Offshore Voluntary Disclosure Program

Post-OVDP Audits | Offshore Voluntary Disclosure Lawyer & Attorney

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A significant number of US taxpayers who went through the OVDP mistakenly believed that they were immune from the IRS post-OVDP audits concerning their post-voluntary disclosure compliance. Sherayzen Law Office has repeatedly warned in the past that these taxpayers were mistaken with respect to their exposure to potential post-OVDP audits. The recent announcement of a new IRS compliance campaign concerning post-OVDP tax compliance confirmed the correctness of Sherayzen Law Office’s analysis.

Post-OVDP Audits: OVDP Background Information

The IRS created the Offshore Voluntary Disclosure Program (“OVDP”) as an incentive for US taxpayers to come forward and disclose their prior willful and non-willful noncompliance with US tax reporting requirements concerning foreign assets and foreign income. In exchange for the voluntary disclosure, the taxpayers paid a significantly lower penalty than what they otherwise could have had to pay outside of the OVDP. Moreover, taxpayers also received protection from IRS criminal prosecution of their prior tax noncompliance.

OVDP is not just one program, but a series of programs. The initial one was created in the early 2000s, but it was a relatively small and unknown program. The first program that became influential was the 2009 OVDP. The 2009 OVDP was created on the heels of the IRS victory in the UBS case and it closed on October 15, 2009.

Then, after the passage of the Foreign Account Tax Compliance Act (“FATCA”) in 2010, the IRS created the 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”). The 2011 OVDI was a hugely popular program. Its success led to the creation of 2012 OVDP and, finally, 2014 OVDP.

The implementation of FATCA had materially altered the IRS interest in the OVDP while the number of the OVDP participants precipitously dropped due to the success of the Streamlined Compliance Initiatives (i.e. Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures). The 2014 OVDP program was closed on September 28, 2018.

Post-OVDP Audits: False Sense of Security After OVDP

Some of the OVDP participants have mistakenly treated their OVDP disclosure as a remedy capable of curing not only their past tax noncompliance, but also future compliance issues. In other words, after going through the OVDP, these taxpayers relaxed their commitment to their ongoing annual compliance. Some of them started filing their FBARs irregularly or stopped filing them altogether while others under-reported their foreign income. Still others engaged in a different conduct overseas without realizing that their new way of doing business gave rise to a different set of US reporting requirements.

Many of these taxpayers also erroneously believed that, by going through the OVDP, they were taken off the “IRS radar”. This means that they felt that the IRS was highly unlikely to audit them after their voluntary disclosure.

Post-OVDP Audits: IRS Noticed Noncompliance Among OVDP Participants

In reality, as Sherayzen Law Office had suspected, the IRS engaged in extensive analysis of the OVDP participants’ behavior after their voluntary disclosure. Of course, it was not difficult for the IRS to monitor them, because the IRS already had a full list of the OVDP participants at its disposal. Some of the data came from field audits while other information was derived from FATCA and data analysis.

As a result of its analysis, the IRS discovered the aforementioned disturbing noncompliance trends among former OVDP participants.

Post-OVDP Audits: July of 2019 IRS Compliance Campaign

After it uncovered these noncompliance trends among the former OVDP participants, the IRS announced in July of 2019 a campaign to specifically target taxpayers who went through the OVDP. As part of this campaign, the IRS will send out soft letters and conduct post-OVDP audits.

Post-OVDP Audits: Potentially Disastrous Consequences for Noncompliant Taxpayers

The targets of this IRS compliance campaign will be in a particularly difficult legal situation for two main reasons. First, during a post-OVDP audit, the taxpayers are unlikely to be able to claim non-willfulness with respect to their post-OVDP tax noncompliance because of the knowledge of US tax requirements that they acquired during their voluntary disclosures. In fact, it is difficult to see how non-willfulness can be established in any way other than claims based on new and/or extraordinary circumstances.

