FATCA Lawyers

Happy New Year 2018 From Sherayzen Law Office

Our team at Sherayzen Law Office wishes a very Happy New Year 2018 to our clients; colleagues at other law firms; judges of state and federal courts; our website blog readers; and our followers on Facebook, Twitter, YouTube and other social media.

Year 2017 was another highly successful year at Sherayzen Law Office. Our tremendous expertise and experience in US international tax law draws an ever-increasing number of clients from all over the world. We have expanded our client base at existing countries and added clients from new countries, bringing the total number of countries with our client assets to close to seventy. Additionally, we were asked to defend a case in federal court concerning FBAR penalties, successfully advised on expatriation cases and finalized a number of existing and new tax planning cases.

Our biggest success area, however, remains Offshore Voluntary Disclosures with the new highs for Form 3520, 5471 and 926 voluntary disclosures as well as FBAR/FATCA voluntary disclosures. FATCA-based cases were especially prolific with a significant variation in fact patterns and countries.

Furthermore, we have made an unprecedented effort to educate our clients as well as the general public about US international tax law. A combined record number of video posts and website blog posts were made available online. Additionally, Mr. Eugene Sherayzen, the owner and the principal attorney of Sherayzen Law Office, spoke at a large number of seminars in 2017, including outside of the United States.

In many ways, year 2017 was also a preparatory year for the new year 2018. We are closely following the rapid changes in US international tax law. The main changes are coming, of course, from the Tax Cuts and Jobs Act of 2017. The changes are enormous and will affect virtually every US taxpayer – both, individuals and businesses. We already started a series of articles on this topic. Please, continue to follow our blog in the new year 2018 to learn more about how the Act’s provisions may affect your tax situation.

It is also important to emphasize that, while the Tax Cuts and Jobs Act of 2017 will introduce the main changes in the new year 2018, some of its provisions are very relevant for the tax year 2017. In particular, the new income recognition rules for US Shareholders of foreign corporations (PFIC corporations are exempted from this provision) may impose a significant and unexpected tax burden on US taxpayers. Please, continue to follow our blog in the new year 2018 to learn more about these changes.

Equally important are the new IRS regulations that will be coming in the new year 2018. The IRS has announced that it intends to issue regulations that will target certain obscure areas of tax law which remain unregulated by the IRS or where the regulations are contradictory. In this context, it is particularly important to mention the interaction of PFIC rules with the Throwback Rule concerning distributions of a foreign trust’s UNI.

Finally, the IRS has also stated that it would announce sometime in the new year 2018 dramatic changes to Offshore Voluntary Disclosure options that exist right now. We have written a number articles on this topic and we have warned our readers that the current favorable environment may change dramatically with a potentially complete closure of the IRS OVDP program.

Sherayzen Law Office is a highly experienced law firm with a unique expertise in US international tax law. We have helped hundreds of US taxpayers around the world to bring and maintain their US tax affairs in full compliance with US tax laws while ethically and effectively reducing their penalties and tax burden. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

South Korean Citizen FBAR Guilty Plea| FATCA Lawyer

On October 27, 2017, the IRS and the DOJ announced that Mr. Hyung Kwon Kim, a South Korean citizen and a Legal Permanent Resident of the United States, pleaded guilty to failure to file correct FBARs.

Alleged Facts of the Case Which Led the South Korean Citizen to the FBAR Guilty Plea

Mr. Kim is a South Korean citizen who became a US permanent resident in 1998. At that time, he traveled to Switzerland to identify financial institutions at which he could open accounts for the purpose of receiving transfers of funds from another person in Hong Kong. Over the next few years, Mr. Kim opened accounts at several banks, including Credit Suisse, UBS, Bank Leu, Clariden Leu, and Bank Hofmann. By 2004, the aggregate value of Mr. Kim’s accounts exceeded $28,000,000.

