May 2010 Archives

IRS Says it Will Subpoena CPAs

May 21, 2010,

A couple of weeks ago I was at the ABA Tax Section Meeting which as I mentioned previously gathered tax lawyers from around the country. Since I spent most of my time at meetings involving FBARs (Foreign Bank Account Report TD F90-22.1), I missed another meeting. It turns out that (according to published reports) Janet Johnson, the Internal Revenue Service deputy division counsel for criminal tax stated that that the IRS Criminal Investigation (CI) unit would subpoena accountants in criminal tax cases. By itself that’s hardly surprising since criminal tax attorneys have known for many years that IRS special agents routinely interview the tax preparer, and the accountant can wind up as the lead witness against his own client.

The part that was surprising was that she stated the government would issue a grand jury subpoena even to a Kovel accountant, i.e. one that was retained by a tax attorney for the purpose of assisting the tax attorney in advising the client.

In an ominous note Johnson stated , “Whether or not that accountant comes to testify can be very serious for the accountant. The grand jury may decide he is part of the problem.”

If you have a tax problem, or are a CPA who has a client with a tax problem feel free to contact the tax lawyers at Brager Tax Law Group, A P.C. for a consultation.

Offshore Bank Account Problems to Expand Likely to Asian and Carribean Banks

May 13, 2010,

According to Kevin Downing, a senior tax attorney of the U.S. Department of Justice, the U.S. government expects over the next couple of years to bring somewhere between 4,000 and 7,000 more cases against wealthy individuals committing tax fraud through offshore bank accounts, in addition to the UBS cases.

According to Reuters, Downing made the announcement in a lecture in Singapore last week. Along with a DOJ team, he is currently touring a number of Asian cities including Singapore, Hong Kong, Beijing and Shanghai, meeting with financial and tax regulatory bodies and bankers to discuss cross-border criminal tax prosecutions.

He stated that since the start of the U.S. crackdown on tax evasion, money has moved from Switzerland to the Caribbean and Asia. In addition, some clients with offshore financial accounts are choosing to take cash from Swiss Bank accounts and carry it by hand back to the United States, in an attempt to avoid an electronic trail, only to be caught by U.S. law enforcement officers . Of course if your bring back more than $10,000 in cash into the U.S. it must be declared on Treasury Form 4790. Civil and criminal tax penalties for failure to make the declaration can run to $500,000 not to mention imprisonment for ten years.

“When they go in and close their accounts, they are picking up brand new $100 bills…that are coming in $100,000 shrink-wrapped bundles. Guess what? We can trace that money,” Downing said, adding such cash would be forfeited.

According to published reports, German and French authorities are getting in on the action as well. Germany is offering to pay for data from whistleblowers on clients of Swiss banks who may be committing tax fraud. France has said it has sensitive data belonging to potential tax evaders as well. While Downing declined to say whether the Justice Department was investigating any other foreign banks, U.S. tax attorneys are sure it’s only a matter of time before banks in other countries come under the type of scrutiny exercised in the UBS FBAR cases.

If you would like information about your options regarding disclosing a foreign bank account, contact the tax controversy lawyers at Brager Tax Law Group, A P.C.

FBARs and More FBARs

May 11, 2010,

I just returned from an ABA meeting of tax lawyers in Washington, D.C. It seemed like all of the tax attorneys (or at least the tax litigation attorneys) could find nothing to talk about, but Foreign Bank Account Reports, i.e. TDF 90-22.1 (FBARs),voluntary disclosures, and offshore bank accounts. Over a period of two days I spend at least 8 hours in formal meetings with other tax lawyers talking about FBARs, and more hours over drinks and food talking about FBARs. The main theme was that the rules surrounding tax amnesty are being enforced more harshly than many tax attorneys had hoped would be the case. A few highlights of what I heard, the good, the bad, and the ugly:

• 225 revenue agents have been assigned to conduct civil tax audits in voluntary disclosure of offshore bank account cases
IDRs (Information Document Requests) can be expected in most offshore bank account cases within the next few weeks
• The goal of IRS management is to close a “substantial portion” of the tax audits by the end of 2010
• IRS has started to identify taxpayers who made quiet voluntary disclosures of their offshore bank accounts, and these cases will be worked as “full blown” civil tax audits—meaning these taxpayers are potentially subject to multiple 50% FBAR penalties
• It is too soon to tell how post Oct. 15th voluntary disclosures will be treated for civil tax purposes—speculation continues to center on 25 to 35 per cent
• IRS has rolled out a “third generation” IDR which the IRS believes is more streamlined
• Basis issues will be negotiable, i.e. if basis information is unavailable revenue agents will likely accept reasonable alternatives, e.g. value security as of 1/1/2003
• Even if a timely 2008 FBAR was filed, if the highest offshore bank account value was in 2008, the 20% penalty will be calculated based upon 2008 value
• Revenue Agents do not “currently” have the authority to waive de minimus violations – there is no such thing as being half pregnant.

If you have a foreign financial account call the tax litigation lawyers at Brager Tax Law Group, A P.C. to get more information on voluntary disclosures and FBARs.

UBS FBAR Indictment Illustrates Tax Problems Exacerbated by Lack of Attorney Client Privilege

May 3, 2010,

Disbarred New York attorney Kenneth Heller was among 7 UBS clients charged a few weeks ago with failing to file Foreign Bank Account Reports, TDF 90.22-1 (FBARs), and tax evasion as a result of failing to report his Swiss bank accounts to the IRS. The case would be just one more in a string of FBAR and tax fraud criminal tax cases, but something in the complaint caught my eye. Some of the records that the IRS Criminal Investigation Division used to prepare its tax fraud case against Heller were obtained from Heller’s tax preparer—both documents and through an interview of the tax preparer. The records included instructions to the tax preparer to go to Switzerland to review the offshore bank account records. There was also a letter from the tax preparer to Heller reminding him that he had to report the income from the Swiss bank accounts.

This illustrates a vital point that as a tax controversy lawyer I remind clients about all the time. In a criminal tax case many times the first witness is the client’s tax preparer. There is no accountant client privilege in a criminal tax fraud case! Had these communications been between Heller and his tax attorney it is likely that the attorney-client privilege would have shielded them from IRS . While the IRS might have been able to bring a tax evasion case without the tax preparer the statements by the tax preparer will no doubt be extremely damaging.

If you have a tax problem including unreported offshore financial accounts contact the tax controversy lawyers at Brager Tax Law Group, A P.C.