Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Section 79
Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble.
In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as "listed transactions."
These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a "listed transaction" must report such transaction to the IRS on Form 8886 every year that they "participate" in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate
Contact Lance Wallach and get out of this tax problem before it's too late
516-236-8440
Wallachinc@gmail.com
Syndicated Conservation Easements Named on IRS 2019 “Dirty Dozen” Tax Scams
The Internal Revenue Service announced a significant increase in enforcement actions for syndicated conservation easement transactions, a priority compliance area for the agency.
Syndicated conservation easements are private placements that promise tax deductions worth four to four-and-a-half times a person’s investment. Some syndicated conservation easement deals are offering investors charitable contribution deductions on taxes for large amounts.
According to the IRS, coordinated examinations are being conducted across the IRS in the Small Business and Self-Employed Division, Large Business and International Division and Tax Exempt and Government Entities Division. Separately, investigations have been initiated by the IRS' Criminal Investigation division. These audits and investigations cover billions of dollars of potentially inflated deductions as well as hundreds of partnerships and thousands of investors.
According to an IRS Notice: The Treasury Department and the IRS have become aware that some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to claim charitable contribution deductions in amounts that significantly exceed the amount invested. In such a syndicated conservation easement transaction, a promoter offers prospective investors in a partnership or other pass-through entity (“pass-through entity”) the possibility of a charitable contribution deduction for donation of a conservation easement.
FBAR IRS Audits
If you have checking, demand deposit, or investment accounts based with an offshore financial institution, there's a good chance that you will need to file what's known as a Foreign Bank Account Report. Popularly referred to as an FBAR, this report is typically filed once a year. There are exceptions based on the amount of funds you have in those offshore accounts.
How do you know when it's necessary to file an FBAR? If you do need to file the report, how do you go about doing so? Here are some essentials that will help you understand the nature of the filing, what it means for your financial well-being, the potential penalties for failing to file, and how you go about filing the right report by the right due date.
Understanding The Basics
Updated in 2013 to what is known as Form 114, the Foreign Bank Account Report is a document that is filed with the US Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau that is part of the US Treasury Department. Don't allow the name of the bureau to intimidate you. Your filing is not in any way an inference that you might be involved in some sort of illegal activity. The goal is simply to ensure that there are no questionable issues occurring with your domestic or international holdings.
Remember that you do not file your FBAR with the IRS. It's not directly connected to your taxes. There are other forms that you would file along with your income tax returns that are related to your foreign holdings. Specifically, you may need to file the FATCA-related Form 8938 with your returns. Form 8938 would be sent to the IRS and not to the Financial Crimes Enforcement Network. Your accountant can help you track when you need to file each of these forms and which agency, or bureau needs to receive them.
Who Has To File An FBAR?
Citizens or resident aliens of the United States who have any type of financial interest in or who have signature authority over one or more offshore accounts may need to file an FBAR. There are specific requirements that determine if there's the need to file this report in any given calendar year.
One important requirement is that the report must be filed if the cumulative balance in all of the filer's offshore accounts exceeds a certain amount at any time during the year under consideration. Since that amount may be subject to change, it's important to seek help from a CPA who can verify what the current minimum amount happens to be.
Is There A Threshold For Filing An FBAR?
As of 2019, there is a threshold or minimum balance that would require you to file an FBAR. At present, the cumulative balances of your offshore accounts would have to meet or exceed the amount of USD 10,000 in order to require the filing. That balance could be realized at any time during the year under consideration and would include balances in investment accounts, demand deposits, any form of savings account, or a checking account.
The key here is that you have to be aware of your account balances throughout the calendar year. Even if those combined balances are less than USD 10,000 USD at the end of the year, you may still need to file the report. For example, the total in those accounts reached a peak amount of USD 12,000 during the third quarter. Even though they dropped back down by the end of the fourth quarter, you will still need to file an FBAR.
Will I Pay Taxes Based On The FBAR?
The purpose of the FBAR is to account for funds that US citizens or resident aliens have placed in offshore accounts. However, they have nothing to do with the amount of taxes that you owe. Your tax burden is based on the amount of income that's generated from domestic sources and other sources that current tax laws do consider subject to taxation. As of the end of 2019, the holdings in your offshore banking and investment accounts are not factored into your tax burden.