Mr. Kim engaged in activities to conceal the funds from the IRS. In order to accomplish this, he also enlisted the help of several bankers, including Dr. Edgar H. Paltzer (who was convicted in 2013 for conspiring to defraud the United States). Dr. Paltzer and other bankers assisted Mr. Kim in opening of sham entities organized in Liechtenstein, Panama and the British Virgin Islands as well as bank accounts in the name of these entities.

Mr. Kim also utilized other means to conceal funds from the US, including directing his bankers to issue checks in the millions of dollars payable to third parties in the United States. This is exactly how the South Korean citizen purchased his personal residence in Greenwich, Connecticut.

In 2005, Mr. Kim created a nominee entity to hold title for the purchase of another home on Stage Harbor in Chatham, Massachusetts, for nearly $5 million. Here, Dr. Paltzer and Mr. Kim engaged in a purchase in such a manner as to create the appearance that Mr. Kim was renting a property from a fictitious owner.

Furthermore, between 2000 and 2008, Mr. Kim took multiple trips to Zurich and withdrew more than $600,000 in cash during these visits. He also brought his offshore assets back to the United States by purchasing millions of dollars’ worth of jewelry and loose gems. In 2008, for example, Mr. Kim purchased an 8.6 carat ruby ring from a jeweler in Greenwich, Connecticut, which he financed by causing Bank Leu to issue three checks totaling $2.2 million to the jeweler.

After the UBS case in 2008, Mr. Kim’s banker at Clariden Leu informed Mr. Kim that due to ongoing investigations in the United States he had to either disclose the accounts to the US government, spend the funds or move the funds to another institution. Mr. Kim chose to move the funds into nominee accounts at another bank.

In 2011, the South Korean citizen engaged in the ultimate strategy of concealment by liquidating the accounts by, among other things, withdrawing tens of thousands of dollars in cash and purchasing three loose diamonds for about $1.7 million from a Greenwich jeweler. Finally, as part of his guilty plea, Mr. Kim also admitted that he filed false income tax returns for 1999 through 2010, on which he failed to report income from the assets held in the foreign financial accounts that he owned and controlled in Switzerland.

FBAR Criminal Penalties and Other Penalties that the South Korean Citizen Faces

As part of his plea agreement, Mr. Kim will pay a civil penalty of over $14,000,000 dollars to the United States Treasury for failing to file, and filing false FBARs. Separately, Mr. Kim faces the sentencing scheduled for January 26, 2018 before the US District Court Judge T.S. Ellis III. The South Korean Citizen faces a statutory maximum sentence of five years in prison. He also faces a period of supervised release, restitution, and monetary penalties, in addition to the FBAR penalty.

Czech Bank Accounts: Lawyer Finds Compliance Problems With FBAR and FATCA

For years, the Czech Republic has held a position within the top fifteen countries among our firm’s voluntary disclosure clients. At the end of May and early June of 2017, our firm’s owner, international tax attorney Eugene Sherayzen, made a trip to the Czech Republic to find out why there are so many clients with unreported Czech Bank accounts.

Ceska Narodni Banka

Ceska Narodni Banka

General Lack of Awareness of FBAR and FATCA With Respect to Czech Bank Accounts

While Mr. Sherayzen found Prague an astonishingly beautiful city, his investigation of FBAR and FATCA awareness confirmed what he already supposed for years – there are important gaps in awareness of these US tax compliance requirements. The results of his investigation also showed that while there were some signs of improvement in FATCA awareness, FBAR was still generally an unknown form.

While Mr. Sherayzen’s investigation was not done using any scientific method and his targeted sample cannot be considered as a properly representative survey, its results are nonetheless alarming.

They are particularly important for Czech citizens who are also US citizens or US permanent residents residing in the United States, especially if they opened their Czech bank accounts with Czech passports prior to moving to the United States. Mr. Sherayzen’s investigation identified this group of individuals as particularly vulnerable to failing to comply with US tax requirements, including FBAR.

