010,
  • Willfully failing to file reports of foreign bank and financial accounts,
  • Conspiracy to defraud the United States, and
  • Aiding and assisting the preparation of false tax returns. 

SENTENCING

  1. The failure to file personal income tax returns charges each carry a maximum sentence of        1 year in prison,
  2. The obstruction charge and the aiding and assisting the preparation of false tax returns charges each carry a maximum sentence of 3 years in prison, and
  3. The willful failure to file reports of foreign bank and financial accounts and conspiracy charges each carry a maximum sentence of 5 years in prison
 
 
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge, but anyway you look at this case, Mr. Little will be doing A LOT OF JAIL TIME!

Have Undeclared Income from an Offshore Account?

Want to Know if the OVDP Program is Right for You?

 
 
Contact the Tax Lawyers at 
Marini& Associates, P.A. 
 
 
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888) 882-9243

 
Source of Mr. Little's Photo:
 

 

Read more at: Tax Times blog

Foreign Investors Also Big Beneficiaries of TCJA, According to Recent CBO Estimates

According to Law360, Foreign investors stand to reap 43 percent of the economic benefits from the federal tax overhaul's effects on federal tax law during the next 11 years, according to a recent report from the Congressional Budget Office.

In a Wednesday letter responding to an inquiry from Sen. Chris Van Hollen, D-Md., the CBO said a new analysis of gross domestic product and gross national product projections show that from 2018 through 2028, foreign investors will obtain at least a 31 percent annual share of increases in the United States economy attributable to the Tax Cut and Jobs Act.

The share of foreign investors’ benefits from the TCJA jumps from 48 percent in 2026 to 60 percent in 2027 and peaks at 71 percent in 2028, the latest year the CBO projects the law’s impact on the economy. The CBO partly attributes the spike in the final two years of its analysis to higher individual tax rates that will take effect in 2026.

“In CBO’s estimates, the share is higher after 2025 in part because the lower tax rates on individual income expire and the subsequent effects on the supply of labor — and therefore on real GDP — are smaller, but the difference between the effects on GDP and on GNP changes little,” the letter said.

The CBO has estimated that the TCJA will reduce the amount of net foreign income earned by U.S. residents, meaning GNP, which includes income that residents earn abroad but excludes domestic income from nonresidents, will rise less than GDP.

The CBO used new calculations of the ratio of the federal overhaul's expected effects on both economic measuring sticks to determine the share of economic growth that will be realized by residents and foreign investors.

The letter said Van Hollen’s staff asked for more clarification on the TCJA’s effects on both GDP and GNP in real terms or after adjustments to remove the effects of inflation.

The senator sent the letter after the CBO released its first economic outlook of 2018, which estimated that recent legislative changes, including the new federal tax law, are projected to increase the budget deficit by $2.7 trillion more than previously thought.

A representative of Van Hollen’s office said the senator had no comment Friday, but shared a video of an exchange between Van Hollen and CBO Director Keith Hall at a Senate Budget Committee hearing on April 13.

At the hearing, Van Hollen asked if 80 cents of every dollar of increased economic activity from the tax law in 2028 “is not going into the pockets of hard-working Americans … it’s going into the pockets of foreigners, right?”

Hall responded that the calculation was correct but added, “I’m just not sure that’s exactly how I would look at the benefits or the impact of the tax act.”

The letter said the CBO revised that number to 71 percent after using “more precise estimates of the real effects on GDP and GNP, which CBO had not previously published.”

In a statement after the CBO’s release of its April 9 report, Van Hollen voiced his opposition to the TCJA’s effects on the economy, calling it a financial boon for special interests and the rich.

“Big corporations and foreign investors are lining their own pockets with record stock buybacks, while American families are facing higher health costs and still haven’t gotten the $4,000 pay raise they were promised,” he said.

The CBO report was the first analysis to take into account the effects of the TCJA, the Bipartisan Budget Act of 2018 and the Consolidated Appropriations Act. It predicted that the national debt will soar from $21.4 trillion at the end of 2018 to nearly $34 trillion at the end of 2028. The debt held by the public will be nearly the size of the U.S. economy at 96 percent of the GDP in 2028, according to the CBO.

Still, the CBO warned that there is a “good deal of uncertainty” behind its estimates, and said the effects of the new tax law depend on what policies state and foreign governments may enact in response, how businesses will rearrange their finances and how taxpayers will respond to changes in incentives to work, save and invest in the U.S.

We Can Advise on How These Tax Cuts Can Benefit You!
 
Contact the Tax Lawyers at 
Marini & Associates, P.A.  
 
 
for a FREE Tax Consultation contact us at:
Toll Free at 888-8TaxAid (888) 882-9243

 

Read more at: Tax Times blog