Don't forget that the FBAR is not a form that you include with your tax returns. It goes to a separate bureau within the Treasury Department. The goal of having citizens and resident aliens file the report is to minimize the amount of fraud that sometimes takes place when unscrupulous individuals and businesses seek to hide funds from the government. Since you have no intention of doing so, there is no need to worry about your FBAR filing having any impact on your taxes.
What Happens If I Fail To File The FBAR?
Keeping track of the balances in your offshore accounts is important for more than one reason. When it comes to reporting your wealth to a domestic agency, you want to avoid any penalties that could result from failing to file your FBAR. That includes the rather stiff financial penalties that could come about if you overlook filing one year.
There are two possible penalties that may apply. Each depends on the reason for failing to file. For example, you may be charged a penalty because the failure to file is considered non-willful. This simply means that you made an honest mistake and did not realize that your offshore assets exceeded the USD 10,000 threshold. In this scenario, you would be assessed a penalty of USD 10,000 per violation.
The second penalty has to do with a charge of willful failure to file. In this instance, there is evidence that you intentionally chose to not file in an attempt to hide funds. The financial penalty would be either USD 100,000 or half of the balances in your offshore accounts, whichever is higher. There is also the possibility of further penalties, up to and including jail time.
Being assessed a civil penalty does not automatically preclude the possibility of being charged with a criminal offense. A lot depends on the circumstances surrounding the failure to file. The IRS could issue a warning in lieu of taking additional actions. At the same time, criminal actions are likely to result in more fines and up to five years in prison.
What's The Actual Filing Process Like?
At present, you can obtain Form 114 online through what is known as the BSA E-Filing System website. The form itself comes with a series of instructions similar to the way the Treasury Department provides instructions for filling out tax forms. The instructions are set up so that you can go over the form line by line and determine what information needs to be included in each field.
The current structure requires that the report be submitted electronically by June 15. In years past, the final date was June 30. Unlike filing tax forms, there are no extensions and no grace periods. You can complete the report and then follow the instructions provided to submit the finished report. The system is set up to provide an acknowledgement that the document was received.
If you are an individual or filing the report with a spouse, you do not need to set up an e-filing account. Accountants, legal counsel, or an agent who files the reports on behalf of clients will need to establish an account.
Keeping Your Financial Reporting In Order
The bottom line is that you should file an FBAR every year if you meet the threshold. In order to confirm that you do need to file, it's important to stay on top of the current balances in your offshore accounts.
IRS: Disclose Offshore Accounts or Go to Jail
Brian
M
That's pretty much the headline from a CNBC article on Friday. And it's true.
In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn't illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.
U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.
So what is a person to do? Taxpayers can do nothing and hope they don't lose the "audit lottery" (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That's right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.
Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms ("FBAR's"), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.
Those that don't comply face prison and loss of 50% of their highest account value.
So what is the risk of getting caught? We think it is quite high.
Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.
The U.S. has been issuing "John Doe" subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.
Still not convinced? The IRS paid its first award under the new whistle blower program - $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.
The world suddenly got much smaller.
In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn't illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.
U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.
So what is a person to do? Taxpayers can do nothing and hope they don't lose the "audit lottery" (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That's right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.
Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms ("FBAR's"), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.
Those that don't comply face prison and loss of 50% of their highest account value.
So what is the risk of getting caught? We think it is quite high.
Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.
The U.S. has been issuing "John Doe" subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.
Still not convinced? The IRS paid its first award under the new whistle blower program - $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.
The world suddenly got much smaller.
Lance
Wallach comment: I do not believe all of the above, but if you have money
overseas you should file for amnesty and then probably opt-out. That is a
special way to get to IRS appeals where you can make a deal. You probably
should get help from an ex IRS agent who is a CPA and has done lots of these.
Lance Wallach, CLU, ChFC, CIMC, speaks and writes
extensively about financial planning, retirement plans, and tax reduction
strategies. He is an American Institute
of CPA’s course developer and instructor and has authored numerous best selling
books about abusive tax shelters, IRS crackdowns and attacks and other tax
matters. He speaks at more than 20 national conventions annually and writes for
more than 50 national publications. For
more information and additional articles on these subjects, visit www.vebaplan.com, www.taxlibrary.us,
lawyer4audits.com or call 516-938-5007
The information provided herein is not intended as legal,
accounting, financial or any type of advice for any specific individual or
other entity. You should contact an appropriate professional for any such advice.
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