France Asks Switzerland for Names of UBS Accountholders

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This is an international tax lawyer news update: on September 26, 2016, Swiss tax officials confirmed that France asked Switzerland to provide the names of the holders of more than 45,000 UBS bank accounts. The request covers years 2006-2008.

Le Parisien newspaper, which first published extracts from the French request that the combined balance in the affected accounts exceeded CHF 11 billion (around $ 11.4 billion.). Le Parisien, which did not disclose how it gained access to the letter, also said the French authorities were able to identify the holders of 4,782 accounts.

The French request came to light after, on September 12th 2016, the Swiss Supreme Court over-ruled the lower court’s rejection of a similar request from the Netherlands for financial details of Dutch residents with accounts at UBS. Despite the Netherlands’ success, doubts still remain about the viability of the French request due to the fact that article 28 of the France-Switzerland tax treaty of 1967, as modified in 2010, provides that accounts that were closed before 2010 are not covered by the agreement and, therefore, should not be subject to information exchange.

Madison Foreign Trust Lawyer | International Tax Attorney

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If you are a US beneficiary or a US owner of a foreign trust and you reside in Madison, Wisconsin, you need the help of an experienced Madison Foreign Trust Lawyer to properly comply with complex US tax reporting requirements regarding foreign trusts and avoid paying very high penalties. Who should you consider retaining as your Madison Foreign Trust Lawyer?

Definition of a Madison Foreign Trust Lawyer: Legal Services Provided in Madison, Wisconsin

First, you want to consider only international tax law firms that offer their services related to foreign trust compliance in Madison, Wisconsin. Note the important language here: “offer their services … in Madison”. Offering services in Madison is not equivalent to residing in Madison.

This means that the definition of a Madison Foreign Trust Lawyer includes not only international tax lawyers who live in Madison, but also lawyers who reside elsewhere (for example, Minneapolis) and offer their services in Madison. It should be, however, a lawyer is licensed to practice law in any of the 50 states or District of Columbia.

Why is the residence not important when it comes to defining who is a Madison Foreign Trust Lawyer? The answer is rather simple – foreign trust law is mainly federal and the high-penalty tax forms are also federal. This means that, unlike situation which concern local law, the input of Madison or even Wisconsin law is very small and, in most situations, none. Since the focus is on the federal tax compliance, the physical residence of your foreign trust lawyer does not matter.

Madison Foreign Trust Lawyer Must Be an Experienced International Tax Lawyer

Now that you know that you can choose your Madison Foreign Trust Lawyer from a larger pool of lawyers and without any geographical limitations, we can turn to the second retainer criteria – a Madison Foreign Trust Lawyer should be an international tax lawyer who is experienced in the are of foreign trust compliance laws and regulations.

A foreign trust lawyer should be aware of all areas of US international tax law that are directly and indirectly relevant to foreign trusts in order to properly help his clients. He should know the foreign trust classification, foreign trust compliance (including Form 3520), foreign trust income reporting, FATCA issues, the rules concerning indirect ownership of foreign assets through a foreign trust and many other relevant issues. Thus, the competence of your lawyer in the area of foreign trusts should be the most important criteria in your selection of an Madison Foreign Trust Lawyer.

Sherayzen Law Office Should Be Retained as Your Madison Foreign Trust Lawyer

Under this criteria, Sherayzen Law Office should be a top choice for your Madison Foreign Trust Lawyer. Led by its founder and international tax attorney Eugene Sherayzen, this firm is one of the leading experts in the field of foreign trust US tax compliance and planning. Not only does it boast a higher devoted and experienced legal team with extensive knowledge of all major relevant areas of US international tax law (including Form 3520, Form 3520-A, PFIC compliance, FATCA, FBAR and other relevant requirements), but it has also helped its clients with foreign trust voluntary disclosures in cases where its clients did not timely and/or correctly complied with the numerous US tax reporting requirements. Sherayzen Law Office has also defended its clients against the IRS attempts to make its clients owners of a foreign trusts where, in reality, they were simply beneficiaries.

This is why, if you are looking for an Madison Foreign Trust Lawyer, you should contact Sherayzen Law Office today to schedule Your Confidential Consultation!

