The Pursley Case: Offshore Tax Evasion Leads to Criminal Conviction

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On September 6, 2019, the Tax Division of the US Department of Justice (“DOJ”) announced another victory against Offshore Tax Evasion. This time, a Houston lawyer, Mr. Jack Stephen Pursley, was convicted of one count of conspiracy to defraud the United States and three counts of tax evasion. Let’s discuss this Pursley Case in more detail.

Facts of the Pursley Case

According to the evidence presented at trial, Mr. Pursley conspired with a former client to repatriate more than $18 million in untaxed income that the client had earned through his company, Southeastern Shipping. Southeastern Shipping had a business bank account located in the Isle of Man.

Knowing that his client had never paid taxes on these funds, Mr. Pursley designed and implemented a scheme whereby the untaxed funds were transferred from Southeastern Shipping’s foreign bank account to the United States. Mr. Pursley helped to conceal the movement of funds from the Internal Revenue Service (“IRS”) by disguising the transfers as stock purchases in domestic corporations in the United States, which Mr. Pursley owned and his client owned and controlled.

At trial, the DOJ proved that Mr. Pursley received more than $4.8 million and a 25% ownership interest in the co-conspirator’s ongoing business for his role in the fraudulent scheme. For tax years 2009 and 2010, Mr. Pursley evaded the assessment of and failed to pay the income taxes he owed on these payments by, among other means, withdrawing the funds as purported non-taxable loans and returns of capital. Mr. Pursley then used these funds for personal investments as well as purchase of properties, including a vacation home in Vail, Colorado and a property in Houston, Texas.

Potential Penalties in the Pursley Case

Judge Lynn Hughes has set sentencing for December 9, 2019. Mr. Pursley faces a statutory maximum sentence of five years in prison for the conspiracy count and five years in prison for each count of tax evasion. He also faces a period of supervised release, monetary penalties, and restitution.

Main Lesson from the Pursley Case

The main lesson from the Pursley case is for business lawyers. They should be very careful about involving themselves in schemes related to repatriation of overseas funds. These business lawyers should verify whether US taxes were paid on these funds and consult an international tax attorney concerning the legality of the proposed repatriation scheme.

Of course, if a business lawyer knows that his client never paid any US taxes on the funds, he should not participate in any stratagems which could be interpreted as conspiracy to defraud the United States. Otherwise, this lawyer would be at risk of finding himself in a situation similar to the Pursley case.

Contact Sherayzen Law Office for Professional Help With US International Tax Compliance

If a business lawyer finds out that he has a client with untaxed funds stored in an overseas account, he should urge the client to contact Sherayzen Law Office concerning the client’s offshore voluntary disclosure options. The main goal of such a voluntary disclosure would be to reduce and even eliminate the risk of a criminal prosecution.

Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

The Booker Case: ex-CPA Indicted for FBAR violations | FBAR Lawyer News

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On August 27, 2019, the US Department of Justice (“DOJ”) announced that a federal grand jury returned a superseding indictment charging Mr. Brian Booker, a former resident of Fort Lauderdale, Florida, whose business specialized in international trade, with failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) and filing false documents with the Internal Revenue Service (IRS). Let’s discuss the Booker case in more detail.

Facts of the Booker Case According to Indictment

Mr. Booker was a Certified Public Accountant who owned a Panamanian cocoa trading company. He allegedly operated that company from Venezuela, Panama, and his former residence in Fort Lauderdale, Florida.

The superseding indictment alleges that, for calendar years 2011 through 2013, Mr. Booker failed to disclose his interest in financial accounts located in Switzerland, Singapore, and Panama on annual Reports of Foreign Bank and Financial Accounts (FBARs) as required by law. Booker also allegedly filed false individual income tax returns for tax years 2010 through 2012 that failed to report to the IRS all of his foreign bank accounts.

Moreover, the indictment alleges that Mr. Booker filed a false offshore voluntary disclosure under the Streamlined Domestic Offshore Procedures. The superseding indictment claims that Mr. Booker’s Streamlined submission falsely claimed that his failure to report all income, pay all tax and submit all required information returns, such as FBARs, was due to non-willful conduct.

The Booker Case: Potential Criminal Penalties

If convicted, Mr. Booker faces a maximum sentence of five years in prison for each count related to his failure to file an FBAR. He also faces a maximum sentence of three years in prison for each of the counts related to filing false tax documents.

