February 2011 Archives

FBAR Tax Amnesty--- The Next Generation

February 8, 2011,

On Tuesday the IRS announced a new tax amnesty for owners of foreign bank accounts who failed to file FBARs (Foreign Bank Account Reports). The new voluntary disclosure program is known as the Offshore Voluntary Disclosure Initiative (OVDI). The IRS has issued its FAQ for the Offshore Voluntary Disclosure Initiative consisting of 53 questions and answers. Our tax attorneys will be reporting on the details in the coming days and weeks, but for now here are the high points for those foreign bank account holders who have not yet come out of the cold.
• No criminal prosecution.
• Civil FBAR penalty of 25% of the highest account balance during the 8 year period from 2003 to 2010.
• A reduced penalty of 12.5% is available for those accounts which did not exceed $75,000 at any time from 2003 to 2010.
• A reduced penalty of 5% is available for certain inherited accounts
• Amended tax returns must be filed, and tax paid with interest for 2003 to 2010
• An "accuracy related penalty" of 20% pursuant to IRC Section 6662 for unpaid tax for the years 2003 to 2010.
• Late filing and/or late payment penalties under IRC Section 6651(a)(1) and 6651(a)(2) in certain cases.
• All documents must be filed with the IRS by Aug. 31, 2010.

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Offshore Tax Fraud Scheme Fabricated Stock Losses to Offset Gains

February 2, 2011,

Two former executives of an investment firm were sentenced to more than 4 months in prison after authorities convicted them of a tax fraud scam that fabricated stock losses in order to help wealthy clients avoid taxes.

The U.S. Attorney's Office for the Western District of Washington reports the firm utilized offshore bank accounts to carry out the scheme.
As our tax attorneys frequently report on our Tax Problem Attorney Blog, the government's crackdown on offshore bank accounts continues to result in federal tax evasion charges throughout the United States.

In this case the executives were charged with conspiracy to defraud the United States and aiding and assisting with the filing of a false tax return.

Both men also paid the Internal Revenue Service $7 million in penalties.

The case involved a tax shelter the men dubbed POINT (Portfolio Optimized Investment Transaction), which resulted in an estimated tax loss to the government of $250 million.

"Today the individuals responsible for developing and selling a fraudulent tax shelter scheme have been held accountable for their actions. Their tax strategies were no more than a web of lies and false representations," said Victor S.O. Song, Chief, IRS Criminal Investigation. "As the tax filing season gets underway, honest taxpayers can be assured that the IRS, in partnership with the Department of Justice, will investigate and prosecute those who promote such bogus schemes. Also, it is worth noting that none of the investors benefited from this fraudulent scheme because the IRS collected the correct tax from those who invested in it."

The government continues to become more aggressive in investigating and prosecuting alleged tax violators -- particularly when the case involves offshore bank accounts. Seeking the advice of a qualified tax lawyer is always the best course of action to protect your rights, your freedom and the future financial well-being of you and your family.

Prosecutors had requested six years in prison, saying the defendants made "a mockery of the entire tax system," by fabricating stock losses to offset gains for very wealthy individuals. The government contends the scheme was carried out from 1999 to 2006.

Puget Sound Business Journal report is available here.

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Prominent Civil Rights Lawyer Disbarred after being Convicted of Tax Evasion, Bankruptcy Fraud & Money Laundering

February 1, 2011,

A controversial Southern California civil rights attorney has been disbarred after being convicted on federal charges of tax evasion, bankruptcy fraud and money laundering, according to the California Bar Journal.

Stephen G. Yagman, 66, had been suspended from the practice of law since August 2007, when he was convicted of one count each of tax evasion and bankruptcy fraud and 17 counts of money laundering.

He was convicted of attempting to avoid paying more than $100,000 in federal taxes and sentenced to three years in federal prison. He also faces two years of supervised release after completing his prison sentence. Prosecutors had requested nine years behind bars. A tax attorney should be consulted as early as possible in such cases.

The government alleged that Yagman hid money and transferred his Venice Beach home into his girlfriend's name before declaring bankruptcy. He is also accused of incurring federal tax liabilities totaling more than $158,000 from 1994 to 1997, when he paid far less than what was owed, according to his own tax returns.

Prosecutors say he also failed to pay federal payroll taxes owed by his law firm, Yagman & Yagman, P.C. They say he hid more than $776,000 in various accounts and made numerous misrepresentations when he filed for both personal and corporate bankruptcy in 1999.

Yagman claimed he was targeted because of the numerous civil rights battles he had with the federal government. In 2002, he was part of a group that filed challenges to the detention of suspects at Guantanamo Bay. In the 1990s he pursued charges in connection with the case of Randy Weaver and the Ruby Ridge shooting. He often targeted the LAPD with allegations of police brutality and civil rights violations.

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