EDGE Magazine | Q3 2011
include the properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties."
It should be noted that when IRS Deputy Commissioner for Services and Enforcement Steven Miller was speaking at the 2011 OECD International Tax Conference on June 7, 2011, he stated "in no event will you have less than 90 days if you ask for it." This comment contrasts with the specific terms of FAQ #25.1, which require taxpayers to demonstrate a good faith attempt to have satisfied the August 31 deadline. Consequently, taxpayers who seek to make a voluntary disclosure in July or August and obtain the extension may find that their request is denied in spite of Miller's comments.
In my prior article I indicated that one of the problems with the 2011 VDP was that it punished dual citizens. The IRS appears to have agreed. For taxpayers who can satisfy the terms of FAQ #52.3, the offshore penalty is reduced to 5% and the penalty is only based upon the value of the unreported foreign accounts, as foreign assets are excluded from the penalty. The reduction is available to "taxpayers who are foreign residents and who meet all three of the following conditions for all of the years of their voluntary disclosure: (a) taxpayer resides in a foreign country; (b) taxpayer has made a good faith showing that he or she has timely complied with all tax reporting and payment requirements in the country of residency; and (c) taxpayer has $10,000 or less of U.S. source income each year. … This exception only applies if the income tax returns filed with the foreign tax authority included the offshore-related taxable income that was not reported on the U.S. tax return." The IRS interprets the $10,000 limitation as including gross income, as opposed to net income. It is unclear as to whether the IRS will permit an otherwise eligible taxpayer to qualify for the reduced penalty if the taxpayer either lives in a tax free jurisdiction or lives in a jurisdiction in which certain income is not taxed, such as interest income.
Enforcement
If the IRS receives information on a U.S. taxpayer's noncompliance from any source (i.e., a whistleblower, John Doe summons, treaty request, investigation, etc) before the taxpayer makes a voluntary disclosure, the taxpayer will no longer be eligible for a voluntary disclosure. Since the IRS and DOJ are committed to
ending tax evasion involving foreign assets and entities, time is of the essence.
Indictments
Prior to and subsequent to the introduction of the 2011 VDP, numerous individuals have been indicted or pled guilty for failure to comply with the US laws regarding the reporting of foreign accounts, and/or reporting worldwide income as well as for helping taxpayers avoid their reporting obligations. Some of the most noteworthy cases are cited here, this is by no means a complete list. Focusing initially on financial advisors four Credit Suisse bankers, were indicted on February 23, 2011 for their roles in advising taxpayers on how to evade U.S. income tax. 2
Then on July 21, 2011, three more Credit Suisse
bankers were indicted as well as the founder of a Swiss trust company which provided sham entities for US taxpayers to hide their Credit Suisse accounts. 3
bankers charged are Markus Walder, the former head of Credit Suisse's North America Offshore Banking, Susanne D. Ruegg Meier, a former manager at the bank, Andreas Bachmann, a former banker at a Credit Suisse subsidiary, and Josef Dorig, the founder of the Swiss trust company,Dorig AG. 4
In addition to indicted Credit Suisse bankers, the US has
focused on US taxpayers with accounts at HSBC India. Subsequent to the 2011 VDP and the initial Credit Suisse indictment, a U.S. taxpayer of Indian descent with an HSBC India account was indicted.5
He is by no means
the only taxpayer to have been indicted, and undoubtedly will not be the last. For example, on May 19 2011, a taxpayer pled guilty to having an undeclared account with
2 The Credit Suisse bankers indicted were Marco Parenti
Adami, Emanuel Agustoni, Michele Bergantino, and Roger Schaerer. See
http://www.justice.gov/tax/txdv11225.htm. The indictment refers to banks in Hong Kong and Switzerland to which the Credit Suisse advisors encouraged taxpayers to transfer their assets. These banks have since been named as Bank Leumi, Bank Frey, and Maerki Baumann. See
http://www.nytimes.com/2011/02/24/business/global/24tax.html
3
http://online.wsj.com/article/SB10001424053111903461104576 460451363657660.html
4 Id. The
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