The Booker Case: Mr. Booker is Presumed Innocent Until Proven Guilty

The readers should remember than an indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.

The Booker Case: Potential Lesson for Streamlined Filers

The Booker case contains two valuable lessons for other US taxpayers who utilize the Streamlined Compliance Options, such as Streamlined Domestic Offshore Procedures (“SDOP”) and Streamlined Foreign Offshore Procedures (“SFOP”).

First, SDOP and SFOP are reserved for non-willful taxpayers only. If you were willful in your noncompliance, utilizing these options can result in a criminal investigation. It is not known if the IRS commenced the investigation of Mr. Booker due to his SDOP filing, but it is very possible that this was the case.

Second, the IRS does not simply “rubber-stamp” all SDOP and SFOP submissions. Taxpayers should expect a rigorous review of their cases.

Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure

If you are a taxpayer who has not filed his required FBARs, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers to utilize various offshore voluntary disclosure options, including SDOP and SFOP, to bring themselves into full compliance with US tax laws, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

July 2019 IRS Compliance Campaigns | International Tax Lawyer & Attorney

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On July 19, 2019, the IRS Large Business and International division (LB&I) announced the approval of another six compliance campaigns. Let’s discuss in more detail these July 2019 IRS compliance campaigns.

July 2019 IRS Compliance Campaigns: Background Information

In the mid-2010s, after extensive tax planning, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.

The first thirteen campaigns were announced by LB&I on January 13, 2017. Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018, five campaigns on September 10, 2018, five campaigns on October 30, 2018 and three campaigns on April 16, 2019. With the additional six July 2019 IRS compliance campaigns, the IRS has created a total of fifty-nine total IRS compliance campaigns.

Six New July 2019 IRS Compliance Campaigns

The six new campaigns are: S-Corporations Built-in Gains Tax, Post-OVDP Compliance, Expatriation, High Income Non-Filers, US Territories – Erroneous Refundable Credits and Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009. As you can see, the new campaigns continue to maintain the IRS focus on US international tax compliance. Let’s discuss each campaign in more detail.

July 2019 IRS Compliance Campaigns: S-Corporations Built-in Gains Tax

This campaign actually focuses on a C-corporation that converted to S-corporation. The main issue here is the Built-in Gains (“BIG”) tax. If a C-corporation has a net unrealized built-in gain, converts to S-corporation and sells assets within five years after the conversion, then it will likely be subject to the BIG tax. The BIG tax is assessed to the S-corporation (this is why the campaign is named in this manner).

LB&I has found that S corporations are not always paying this tax when they sell the C-corporation’s assets after the conversion. LB&I has developed comprehensive technical content for this campaign that will aid revenue agents as they examine the issue. The goal of this campaign is to increase awareness and compliance with the law as supported by several court decisions. Treatment streams for this campaign will be issue-based examinations, soft letters, and outreach to practitioners.

July 2019 IRS Compliance Campaigns: Post-OVDP Compliance

This is an IRS campaign of an especially high interest for international tax lawyers, because it targets specifically taxpayers who went through the IRS Offshore Voluntary Disclosure Program (“OVDP”). The IRS noticed that some taxpayers again became noncompliant after they went through the OVDP.

The campaign will specifically target post-OVDP taxpayers who failed to remain compliant with their foreign income and asset reporting requirements. The IRS will address tax noncompliance through soft letters and examinations.

July 2019 IRS Compliance Campaigns: Expatriation

This is another IRS campaign of high interest to international tax attorneys. US citizens and long-term residents (defined as lawful permanent residents in eight out of the last fifteen taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.

July 2019 IRS Compliance Campaigns: High Income Non-Filers

This campaign again focuses on US international tax law. In particular, the campaign targets high-income US citizens and resident aliens who receive compensation from overseas that is not reported on a Form W-2 or Form 1099. IRS audits are going to be the main treatment stream for this campaign.

July 2019 IRS Compliance Campaigns: US Territories – Erroneous Refundable Credits

Some bona fide residents of US territories are erroneously claiming refundable tax credits on Form 1040. This campaign will address noncompliance through a variety of treatment streams including outreach and traditional examinations.

