international tax lawyers

BSI SA is the First Bank to Reach Resolution Under Swiss Bank Program

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On March 30, 2015, the US Department of Justice announced that BSI SA, one of the 10 largest private banks in Switzerland, was the first bank to reach a resolution under the DOJ Swiss Bank Program.

Background Information

The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared United States-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

“Because of the department’s continuing efforts to root out offshore tax evasion, Swiss banks are operating much differently today than they did just a few years ago, and the department’s Swiss Banking Program is a big part of that change,” said Acting Deputy Attorney General Sally Quillian Yates. “When we announced the program, we said that it would enhance our efforts to pursue those who help facilitate tax evasion and those who use secret offshore accounts to evade taxes. And it has done just that. We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals.”

Since 2009, the department has charged more than 100 offshore bank accountholders, dozens of facilitators, and financial institutions. The department’s offshore enforcement efforts have reached far beyond Switzerland, as evidenced by publicly announced actions involving banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean.

“Today’s action sends a clear message to anyone thinking about keeping money offshore in order to evade tax laws,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “Fighting offshore tax evasion continues to be a top priority for IRS-CI and we will trace unreported funds anywhere in the world. IRS-CI special agents are our nation’s best financial investigators, trained to follow the money and enforce our country’s tax laws to ensure fairness for all.”

BSI – DOJ Non-Prosecution Agreement

According to the terms of the non-prosecution agreement signed on March 30, 2015, BSI agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts, and pay a $211 million penalty in return for the department’s agreement not to prosecute BSI for tax-related criminal offenses.

BSI had more than 3,000 active United States-related accounts after 2008, many of which it knew were not disclosed in the United States. In resolving its criminal liabilities under the program, BSI provided extensive cooperation and encouraged hundreds of U.S. accountholders to come into compliance. BSI is also assisting with ongoing treaty requests.

BSI’s Past Activities

BSI helped its U.S. clients create sham corporations and trusts that masked the true identity of its U.S. accountholders. Many of its U.S. clients also opened “numbered” Swiss bank accounts that shielded their identities, even from employees within the Swiss bank. BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many U.S. accountholders without names visible on the card itself.

BSI not only helped U.S. clients shield their identity from the Internal Revenue Service (IRS), but helped them repatriate cash as well. BSI admitted that its relationship managers and their U.S. clients used code words in emails to gain access to funds.

Consequences for US Taxpayers With Undisclosed Foreign Accounts

The consequences of the BSI’s participation in the DOJ Program for Swiss Banks are far reaching for the US taxpayers with undisclosed foreign accounts, particularly BSI accounts.

First, the most immediate consequence of the BSI’s Non-Prosecution Agreement is the higher OVDP penalty. Most U.S. taxpayers who enter the IRS offshore voluntary disclosure program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of BSI’s non-prosecution agreement, its noncompliant U.S. accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the OVDP program.

Second, as part of its participation in the DOJ Program for Swiss Banks, BSI provided a very large amount of information regarding its US accountholders as well as individuals who facilitated US tax evasion. This means that these individuals are at the very high risk of being investigated and/or prosecuted by the IRS for tax non-compliance.

Third, as part of its participation in the DOJ Program for Swiss Banks, BSI (and other banks in the Swiss Bank Program) also provided detailed information to the DOJ about transfers of money from Switzerland to other countries. The Tax Division and the IRS intend to follow that money to uncover additional tax evasion schemes.

This means that any US taxpayers who transferred the money out of Switzerland to avoid Swiss bank disclosure are at very high risk of the IRS detection.

What Should US Taxpayers with Undisclosed BSI and Other Swiss Bank Accounts Do?

If you are a US taxpayer who has (or had any point since 2008) undisclosed financial accounts at BSI and any other Swiss bank, you should contact an international tax lawyer to consider your voluntary disclosure options as soon as possible.

What if voluntary disclosure is no longer possible due to investigation by the IRS? The answer that your international tax lawyer will give you is likely to depend on the facts of the case. In some cases, it may be best to pursue a noisy voluntary disclosure option. In other cases, it may be best to contact the IRS and work with them directly to reduce the penalties.