Second, since it is not likely that they will be able to establish non-willfulness, taxpayers will most likely face willful penalties during an IRS audit, perhaps even civil and criminal fraud penalties. The IRS is unlikely to be lenient with taxpayers who already benefitted from a voluntary disclosure and persisted in their noncompliance afterwards. In other words, a post-OVDP audit may result in disastrous consequences for noncompliant taxpayers.

Contact Sherayzen Law Office for Professional Help With Post-OVDP Audits

Given the particularly dangerous nature of a post-OVDP audit, a taxpayer subject to this type of an IRS audit must retain an experienced international tax attorney as soon as he is notified about the commencement of the audit. Failure to do so may severely damage the taxpayer’s ability to defend against subsequent IRS penalties.

This is why you need to contact Sherayzen Law Office as soon as possible. We are a highly-experienced international tax law firm that has helped hundreds of US taxpayers to resolve their past noncompliance with US tax laws, including in the context of an IRS audit. We Can Help You!

Contact Us 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!

FY 2018 DOJ Criminal Case Statistics | Tax Lawyer & Attorney Minneapolis

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An analysis of the fiscal year 2018 DOJ criminal case statistics reveals certain interesting patterns about federal criminal tax prosecution in that year. Let’s explore in more detail these patterns.

2018 DOJ Criminal Case Statistics: Typical Tax Criminal

The analysis of the FY 2018 DOJ criminal case statistics reveals an interesting fact – a typical tax criminal is very different from any other type of a criminal. A typical tax criminal is about 50 years old and has at least one college degree; and, he is male.

This finding is not very surprising, because this category of males happens to also include the description of one of the most productive and affluent parts of our society. Rational risk-taking and even gambling are also characteristics that belong to this demographic.

2018 DOJ Criminal Case Statistics: Fewer but Longer Sentences

In FY 2018, 577 tax crime offenders were sentenced compared to 660 in 2017. The tax crime sentence, however, was much longer than in 2017 – 17 months in FY 2018 versus 13 months in FY 2017.

It should be pointed out that the majority of tax crime offenders entered into plea agreements. Only 7.5% of tax crime cases went to trial.

2018 DOJ Criminal Case Statistics: Judges Are Mostly More Lenient Than Federal Sentencing Guidelines

Another interesting fact is revealed by the FY 2018 DOJ criminal case statistics concerning sentencing. In FY 2018, federal judges were more lenient than the federal sentencing guidelines, thus considering them too harsh for the crimes committed. Almost 76% of sentences fell short of the minimum recommended by the federal sentencing guidelines. About 24% of tax crime sentences fell within the federal sentencing guidelines, but even 65.1% of them were at the minimum end of the recommended range.

Tax practitioners, however, should not ignore the guidelines or assume that the judges will always be lenient: 10 sentences or 7.8% of the 129 cases within the guidelines came in at the maximum end of the range. There were also additional sentences that even exceeded the guidelines.

2018 DOJ Criminal Case Statistics: Probation

In addition to prison time, the courts imposed probation and other conditional confinement which affected the average 17-month sentence that was discussed above. Without the probation, the average FY 2018 tax crime sentence was 23 months. About 32.2% of the tax crime convictions received probation or probation plus some other conditions of confinement (other than prison).

2018 DOJ Criminal Case Statistics: Fines and Restitution

72.1% of tax crime cases resulted in sentences which included restitution but no fines; 16.3% included both; 6.1% of sentences contained neither fines nor restitution. In FY 2018, the judges imposed fines and restitution totaling close to $283.1 million; this averages at $27,517 in fines and $565,766 in restitution per case.

Sherayzen Law Office Strives to Help Its Clients to Avoid Criminal Prosecution

US international tax law is replete with criminal penalties. A US taxpayer who fails to comply with US international tax requirements must always contend with the possibility of facing criminal prosecution.

One of the primary goals of Sherayzen Law Office is to help its clients reduce and even eliminate the possibility of a criminal prosecution with respect to prior noncompliance with US tax laws. A number of strategies may be employed to achieve this goal depending on the situation, including offshore voluntary disclosure and proper handling of an IRS audit.