Czech Bankers Often Do Not Inform Their Clients of FBAR and FATCA Obligations With Respect to Czech Bank Accounts

Additionally, Mr. Sherayzen found a general lack of awareness of the obligation of foreign bankers to inform their clients about FATCA and, especially, FBARs. Of the five banks chosen, Mr. Sherayzen was unsatisfied with level of FATCA preparedness of the Czech bankers. These results further supported Mr. Sherayzen’s original supposition that the Czech bankers’ lack of proper education about US tax requirements exacerbated and, in many instances, were directly responsible for his clients’ unawareness of their FBAR and FATCA obligations.

These results are too recent at this point and need further analysis and confirmation in the future. Yet, it is clear that all US persons with Czech bank accounts need to urgently re-evaluate their current US tax compliance, especially if it is based on advice from Czech bankers.

Contact Sherayzen Law Office for Help With US Tax Compliance Concerning Czech Bank Accounts

If you have undisclosed Czech bank accounts or any other foreign assets, contact Sherayzen Law Office as soon as possible. Failure to do it before the IRS initiates an investigation may result in imposition of draconian FBAR penalties.

We have helped hundreds of US taxpayers around the world to bring their tax affairs into fully compliance with US laws. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

Specified Domestic Entity Definition | FATCA Form 8938 Tax Lawyers Update

The recent introduction of the new concept of Specified Domestic Entity by the IRS represents a major expansion of the application of FATCA to US businesses and US trusts. For tax years beginning after December 31, 2015, a domestic corporation, partnership or trust classified as a Specified Domestic Entity must file FATCA Form 8938 with respect to its Specified Foreign Financial Assets (SFFA) as long as the total value of those assets meets the filing threshold. With this article, I begin a series of articles with respect to the definition of the Specified Domestic Entity and the affect of this new FATCA concept on US businesses and trusts. Today, I will introduce the general definition of a Specified Domestic Entity.

Specified Domestic Entity Definition: FATCA Background

Before we approach the Specified Domestic Entity Definition, we first need to make sure that we understand what FATCA is. The Foreign Account Tax Compliance Act or FATCA was signed into law in 2010 and codified in Sections 1471 through 1474 of the Internal Revenue Code. The law was enacted in order to reduce offshore tax evasion by US persons with undisclosed foreign accounts.

There are three main parts of FATCA (one can identify even more, but this type of analysis is most useful for the purposes of introducing the Specified Domestic Entity Definition). The first part is the obligation of foreign financial institutions (FFIs) to report to the IRS all foreign financial accounts held, directly or indirectly, by US persons. The second part of FATCA is a 30% withholding tax imposed on the gross amount of each transaction if the transaction involves a non-compliant FFI (these are the “teeth” of FATCA that force FFIs around the world to accept the first part of FATCA).

Finally, the third part of FATCA is the part most relevant to the Specified Domestic Entity Definition – the imposition of a new reporting requirement on US taxpayers with respect to Specified Foreign Financial Assets. This new requirement is called Form 8938.

Specified Domestic Entity Definition: Form 8938 Applied to Specified Individuals Only Prior to 2016

Prior to January 1, 2016, only certain categories of individuals were required to file Form 8938. These individuals were grouped under the term of a “specified individual”. In general, the term “specified individual” included US citizens, all resident aliens and certain categories of nonresident aliens. No business entities or trusts were required to file Form 8938 prior to 2016.

Specified Domestic Entity Definition: New Filing Category Starting 2016

This situation changed dramatically on January 1, 2016 with the introduction of a new category of Form 8938 filers. Starting tax years that began after December 31, 2015, business entities and trusts that are classified as Specified Domestic Entities must file Form 8938 as long as they meet the Form 8938 filing threshold.

Specified Domestic Entity Definition: General Definition

Now that we understand the context in which the Specified Domestic Entity Definition appeared, let’s state this definition.

Treas. Reg. §1.6038D-6(a) defines a Specified Domestic Entity as “a domestic corporation, a domestic partnership, or a trust described in 26 U.S.C. §7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets.” As it is often the case with US international tax law, this general definition is pregnant with terms of art that require specific understanding and further analysis. In particular, we will need to explore the terms “domestic”, “formed or availed of for purposes of holding”, “holding directly or indirectly”, and “specified foreign financial assets.”