July 2019 IRS Compliance Campaigns: Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009

This campaign addresses compensation deferred from nonqualified entities attributable to services performed before January 1, 2009. In general, IRC Section 457A requires that any compensation deferred under a nonqualified deferred compensation plan shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation. The campaign objective is to verify taxpayer compliance with the requirements of IRC Section 457A through issue-based examinations.

Contact Sherayzen Law Office for Professional Tax Help

If you have been contacted by the IRS as part of any of its campaigns, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Child’s FBAR Requirements | FBAR Tax Lawyer & Attorney

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I often receive questions concerning a child’s FBAR requirements. Many taxpayers automatically assume that, if their children are below the age of majority, these children do not have to file FBARs. Unfortunately, this is not the case – a child’s FBAR requirements are every bit as extensive of those of his parents.

Child’s FBAR Requirements: FBAR Background Information

A US Person must file FinCEN Form 114, the Report of Foreign Bank and Financial Account, commonly known as “FBAR”, if he has a financial interest in or a signatory authority or any other authority over a foreign financial account and the highest value of this account (in the aggregate with any other foreign accounts of this US person) is in excess of $10,000. FBAR is filed separately from the tax return.

Failure to file FBAR can lead to very high penalties. In fact, FBAR has the most severe penalty system in comparison to any other forms related to foreign accounts; it includes even criminal penalties. Even when a person was not willful in his non-filing of FBAR, he may still be subject to FBAR non-willful civil penalties of up to $10,000 (as adjusted for inflation) per account per year.

Child’s FBAR Requirements: Age Does Not Matter

The gruesome consequences of a failure to file FBAR make the determination of who is required to file FBARs one of the most important tasks of an international tax lawyer. This is why understanding a child’s FBAR requirements is so important. Let’s clarify this issue right now.

The rule is that a US Person is subject to the FBAR filing requirement regardless of his age. In other words, even an infant must file an FBAR.

Hence, it is important for an international tax lawyer (and his clients) to always check whether minor children have any foreign accounts. A typical fact pattern in this context involves situations where grandparents set up foreign savings accounts for their US grandchildren.

It is especially important to keep this in mind during an offshore voluntary disclosure. Oftentimes, a voluntary disclosure is focused on parents; children’s accounts are often neglected.

Child’s FBAR Requirements: FBAR Filing

Generally, a child is responsible for filing his own FBAR. Again, this responsibility arises irrespective of the age of the child.

The IRS understands, however, that a child would normally be unable to file his own FBARs. In such cases, the responsibility for filing FBARs is placed on the legally responsible person (such as parents, guardians, et cetera). The legally responsible person will be allowed to sign and file FBARs on behalf of the child.

Contact Sherayzen Law Office With Respect to Your Child’s FBAR Requirements

If your child has foreign accounts, contact Sherayzen Law Office for professional FBAR help. We have helped hundreds of US taxpayers around the world with their FBAR obligations, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

2019 Fourth Quarter IRS Interest Rates | PFIC Tax Lawyers

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On August 28, 2019, the Internal Revenue Service (“IRS”) announced that the 2019 Fourth Quarter IRS underpayment and overpayment interest rates will not change from the 3rd Quarter of 2019. This means that, the 2019 Fourth Quarter IRS underpayment and overpayment interest rates will be as follows:

  • five (5) percent for overpayments (four (4) percent in the case of a corporation);
  • two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • five (5) percent for underpayments; and
  • seven (7) percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. The IRS used the federal short-term rate for July of 2019 to determine the 2019 Fourth Quarter IRS interest rates The IRS interest is compounded on a daily basis.

2019 Fourth Quarter IRS interest rates are important for many reasons. These are the rates that the IRS uses to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an IRS audit or an amendment of his US tax return. The IRS also utilizes these rates with respect to the calculation of PFIC interest on Section 1291 tax.

As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment interest rates on a regular basis. We often amend our client’s tax returns as part of an offshore voluntary disclosure process. For example, both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures require that a taxpayer amends his prior US tax returns, determines the additional tax liability and calculates the interest on this liability.

Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology. This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.

Finally, it is important to point out that the IRS will use the 2019 Fourth Quarter IRS overpayment interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. Surprisingly, we often see this scenario arise in the context of offshore voluntary disclosures.