Experienced International Tax Law Firm of Sherayzen Law Office

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Most U.S. taxpayers who need international tax services look for an experienced international tax law firm to help them. Sherayzen Law Office, Ltd. is a highly experienced international tax law firm. In this essay, I will conduct the analysis explaining why Sherayzen Law Office is considered such an experienced international tax law firm.

Areas of Law Covered by an Experienced International Tax Law Firm

In order for a firm to be considered an experienced international tax law firm, it must have sufficient breadth of coverage of international law – i.e. a firm cannot be considered experienced if it only operates on the margins of international tax law. Sherayzen Law Office covers the full range of areas of international tax law, including: Offshore Voluntary Disclosures (all types – OVDP (now closed),  Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Noisy Disclosures and Reasonable Cause Disclosures); Annual International Compliance with respect to PFICs (Form 8621), foreign business ownership (5471, 8865, 8858, et cetera), foreign business transactions (926 and other related forms) and ownership of foreign accounts (FBAR, Form 8938, et cetera); Foreign Gifts and Inheritance (Form 3520), Beneficiary and/or Owner of a Foreign Trust (Form 3520 and 3520-A); Anti-Deferral Regimes (PFICs, Subpart F rules, et cetera); full domestic compliance (1040, 1065, 1120, et cetera); tax withholding; International Tax Planning; FATCA compliance; and numerous other areas and sub-areas of international tax law.

Furthermore, Sherayzen Law Office helps clients with IRS audits (including FBAR audits), IRS Appeals, and tax court appeals.

The expertise developed by Sherayzen Law Office covers both legal and accounting aspects of international tax law. This means that this is one of the few law firms in the United States where a client’s U.S. legal and accounting needs are fully met without the expense and inconvenience of involving third parties.

Experienced International Tax Law Firm and its Clients

Sherayzen Law Office is an experienced international tax law firm not only because it is in this business for more than 10 years, but also because, during this period of time, it has helped hundreds of U.S. taxpayers throughout the world to resolve their U.S. international tax matters. While a minority of our clients belong to middle class, the majority of our clients consist of the upper middle-class and high-net-worth individuals (including owners of foreign and domestic businesses) with highly complex international tax issues.

Countries Covered by an Experienced International Tax Law Firm

The breadth of the geographical experience is one of the most important characteristics of an experienced international tax law firm. Sherayzen Law Office is proud to state that it has worked with U.S. taxpayers with foreign accounts and/or assets in countries in all continents inhabited by humans: North America (Canada, Mexico and the United States), Central America (Costa Rica, Nicaragua and Panama – geographically, part of the North American continent), South America (Argentina, Brazil, Chile and Colombia), the Caribbean region (Bahamas, Barbados, Saint Kitts and Nevis and Cayman Islands), Europe (Austria, Belarus, Belgium, Croatia, Cyprus, Czech Republic, France, Germany, Hungary, Ireland, Italy, Luxembourg, Monaco, Poland, Portugal, Russia, Spain, Switzerland, Ukraine and the United Kingdom), Middle East (Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Turkey and United Arab Emirates – geographically part of Asia), Australia, New Zealand, Africa (Cote D’Ivore, Ethiopia, Morocco and Nigeria), and Asia (Bangladesh, China, India, Hong Kong, Japan, Philippines, Singapore, South Korea and Thailand).

Such a broad geographical spread qualifies Sherayzen Law Office as one of the most experienced international tax law firms in the United States.

Contact Sherayzen Law Office for Professional Help with Your International Tax Issues

U.S. international tax law is extremely complex with numerous reporting requirements and traps for the unwary. This is why you need to make sure that you have the right team of international tax professionals on your side, especially for the purpose of voluntary disclosure of your foreign accounts and income. Sherayzen Law Office is your best choice; our international tax firm is highly knowledgeable and experienced in international tax law and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Cambata Case: IRS Wins Against Former U.S. Citizen on Offshore Income

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In the Cambata case, the IRS successfully demonstrated once again that renunciation of U.S. citizenship will not protect a taxpayer from being pursued for unreported income from foreign accounts. On February 3, 2016, Mr. Albert Cambata pleaded guilty to filing a false income tax return with respect to his unreported Swiss account income.