Contact Sherayzen Law Office for professional help with reducing the possibility of criminal prosecution with respect to your past US tax noncompliance.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer | International Tax Attorney

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Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office, Ltd., is a premier Minneapolis Minnesota Voluntary Disclosure Lawyer. Why is this the case? Let’s explore the top five reasons for it.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Experience

Mr. Sherayzen started practicing law at the end of 2005. In other words, he has been an international tax lawyer for over 13 years. During this time, he has successfully conducted hundreds of voluntary disclosures for US taxpayers all around the world.

He is a highly experienced lawyer in every type of a voluntary disclosure: OVDP/OVDI (while these programs existed), Streamlined Domestic Offshore Procedures (“SDOP”), Streamlined Foreign Offshore Procedures (“SFOP”), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures.

During 2014-2016, Mr. Sherayzen also conducted the Transition to Streamlined Disclosure for some of his OVDP clients. Moreover, starting 2017, he has also helped his clients with the IRS audits of voluntary disclosures done pursuant to SDOP and SFOP. During all of these years, Mr. Sherayzen also helped clients with amendment of Forms 906 signed pursuant to OVDP or OVDI.

As a result of such an intense and diverse voluntary disclosure practice, Mr. Sherayzen has accumulated a tremendous, in many ways unique, amount of experience in offshore voluntary disclosures.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Knowledge

Knowledge comes with experience. Mr. Sherayzen may be considered a true expert on offshore voluntary disclosure. Not only does he possess a deep understanding of substantive US international tax law, but his extensive experience with offshore voluntary disclosures endowed him with a profound knowledge of the procedural aspects of offshore voluntary disclosures.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Ethical Creativity

This combination of knowledge and experience allows Mr. Sherayzen to devise creative ethical legal strategies for his clients’ offshore voluntary disclosures. Each strategy is customized based on the facts of each case. All pros and cons are carefully considered to achieve the necessary balance of risks and rewards. Potential IRS challenges are considered and prepared for. Each alternative strategy is discussed with each client in order to choose the most agreeable one to the client.

It should be emphasized that Mr. Sherayzen offers only those voluntary disclosure strategies which comply with the legal and ethical standards demanded by the IRS as well as the legal profession.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Customization

Mr. Sherayzen rejects “one size fits all” approach to offshore voluntary disclosure and strongly believes a case strategy must be considered only in light of the specific facts of each case. Too often, with dismay, he sees how many accountants and even lawyers herd their clients into one approach, charging a flat fee for it, without the proper consideration of specific facts of each case.

Mr. Sherayzen believes that each case is unique and deserves a special consideration of its special facts and circumstances. Each legal strategy must be adjusted to fit these facts and circumstances in order to produce the best result for the client.

Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Voluntary Disclosure Team

Mr. Sherayzen also counts on the support of a superb voluntary disclosure team of accountants and staff – a team which he has gradually built and trained over the past 13 years. He carefully chose each member of the team and personally trained them to master certain aspects of a voluntary disclosure. The team is not trained only in their specific duties, but also to help each other, creating a sense of comradeship among Sherayzen Law Office employees. Everyone’s work goes through at least two levels of review to assure the highest quality. As a result, Mr. Sherayzen and his team are able to conduct and produce successful highly-efficient high-quality offshore voluntary disclosures.

Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

SFOP Non-Residency | Streamlined Foreign Offshore Procedures Lawyer

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Streamlined Foreign Offshore Procedures (“SFOP”) is currently the preferred offshore voluntary disclosure option for US taxpayers who reside overseas, recently came to the United States or recently left the United States. Hence, the issue of SFOP eligibility (i.e. the ability of a taxpayer to participate in this program) is very important for these taxpayers. Today, I would like to concentrate on the SFOP non-residency requirement (I will alternatively refer to it simply as “SFOP non-residency”).

SFOP Non-Residency: Two Main SFOP Legal Requirements

In addition to meeting the general procedural requirements, a taxpayer who wishes to do a SFOP voluntary disclosure must meet two specific legal requirements. First, he must satisfy the applicable non-residence requirement. Second, he must meet the non-willfulness requirement. As I pointed out above, the focus of today’s article is on the non-residency requirement.