In the future articles concerning the analysis of the Specified Domestic Entity Definition, I will explore all of these terms. Without a doubt, the focus of our analysis will be on “formed or availed of for purposes of holding” clause, because this is the heart of the Specified Domestic Entity Definition.

Contact Sherayzen Law Office for Professional Help With the Specified Domestic Entity Definition, FATCA Form 8938 Filing and Other International Tax Compliance Issues

If you need to determine whether your business entity or your trust falls under the definition of a Specified Domestic Entity, contact Sherayzen Law Office for help. Our professional team, headed by international tax attorney Eugene Sherayzen, Esq., will thoroughly analyze your case, determine whether you need to file Form 8938 and/or any other US international information returns, and prepare these forms for you. We can also help you with the voluntary disclosure of any of your offshore assets if you did not timely comply with your US tax obligation with respect to these assets.

Contact Us Today to Schedule Your Confidential Consultation!

Former Credit Suisse Banker Pleads Guilty | FATCA Lawyer Duluth

On July 19, 2017, Ms. Susanne D. Rüegg Meier, a citizen of Switzerland, pleaded guilty to conspiring to defraud the United States in connection with her work as the head of a team of bankers for Credit Suisse AG. The announcement of this plea by a former Credit Suisse Banker came from the U.S. Department of Justice’s Tax Division.

Facts that Led to Guilty Plea by the Former Credit Suisse Banker

According to the statement of facts and the plea agreement, Ms. Rüegg Meier admitted that, between 2002 and 2011, she worked as the team head of the Zurich Team of Credit Suisse’s North American desk in Switzerland. Ms. Rüegg Meier was responsible for supervising the servicing of accounts involving over 1,000 to 1,500 client relationships, out of which she personally handled about 140 to 150 clients (the great majority of these clients were U.S. persons). These “personally handled” clients had assets of about $400 million.

Ms. Rüegg Meier assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of their undeclared financial accounts from the U.S. Department of the Treasury and the IRS. In particular, she engaged in the following activities to help her clients conceal their accounts: retaining in Switzerland all mail related to the account; structuring withdrawals in the forms of multiple checks each payable in amounts less than $10,000 that were sent by courier to clients in the United States and arranging for U.S. customers to withdraw cash from their Credit Suisse accounts at Credit Suisse locations outside Switzerland, such as the Bahamas. Moreover, Ms. Rüegg Meier admitted that approximately 20 to 30 of her U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities or other structures that were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

Additionally, between 2002 and 2008, the former Credit Suisse banker traveled approximately twice per year to the United States to meet with her clients. Among other places, Ms. Rüegg Meier met clients in the Credit Suisse New York representative office. To prepare for the trips, the former Credit Suisse banker would obtain “travel” account statements that contained no Credit Suisse logos or customer information, as well as business cards that bore no Credit Suisse logos and had an alternative street address for her office, in order to assist her in concealing the nature and purpose of her business.

After the UBS case, Credit Suisse began closing U.S. customers’ accounts in 2008. During that time, Ms. Rüegg Meier assisted the clients in keeping their assets concealed. In one instance, when one U.S. customer was informed that the bank planned to close his account, the former Credit Suisse banker assisted the customer in closing the account by withdrawing approximately $1 million in cash. Furthermore, she advised the client to find another bank simply by walking along the street in Zurich and locating a bank that would be willing to open an account for the client. The customer placed the cash into a paper bag and exited the bank.

Admitted Tax Loss from the Activities of the Former Credit Suisse Banker and Potential Sentence

The former Credit Suisse Banker admitted that the tax loss associated with her criminal conduct was between $3.5 and $9.5 million. The sentencing of Ms. Rüegg Meier is scheduled for September 8, 2017. She faces a statutory maximum sentence of five years in prison, a period of supervised release, restitution and monetary penalties.