Facts Related to Mr. Cambata’s Unreported Swiss account income

According to court documents, in 2006, Mr. Albert Cambata established Dragonflyer Ltd., a Hong Kong corporate entity, with the assistance of a Swiss banker and a Swiss attorney. Days later, he opened a financial account at Swiss Bank 1 in the name of Dragonflyer. Although he was not listed on the opening documents as a director or an authorized signatory, Mr. Cambata was identified on another bank document (which the IRS obtained most likely through the Swiss Bank program) as the beneficial owner of the Dragonflyer account. That same year, Mr. Cambata received $12 million from Hummingbird Holdings Ltd., a Belizean company. The $12 million originated from a Panamanian aviation management company called Cambata Aviation S.A. and was deposited to the Dragonflyer bank account at Swiss Bank 1 in November 2006.

On his 2007 and 2008 federal income tax returns, Mr. Cambata failed to report interest income earned on his Swiss financial account in the amounts of $77,298 and $206,408, respectively. In April 2008, Mr. Cambata caused the Swiss attorney to request that Swiss Bank 1 send five million Euros from the Swiss financial account to an account Mr. Cambata controlled at the Monaco branch of Swiss Bank 3. In June 2008, Cambata closed his financial account with Swiss Bank 1 in the name of Dragonflyer and moved the funds to an account he controlled at the Singapore branch of Swiss Bank 2.

In 2012, Mr. Cambata, who has lived in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization.

Link between the Cambata Case and Swiss Bank Program

It appears that the IRS was able to focus on Mr. Cambata due to information provided by one of the Swiss Bank that participated in the Swiss Bank Program. This led to the IRS investigation that unraveled the whole scheme constructed by Mr. Cambata. Additional information might have been provided to the IRS by one of the Category 1 banks as part of a Deferred Prosecution Agreement.

This affirms what the IRS has stated in the past about its determination to continue to pursue older fraud cases based on the information it already obtained from the Swiss banks. “IRS Criminal Investigation will continue to pursue those who do not pay the taxes they owe to the United States,” said Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office. “Today’s plea is a reminder that we are committed to following the money trail across the globe and will not be deterred by the use of sophisticated international financial transactions that hide the real ownership of income taxable by the United States.”

The Global Reach of the IRS Investigations Grows

Mr. Cambata’s accounts were spread out among the local branches of Swiss banks in Monaco, Singapore and Switzerland. The funds originated from companies based in Belize and Panama (the information regarding these companies was probably obtained through John Doe summons issued in 2015).

It becomes obvious from this case that our earlier warnings about the spread of the IRS investigations beyond Switzerland were correct. The IRS now reaches far beyond Switzerland and focuses more and more on jurisdictions like Belize, Cayman Islands, Cook Islands, Monaco, Panama, Singapore and other favorite offshore jurisdictions. The Cambata case is a grave warning to U.S. taxpayers who still operate in offshore jurisdictions to hide assets from the U.S. government.

The Cambata Case is a Warning to Taxpayers Who Pursued Quiet Disclosure to Cover-Up Past Tax Noncompliance

One of the most curious aspects about the Cambata case is that the IRS never imposed any FBAR penalties or tax return penalties with respect to the later years. While it is not clear from the documents, it appears that Mr. Cambata probably did a quiet disclosure in the year 2009 and has properly filed his FBARs and tax returns ever since.

The FBAR statute of limitations probably did not allow the IRS to impose the FBAR penalties, but the IRS still ignored the quiet disclosure and pursued criminal penalties for the 2006 and 2007 fraudulent tax returns (in addition to restitution of $84,849 – presumable the tax Mr. Cambata would have owed had he filed his 2006 and 2007 returns correctly).

Therefore, U.S. taxpayers who filed quiet disclosure should heed one of the main lessons of the Cambata case – quiet disclosure will not protect you from the IRS criminal prosecution.

The Cambata Case is also a Warning to Taxpayers Who Renounced U.S. Citizenship to Hide Past Tax Noncompliance

The Cambata case also dispels another myth common to U.S. taxpayers: renouncing citizenship somehow prevents the IRS criminal prosecution for past noncompliance. On the contrary, U.S. taxpayers who renounce citizenship may draw the IRS attention because they have to certify that they are fully compliant with the tax laws of the United States.

If the IRS is able to prove that these taxpayers are not fully tax-compliant, then, as the Cambata case clearly demonstrates, the IRS can pursue criminal penalties against former U.S. citizens. It is possible that one of the chief purposes of the IRS in this case was to scare other U.S. citizens who renounced their citizenship to hide their past tax noncompliance.

