IRS Lawyers

Shakira Tax Evasion is Reportedly Investigated by Spain | Tax Law News

On January 23, 2018, the Spanish Newspaper based in Madrid “El País” broke the news that the Colombian Singer Shakira (full name Shakira Isabel Mebarak) is being reportedly investigated by the Spanish tax authorities for tax evasion. Let’s explore the alleged Shakira tax evasion investigation in more detail.

Alleged Shakira Tax Evasion Investigation is Centered Around Spanish Tax Residency

At the core of the alleged investigation of potential Shakira tax evasion lies the concept of tax residency. Under the tax laws of Spain, a person who resides in Spain for at least 183 days during a calendar tax year may generally be considered a Spanish tax resident. As such, he would be required to disclose his worldwide income on a Spanish tax return.

It should be noted (as Sherayzen Law Office has pointed out in the past) that Spain is a very strict tax jurisdiction in many aspects, especially when it comes to tax evasion. In fact, it is the only country in the European Union which has a form similar to the IRS Form 8938 – Spanish Modelo 720.

Alleged Shakira Tax Evasion Investigation: 2011-2014 Tax Residency of Shakira in Question

El País reported that the Spanish tax authorities focused their investigation of Shakira on tax years 2011 through 2014. The singer has claimed that she was resident of the Bahamas at that time. Shakira’s lawyer stated that Shakira lived in several places over the years due to her lifestyle as an international singer and has been in full compliance with tax laws of all relevant jurisdictions.

The tax authorities reportedly reached a different conclusion – that Shakira was a Spanish tax resident during the years 2011, 2012, 2013 and 2014. It is not clear whether the alleged conclusion was arrived at using direct evidence or indirect evidence. El País, for example, stated that the Spanish Tax Agency investigators went to her hairdresser in Spain to establish that Shakira lived in Spain.

It should be pointed out that Shakira officially declared herself as a Spanish tax resident in 2015 due to her marriage with the Spanish soccer player Gerard Pique.

Paradise Papers Could Have Prompted the Investigation of Potential Shakira Tax Evasion

The alleged Shakira Tax Evasion investigation also has an interesting twist. It appears that it could have been prompted by the famous Paradise Papers in November of 2017.

The Paradise Papers is a collection of 13.4 million of files that were stolen from the client files of Appleby law firm, a Singapore-based trust company, as well as company registries of nineteen different jurisdictions.

According to the Paradise Papers, Shakira transferred some or all of her intellectual property and trademarks to Tournesol, Ltd., (“Tournesol”) a company registered in Malta in 2009. Shakira is the sole shareholder of this company. Tournesol increased its capital by 31 million euros through an interest-free loan agreement with ACER Entertainment, a related company owned by Shakira and registered in Luxembourg.

Alleged Shakira Tax Evasion Investigation: Potential Penalties

Shakira’s estimated net worth is $200 million. This means that her tax fraud case will involve large numbers, possibly in the millions of dollars.

It appears that if Shakira is found guilty of tax fraud that is in excess of 600,000 euros, she could be facing from two to six years in prison for each count of tax fraud. Moreover, she could be facing a fine of six times the amount of underpaid tax. It should be pointed out that the charges will most likely focus on the years 2012-2014, because 2011 appears to be barred by the Spanish statute of limitations.

Shakira’s celebrity status will not have any impact on the Spanish tax authorities. In fact, she now joined a list of many celebrities who have been investigated by the Spanish Tax Agency, including Lionel Messi and Cristiano Ronaldo.

2018 Government Shutdown is the IRS Nightmare | IRS Lawyer & Attorney

A government shutdown is always bad for the normal functioning of federal agencies, but the 2018 government shutdown spells disaster for the IRS, especially if it lasts for a significant amount of time.

2018 Government Shutdown Comes at the Worst Time for the IRS

What makes the current 2018 government shutdown so bad is the timing. The shutdown comes just nine days before the tax season begins. For the IRS, the tax season is always the busiest time of the year.

Moreover, this year, the shutdown also comes right after a huge tax reform passed. Many of the provisions of the Tax Cuts and Jobs Act of 2017 still need to be implemented, the IRS software needs to be adjusted and the employees at the Call Centers need to be prepared to answer the questions of millions of Americans about the new tax laws.