SFOP Non-Residency: All Participants Must Meet This Requirement

From the outset, it is important to point out that all SFOP participants must meet the SFOP non-residency requirement. This means that, in case of joint filers, both spouses must satisfy this requirement. This is the case even if only one spouse has unreported foreign assets.

SFOP Non-Residency: Two Categories

There are two distinct SFOP non-residency requirements depending on the immigration status of SFOP participants. The first type of non-residency requirements applies only to US citizens, US Lawful Permanent Residents (a/k/a “green card holders”) and their estates. The second type applies to everyone else.

SFOP Non-Residency: US Citizens and US Permanent Residents

In order to meet the SFOP non-residency requirement, a US citizen or US Permanent Resident (or his estate) must satisfy the following test:

1. In any one or more of the most recent three years for which the US tax return due date (including proper due date extensions) has passed;

2. He did not have a US abode; and

3. He was physically outside of the United States for at least 330 full days.

SFOP instructions specifically cite IRC §911 and its regulations for interpreting the term “abode”, which the IRS defines as one’s home, habitation, residence, domicile, or place of dwelling; it is not equivalent to one’s principal place of business. The IRS confirmed that temporary presence in the United States or maintenance of a dwelling in the United States does not necessarily mean that one has an abode in the United States.

SFOP Non-Residency: IRS Examples for US Citizens and US Permanent Residents

The SFOP instructions offer two examples where a US citizen or US Permanent Resident meets the SFOP non-residency requirement. I have provided both examples here verbatim:

“Example 1: Mr. W was born in the United States but moved to Germany with his parents when he was five years old, lived there ever since, and does not have a U.S. abode. Mr. W meets the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.

Example 2: Assume the same facts as Example 1, except that Mr. W moved to the United States and acquired a U.S. abode in 2012. The most recent 3 years for which Mr. W’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011. Mr. W meets the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.”

Please, note that example 2 emphasizes the fact that the non-residency requirement is satisfied even if an individual complies with it in only one of the past three years.

SFOP Non-Residency: Other Individuals

The second type of the SFOP non-residency requirement applies to all individuals who do not fit into the first category (i.e. they are not US citizens or US Permanent Residents). An individual from the second category meets the SFOP non-residency requirement if:

1. In any one or more of the most recent three years for which the US tax return due date (including proper due date extensions) has passed;

2. He did not meet the substantial presence test described in IRC §7701(b)(3).

SFOP Non-Residency: Substantial Presence Test

The Substantial Presence Test of IRC §7701(b)(3) is used to determine whether a person was a US tax resident in a given tax year. The Substantial Presence Test is satisfied if:

1. The individual was present in the United States for at least 31 days during the tax year in question; and

2. The sum of the number of days on which such individual was present in the United States during the current year and the two preceding calendar years equals or exceeds 183 days. The amount of days in the two preceding years should be multiplied by the applicable multiplier as follows: first preceding year – one-third; second preceding year – one-sixth.

I wish to emphasize that this is the general rule. There are numerous exceptions to the Substantial Present Test, including the “closer connection exception” and certain visa exemptions.

SFOP Non-Residency: IRS Example for Other Individuals

The IRS SFOP instructions again provide a useful example, which I copied here:

“Example 3: Ms. X is not a U.S. citizen or lawful permanent resident, was born in France, and resided in France until May 1, 2012, when her employer transferred her to the United States. Ms. X was physically present in the U.S. for more than 183 days in both 2012 and 2013. The most recent 3 years for which Ms. X’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011. While Ms. X met the substantial presence test for 2012 and 2013, she did not meet the substantial presence test for 2011. Ms. X meets the non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents.”

Contact Sherayzen Law Office for Professional Help With Streamlined Foreign Offshore Procedures, Including SFOP Non-Residency and Non-Willfulness Requirements

If you are not in compliance with US tax laws concerning foreign assets and foreign income, please contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers around the globe with their offshore voluntary disclosures, including Streamlined Foreign Offshore Procedures. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!