Contact Sherayzen Law Office for Legal Help with Your Foreign Accounts

If you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible. Whether your case involves complex beneficial ownership structures or you own your foreign accounts personally, our highly experienced team of tax professionals can help you!

Contact Us Today to Schedule Your Confidential Consultation!

2015 FBAR (FinCEN Form 114) Due on June 30, 2016

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2015 FBAR is one of the most important tax information returns required by the IRS this year. While the 2015 FBAR is not the most complicated form, it is definitely the one that is associated with the most severe penalties.

2015 FBAR History

The FBAR is an abbreviation for the Report of Foreign Bank and Financial Accounts (the “FBAR”). The current official name of the FBAR is FinCEN Form 114 (prior to mandatory e-filing, Form TD F 90-22.1 was the name of the FBAR).

Many of my clients are surprised to learn that FBAR is a tax information return with a long history, dating back to the late 1970s. Its origin lies in the Bank Secrecy Act (31 U.S.C. §5311 et seq.) and it was originally meant to combat money laundering. However, after September 11, 2001, the FBAR enforcement was turned over to the IRS and it became a tax-enforcement tool of heretofore unimaginable power due to its heavy penalties.

Who is Required to File 2015 FBAR

The Department of Treasury (the “Treasury”) requires that an FBAR is filed whenever a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. If you had such a situation in 2015, then you must seek an advice from an FBAR lawyer on whether you need to file the 2015 FBAR.

2015 FBAR Deadline

2015 FBAR must be e-filed with the IRS by June 30, 2016; there are no extensions available – the 2015 FBAR must be received by the IRS no later than June 30, 2016. Note: FBAR due date now coincides with due dates for tax returns. 

Consequences of Failure to File Your 2015 FBAR Timely

If your 2015 FBAR is not timely filed, then it will be considered delinquent and might be subject to severe FBAR civil and criminal penalties, depending on your circumstances. It is also important to point out that an incorrect or incomplete 2015 FBAR will also be considered delinquent with the higher possibility of imposition of the FBAR’s draconian penalties.

Multiple Years of FBAR Delinquency

If you did not file the FBARs in the prior years and you were required to do so, this situation is extremely dangerous (especially in our FATCA-dominated world) and may result in imposition of multiple FBAR penalties. This is why you should seek advice of an experienced FBAR lawyer as soon as possible

Contact Sherayzen Law Office for Assistance with Your FBAR Compliance

If you have not filed your FBARs previously and you were required to do so, contact Sherayzen Law Office for help as soon as possible. Our team of experienced tax professionals, headed by attorney Eugene Sherayzen, has helped hundreds of US taxpayers around the world to lower and even eliminate their FBAR penalties. We can help You!

Contact Us NOW to Schedule Your Confidential Consultation

What is a FATCA Letter?

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Over eight million U.S. taxpayers are expected to receive FATCA letters from their foreign banks. The first reaction of most taxpayers is to ask: “What is a FATCA letter?” The next question is: “What should I do if I receive(d) a FATCA Letter?” This article intends to answer both questions.

The FATCA Letter

A FATCA Letter is a communication from your foreign bank to you in order to obtain the information that the foreign bank is required to disclose to the IRS under the Foreign Account Tax Compliance Act (FATCA). The basic purpose of a FATCA Letter is to confirm whether you are a U.S. person. Once this information is confirmed, your foreign bank will disclose to the IRS all of the FATCA-required information, including the account numbers and balances of your foreign account.

Your FATCA Letter will usually arrive with the enclosed Forms W-9 and W-8BEN. Form W-9 usually pertains to U.S. citizens, while the Form W-8BEN is usually reserved for nonresident aliens (for U.S. tax purposes).

What Should I Do if I Received a FATCA Letter and I Have Not Reported My Foreign Accounts to the IRS?

Now that you know what a FATCA Letter is, it is important to consider what you should do when you receive one from your foreign bank.

The first thing is to understand what not to do – you should NOT ignore a FATCA Letter. You now know what a FATCA Letter is and you understand that it is used by the bank to comply with FATCA. Hence, if you ignore your FATCA Letter, the bank must do something to explain to the IRS why it could not comply with its reporting obligations. This “something” is likely to get you in trouble, because not only can your bank close your bank account (depending on the FATCA treaty), but your foreign bank will also report you as a “recalcitrant” taxpayer to the IRS together with the account number and the balance. This will likely lead to a later IRS examination which may prevent you from doing any type of a voluntary disclosure and subject you to draconian FBAR penalties.