IRS FBAR Audits Caused by Tax Returns | FBAR Audit Lawyer

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IRS FBAR Audits can lead to catastrophic consequences for noncompliant US taxpayers. While there may be a numbers of factors that influence the IRS decision to commence such an audit, one of the leading sources of the IRS FBAR Audits are the US tax returns. In this article, I would like to explore the main types of documents that the IRS is searching for during a tax return examination in order to uncover the information that may lead to the commencement of IRS FBAR Audits (I will not discuss here the right of the IRS to disclose US tax return information for Title 31 FBAR Audit; this topic is reserved for a subsequent article).

IRS FBAR Audits and IRS Title 26 Examinations

From the outset, it should be made clear that filing of US tax returns does not automatically lead to IRS FBAR Audits. Rather, a great percentage of the IRS FBAR Audits arise from the IRS Title 26 Examinations of these returns– i.e. IRS examinations and audits of US tax returns pursuant to the various provisions of the Internal Revenue Code. During these examinations, the IRS analyzes the audited tax returns and may uncover information related to FBAR non-compliance which usually serves as a cause of the subsequent FBAR audit.

Tax Return Information that May Trigger IRS FBAR Audits

So, what kind of evidence is the IRS looking for that may trigger IRS FBAR audits? First and most logical is Schedule B, particularly looking at whether box in Part III (which has questions related to foreign accounts and foreign trusts) is checked. If there is a discrepancy between the information provided to the IRS and Schedule B, this may lead to IRS FBAR Audits.

Second, foreign income documents from the tax examination administrative case file (which includes the Revenue Agent Reports). Here, the IRS is looking for income related to foreign bank and financial accounts that was not reported. A combination of unreported foreign income and undisclosed foreign accounts is precisely the toxic mix that lays the foundation for IRS FBAR Audits.

Third (and this is a very interesting strategy), copies of tax returns for at least three years before the opening of the offshore account and for all years after the account was opened, to show if a significant drop in reportable income occurred after the account was opened. The analysis of the returns for three years before the opening of the account would give the examiner a better idea of what the taxpayer might have typically reported as income before the foreign account was opened. This strategy shows just how analytical and creative the IRS can be in looking for cases that should be subject to IRS FBAR Audits.

Fourth, copies of any prior Revenue Agent Reports that may show a history of noncompliance. This strategy confirms once again the notion that a large history of noncompliance may lead to more frequent IRS examinations, including IRS FBAR Audits.

Fifth, IRS is also looking into “cash accounting’ – two sets of cash T accounts (a reconciliation of the taxpayer’s sources and uses of funds) with one set showing any unreported income in foreign accounts that was identified during the examination and the second set excluding the unreported income in foreign accounts.

Finally, the IRS makes a connection between tax fraud and FBAR noncompliance – the IRS is looking at any documents that would support fraud in commencing IRS FBAR Audits. Such documents include: false explanations regarding understated or omitted income, large discrepancies between actual and reported deductions of income, concealment of income sources, numerous errors which are all in the taxpayer’s favor, fictitious records or other deceptions, large omissions of certain types of income (personal service income, specific items of income, gambling winnings, or illegal income), false deductions, false exemptions, false credits, failure to keep or furnish records, incomplete information given to the return preparer regarding a fraudulent scheme, large and frequent cash dealings that may or may not be common to the taxpayer’s business, and verbal misrepresentations of the facts and circumstances.

Of course, the IRS is not limited to these six types of tax return documents; however, this is the most common evidence that the IRS uncovers during a tax return examination that may lead to subsequent IRS FBAR Audits.

Contact Sherayzen Law Office for Legal Help with IRS FBAR Audits

If you are subject to an IRS FBAR Audit or a tax return examination that involves foreign assets and foreign income, or you have undisclosed foreign assets and you are looking for a way to bring your legal situation into compliance with US tax laws, then contact the international tax law firm of Sherayzen Law Office, Ltd. Sherayzen Law Office is one of the best law firms in the world dedicated to helping US taxpayers with foreign assets and foreign income. Our highly experienced team of tax professionals, headed by an international tax attorney Eugene Sherayzen, provides effective, knowledgeable and reliable legal and tax help to its clients throughout the world, and we can help you deal with any IRS problem.