2018 Government Shutdown Comes After Years of Budget Cuts

The 2018 government shutdown also comes after many years of the IRS budget cuts. Since 2010, the IRS lost more than $900 million in funding, eliminated 18,000 full-time positions and had to implement hiring freezes. Moreover, many IRS veterans are now retiring without being able to train proper replacement. This means that the IRS is gradually losing its best, highly-knowledgeable and experienced cadres – professionals who know how to enforce tax laws in an equitable manner. This unfortunate circumstance will inevitably have a profound impact on IRS ability to properly implement US tax laws in the future.

It is not only the professionals that the IRS is losing. The long years of budget cuts dramatically reduced the IRS ability to staff its call centers. Even before the shutdown, the IRS projected that, with its current budget, it will only be able to answer at best four calls out of every ten – i.e. the IRS said that it could answer only 40% of the calls, leaving 60% of Americans without any assistance.

Furthermore, the budget cuts came at a time when there was an unprecedented explosion of new tax laws, domestic and international, which have created an enormous demand for more IRS employees. The Tax Cuts and Jobs Act of 2017 is just the latest example of these new laws.

So far, the IRS has been able to more or less survive by cutting everything it could in the non-essential areas and relying on new technology to save costs. However, it does not appear that this is a sustainable situation in the future.

2018 Government Shutdown: Immediate Impact

The most immediate impact of the 2018 government shutdown will be the fact that only 43.5% of IRS employees will be coming to work on next week. 56.5% of the IRS workforce will be forced to stay at home.

While the IRS will continue to do “excepted activities” such as processing 2017 tax returns (this is a matter of life and death for the federal government), a number of its functions will be suspended.

Here is the list of the most common examples of the suspended activities: issuing refunds, processing of amended tax returns (Forms 1040X), conducting any audits or examinations, processing of non-electronic tax returns that do not include remittances, non-automated collections, legal counsel, planning, research, training, all development activities, most information systems functions, headquarters and administrative functions not related to the safety of life and protection of property, service center processing after the point of batching (i.e. Code & Edit, data transcription, error resolution, un-postables) and other activities. With respect to offshore voluntary disclosures, they are not likely to be processed while the government shutdown continues.

At this point, we can only wish that the government shutdown be over as soon as possible to minimize the negative impact it may have on the IRS, our nation and our fellow citizens.

Sherayzen Law Office will continue to monitor the situation.

Treasury List of Boycott Countries Published | Tax Lawyer & Attorney

On January 8, 2018, the US Treasury Department published a list of boycott countries. Let’s analyze what is meant here by Boycott Countries.

Boycott Countries: The Meaning of Boycott Under IRC Section 999(b)(3)

IRC Section 999(a)(3) requires the Department of the Treasury to publish (at least on a quarterly basis) a current list of countries which require or may require participation in or cooperation with an international boycott. IRC Section 999(b)(3) defines “boycott participation and cooperation”.

Basically, the cooperation with an international boycott requires a person to agree:

“(i) to refrain from doing business with or in a country which is the object of the boycott or with the government, companies, or nationals of that country;
(ii) to refrain from doing business with any United States person engaged in trade in a country which is the object of the boycott or with the government, companies, or nationals of that country;
(iii) to refrain from doing business with any company whose ownership or management is made up, all or in part, of individuals of a particular nationality, race, or religion, or to remove (or refrain from selecting) corporate directors who are individuals of a particular nationality, race, or religion; or
(iv) to refrain from employing individuals of a particular nationality, race, or religion; or
(B) as a condition of the sale of a product to the government, a company, or a national of a country, to refrain from shipping or insuring that product on a carrier owned, leased, or operated by a person who does not participate in or cooperate with an international boycott (within the meaning of subparagraph (A)).” IRC Section 999(b)(3)

List of Boycott Countries

The following countries were placed on the boycott list by the Department of the Treasury as of January 2, 2018: Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, Yemen

IRS Written Advice Abatement Procedures | IRS Tax Lawyer

This is the concluding article in our series of articles on the topic of the IRS Written Advice Defense. In prior articles, we have outlined the general legal test of the IRS Written Advice Defense and described each of the three prongs of this test. In this article, I would like to discuss the IRS Written Advice Abatement Procedures – i.e. the actual administrative process for requesting abatement of penalties based on this defense.

This article is for educational purposes only and I strongly encourage you to retain the services of an experienced tax attorney before engaging in the IRS Written Advice Abatement Procedures.

IRS Written Advice Abatement Procedures: Form 843

The centerpiece of the IRS Written Advice Abatement Procedures is Form 843. Taxpayers who are entitled to an abatement of penalties pursuant to 26 U.S.C. §6404(f) should complete and file Form 843. At the top of Form 843, taxpayers should write: “Abatement of penalty or addition to tax pursuant to section 6404(f).” Furthermore, taxpayers should state on Form 843 whether the penalty or addition to tax has been paid.