Rather, with the understanding of the FATCA Letter, your plan of action should be as follows:

1. Understand the deadline by which you should respond to your FATCA letter and see if you have sufficient time to contact an international tax law firm (such as Sherayzen Law Office) prior to the deadline. If you do not have enough time, contact the bank and ask them for more time due to your need to seek legal advice – 30 to 45 days is usually considered reasonable.

However, try to avoid sending any information to the bank if possible without going through step #2 first. I have seen on the internet suggestions from some attorneys to immediately send to the bank Form W-9 before you consult an attorney; usually, such haste is premature and ill-advised. You need to know your legal position first.

2. Schedule a consultation with an international tax law firm immediately after you receive your FATCA Letter – Sherayzen Law Office would naturally be the best choice as the firm that specializes in dealing with FATCA letters.

3. Prepare as many documents and bank records as you can prior to the consultation. Now that you know about the FATCA Letter, you understand that it will involve your entire tax situation. Ask Attorney Eugene Sherayzen for a list of items needed to be supplied prior to the consultation.

4. Go through with the consultation. The consultation is not going to focus just on the FATCA Letter and how it impacts your case; rather, the majority of the consultation will be centered around the discussion of your legal position, your current tax reporting requirements and your voluntary disclosure options.

5. Retain an international tax law firm to do your voluntary disclosure. Again, my suggestion is to retain Sherayzen Law Office, because this is a firm that specializes in the voluntary disclosures and international tax compliance involving FATCA, FBAR, foreign trusts, foreign inheritance, foreign business ownership, and other IRS requirements that may be applicable to you.

Taxation of Liquidating Trusts

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Liquidating trusts are common in today’s business environment and it is highly important to understand how they are taxed in the United States. This article is a continuation of a series of articles on the general overview of U.S. taxation of different types of foreign and domestic trusts with the focus on liquidating trusts.

Liquidating Trusts: Definition

Regs. §301.7701-4(d) states that a trust will be considered a liquidating trust “if it is organized for the primary purpose of liquidating and distributing the assets transferred to it, and if its activities are all reasonably necessary to, and consistent with, the accomplishment of that purpose”.

Liquidating Trusts: Tax Treatment

Generally, liquidating trusts are treated as trusts for U.S. tax purposes, but only as long as the trust’s business activities do not become so big as to obscure the trust’s liquidating function. Id. If the latter becomes the case (i.e. the trust’s business activities will obscure its liquidating purpose), then the trust will be treated as a partnership or an association taxable as a corporation.

As Regs. §301.7701-4(d) states, “if the liquidation is unreasonably prolonged or if the liquidation purpose becomes so obscured by business activities that the declared purpose of liquidation can be said to be lost or abandoned, the status of the organization will no longer be that of a liquidating trust.”

Presumptively, Regs. §301.7701-4(d) will treat the following entities as liquidating trusts: bondholders’ protective committees, voting trusts, and other agencies formed to protect the interests of security holders during insolvency, bankruptcy, or corporate reorganization proceedings are analogous to liquidating trusts. However, if they are “subsequently utilized to further the control or profitable operation of a going business on a permanent continuing basis, they will lose their classification as trusts for purposes of the Internal Revenue Code”. Id.

It should be mentioned that, in Rev. Proc. 94-45, the IRS stated that it will treat organizations created under Chapter 11 of the Bankruptcy Code as liquidating trusts as long as all of the IRS extensive requirements are satisfied. Rev. Proc. 94-45 described in detail eleven IRS requirements.

Liquidating Trusts: IRS Review

In general, during the examination of a taxpayer’s classification of the entity as a liquidating trust, the IRS will engage in a two-step analysis. First, it will focus on the trust’s documents, its stated purpose and the powers of the trustees. Second, the IRS will analyze the actual operations of the trust.

The powers of trustees deserve special attention in liquidating trusts. Generally, granting to a trustee incidental business powers to prevent the loss of the value of distributed assets will not turn a liquidating trust into a corporation. However, where trustees are granted extensive powers to conduct business for a relatively large period of time, there is a significant risk that the IRS will re-classify a liquidating trust as a corporation or a partnership.