Contact Us Today to Schedule Your Confidential Consultation!

4th Quarter 2016 Underpayment and Overpayment Interest Rates

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On September 14, 2016, the IRS announced that the 4th Quarter 2016 underpayment and overpayment interest rates will remain the same.  This means that, the 4th quarter 2016 IRS underpayment and overpayment interest rates will be as follows:

four (4) percent for overpayments (two (3) percent in the case of a corporation);
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code (IRC), the interest rates are determined on a quarterly basis; for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The IRS underpayment rates are especially important for US taxpayers who participate in the OVDP or a voluntary disclosure under the Streamlined Domestic Offshore Procedures. This is the case because the IRS underpayment rates are used to calculate the interest charged on any tax due as well as PFIC interest (default Section 1291 PFICs) on any excess distributions.

The IRS interest rates remained at 3% for from the 4th quarter of 2011 through the first quarter of 2016. However, in the second quarter of 2016, the IRS raised the interest rates from 3% to 4% following the increase of the federal short-term rate. The recent 4th Quarter 2016 IRS rates remain the same as in the second and third quarters of 2016. However, the situation may change in the 1st quarter of 2017 if the Federal Reserve raises its rates either in September or December of 2016.

Ignorance of the Law and Reasonable Cause Exception

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Ignorance of the Law forms part of a much broader Reasonable Cause Exception which is almost a universal defense against the imposition of IRS civil penalties. Ignorance of the Law is often utilized as a defense against the US international tax information return penalties, including penalties envisioned under FBAR, Form 8938, Form 5471, Form 8865, et cetera. In this article, I would like provide a general description for the Ignorance of the Law defense.

It is important to remember that the application of the Ignorance of the Law defense depends on the specific circumstances of your case and nothing in this article should be interpreted as a legal advice. Rather, you need the help of an experienced tax attorney to determine whether the Ignorance of Law defense applies to your case.

Ignorance of the Law Defense Legal Test

Ignorance of the Law may provide the basis for an effective reasonable cause defense in situations where a taxpayer does no know about his obligations to comply with a tax requirement in question and/or pay taxes. However, the ignorance by itself is not sufficient to establish a reasonable cause; other circumstances must be reviewed in order to determine whether all or the requirements of this defense’s legal test are satisfied.

The legal test for the Ignorance of the Law defense requires that three requirements are satisfied in order the for taxpayer’s conduct to satisfy the reasonable cause exception:

1). The taxpayer was not aware of the tax requirement in question;

2). The taxpayer could not reasonably be expected to know of the requirement; and

3). The taxpayer’s conduct satisfied the “ordinary business care and prudence” standard.

Oftentimes, the second and the third requirement are blended into the same analysis. This is why I now turn to the examination of the ordinary business care and prudence standard for the purposes of the Ignorance of the Law defense.

Ignorance of the Law and Ordinary Business Care and Prudence Standard

Ordinary Business Care and Prudence Standard is a requirement present in all reasonable cause defenses. With respect to the Ignorance of the Law defense, the ordinary business care and prudence standard requires that a taxpayer acts in good faith, reasonably and attempts to determine his tax obligations. This means all of the relevant circumstances must be reviewed before the determination is made whether the taxpayer’s conduct satisfied the ordinary business care and prudence standard.

The precise circumstances that need to be considered depend on the particular facts of a case. Some of the common factors include: the taxpayer’s education, his tax advisors (including what information the taxpayer supplied to his tax advisors, whether he has been previously subject the tax at issue, whether he has filed the tax forms in question before, whether he has been penalized before with respect to the issue at hand, whether there any changes to the tax forms or tax law (which the taxpayer could not reasonably be expected to know), the level of complexity of the issue in question, et cetera.

Contact Sherayzen Law Office for Professional Help with Your Ignorance of the Law Reasonable Cause Defense

If you were penalized by the IRS with respect to a tax requirement and you did not know about this requirement, contact Sherayzen Law Office for professional and experienced legal help. We have helped taxpayers around the world to successfully reduce and even entirely eliminate penalties based on the reasonable cause defense that often stemmed from our clients’ ignorance of relevant tax requirements. We can also help You!

Contact Us Today to Schedule Your Confidential Consultation!