IRS Written Advice Abatement Procedures: Documents to Be Submitted with Form 843

The taxpayers must submit copies of the following documents together with their Form 843 (note that these documents are directly related to the three-prong legal test for the IRS Written Advice Defense):

1. A copy of the taxpayer’s written request for the IRS advice (with a statement of adequate and accurate facts);

2. A copy of the erroneous written advice provided by the IRS to the taxpayer and relied upon by the taxpayer; and

3. A copy of a report (if any) of tax adjustments (the report should identify the penalty or addition to tax and the item for which the erroneous IRS written advice was requested).

In addition to these required documents, I recommend that most of Form 843 abatement requests be accompanied by a detailed description of facts, the erroneous IRS written advice, the taxpayer’s reliance on this advice and how this reliance led to the imposition of a penalty.

IRS Written Advice Abatement Procedures: Time Limitations for Filing Form 843

The IRS regulations also address the issue when Form 843 should be submitted in order to be considered a timely request for abatement. The regulations specified that any abatement of a penalty or addition to tax pursuant to 26 U.S.C. §6404(f) will be permitted only if the request for such an abatement “is submitted within the period allowed for collection of such penalty or addition to tax, or, if the penalty or addition to tax has been paid, the period allowed for claiming a credit or refund of such penalty or addition to tax.” Treas. Reg. §301.6404-3(e).

IRS Written Advice Abatement Procedures: Where to File Form 843

The mailing address of Form 843 depends on whether the incorrect IRS advice is related to an item on a federal tax return. If the advice is related to an item on the taxpayer’s tax return, then Form 843 should be submitted to the IRS center where the tax return was originally filed. On the other hand, if the erroneous IRS advice is not concerning any item of the taxpayer’s federal tax return, then the taxpayer should submit Form 843 to the IRS Center where the taxpayer’s return was filed for the taxable year in which the taxpayer relied on the erroneous advice.

Contact Sherayzen Law Office for Professional Help With Respect to Abatement or Reduction of IRS Penalties

If the IRS imposed a penalty with respect to your prior noncompliance with US international tax returns, such as FBAR, Forms 926, 3520, 5471, 5472, 8621, 8865, 8938, et cetera, you should contact Sherayzen Law Office to explore your IRS penalty reduction options. Sherayzen Law Office is an international tax law firm that has helped US taxpayers around the world to deal with these penalties. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

IRS Written Advice Defense & The Written Request | Tax Lawyers MN

This article is a continuation of the series of articles on the IRS Written Advice Defense. In the first article of this series, I outlined the legal test for the Defense. The second article of the series focused on the first prong of that test. In this essay, I would like to briefly highlight the second prong of this legal test: the IRS written Advice must be issued in response to a taxpayer’s written request.

IRS Written Advice Issued in Response to Written Request by the Taxpayer

This second prong of the IRS Written Advice Defense is not as simple as it seems at first. The main issue here is when a specific written request is considered to be made by a taxpayer. Obviously, if the taxpayer writes a written request himself, it was made “by a taxpayer”. What about a request made by a taxpayer’s representative?

The IRS regulations state that a written request from a taxpayer’s representative shall be considered a “written request by the taxpayer” only if two conditions are met. First, a taxpayer’s representative must be “an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, or any other person permitted to represent the taxpayer before the Service and who is not disbarred or suspended from practice before the Service.” Treas. Reg. §301.6404-3(b)(3).

Second, “the written request for advice either is accompanied by a power of attorney that is signed by the taxpayer and that authorizes the representative to represent the taxpayer for purposes of the request, or such a power of attorney is currently on file with the Service.” Id.

The Written Request for the IRS Written Advice Must Be Properly Made

In a future article, I will describe the property abatement procedure with which the taxpayer’s written request must comply. For the purposes of this essay, I just wish to point out that this is the second major issue concerning written requests for the IRS Written Advice.

Contact Sherayzen Law Office for Professional Help With Your IRS Written Advice Defense And Any Other Reasonable Cause Defense

If the IRS has imposed penalties as a result of an audit of your tax return or FBAR, contact Sherayzen Law Office for professional help. We have helped US taxpayers around the world to deal with their IRS penalties, and We can help You!

Contact Us Today to Schedule Your Confidential Consultation!