“An individual is not culpable simply because he or she is identified by a bank within the program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the department’s Tax Division. “With that said, the department strongly encourages those individuals and entities currently under indictment, under investigation, or who have concerns regarding their potential criminal liability to contact and fully cooperate with the department to reach a final resolution.”

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts

If you have (had at any point since the year 2008) undisclosed foreign accounts (whether BSI accounts or any other foreign bank), you should contact the international tax law firm of Sherayzen Law Office for experienced professional help.

We have helped hundreds of US taxpayers around the globe to bring their US tax affairs in compliance with the simultaneous goal of reducing the penalty exposure to a reasonable amount under the IRS rules. And we can help You!

Contact Us to Schedule Your Confidential Consultation Now!

2015 Second Quarter IRS Underpayment and Overpayment Interest Rates

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On March 13, 2015, the IRS announced that the underpayment and overpayment interest rates for the calendar quarter beginning April 1, 2015, will remain unchanged. The rates will be:

three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

How are the IRS Underpayment and Overpayment Rates Determined?

Under the Internal Revenue Code, the rate of interest is 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 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.

What do the IRS Underpayment and Overpayment Rates Affect?

The most important impact of the IRS underpayment and overpayment rates is felt whenever the tax liability of a US taxpayer changes from the liability indicated on the original tax return. Most often, this happens as a result of an amended tax return filed voluntarily by the taxpayer or as a result of an IRS audit.

If, as a result of an audit or an amended tax return, the taxpayer is assessed with additional tax liability, the underpayment interest rate will be applied from the due date of the original tax return (usually, April 15) through the date of assessment of additional tax liability (or the date the amended tax return is filed). Conversely, if an amended tax return or an IRS audit produces a refund, then, the IRS is obligated to pay the overpayment interest rate on the refund due.

IRS Underpayment Rate and PFIC Calculations

The IRS Underpayment Rate has a surprising additional affect on a taxpayer’s liability. If a taxpayer owns a PFIC that is considered a Section 1291 fund, then, under the default PFIC method, he will need to calculate PFIC interest on the PFIC tax due. This PFIC interest is calculated at the IRS underpayment rates.

Incorrect or Delinquent Form 5471 Penalties

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Various Form 5471 penalties are associated with failure to file Form 5471 or the filing of an incorrect Form 5471. In this article, I will describe the most important of these penalties.

IRS Form 5471

The IRS Form 5471 is an extremely complex form that is used to satisfy the reporting requirements of two esoteric sections of the Internal Revenue Code: 26 U.S.C. § 6038 (“Information reporting with respect to certain foreign corporations and partnerships”) and 26 U.S.C. § 6046 (“Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock”).

As long as Form 5471 requirements are met, the Form must be filed by certain U.S. citizens and residents who are officers, directors, or shareholders in specified foreign corporations with their US tax returns.  Failure to file Form 5471 or failure to file a correct Form 5471, can result in steep penalties.

Form 5471 Penalties: Failure to file information required under section 26 U.S.C. § 6038(a) 

From the outset, it is important to note that 26 U.S.C. § 6038 applies to two different parts of Form 5471: the Form 5471 proper (i.e. the first four pages containing the identifying information and Schedules A through I) and Schedule M of Form 5471.   Failure to file either is enough to trigger a $10,000 penalty for each annual accounting period of each foreign corporation. If the IRS sends the taxpayer a notice of a failure to file, an additional $10,000 penalty (per foreign corporation) will be charged for each 30-day period (or fraction thereof), during which the failure continues after the 90-day period in which the notification occurred, has expired. This additional penalty is limited to a maximum of $50,000 for each failed filing.

Furthermore, there is an income tax penalty associated with the failure to comply with 26 U.S.C. § 6038 in a timely manner – the taxpayer may be subject to a 10% reduction of certain available Foreign Tax Credits. A further 5% reduction may be applied for each 3-month period (or fraction thereof), during which the failure to timely report or file continues after the 90-day period of IRS notification has expired. (26 U.S.C. § 6038(c)(2) places certain limitations on this penalty).

The Second Set of Form 5471 Penalties: Failure to file information required by 26 U.S.C. § 6046 and related regulations (Form 5471 and Schedule O)

In addition to 26 U.S.C. § 6038 Form 5471 penalties, there is also an additional set of Form 5471 penalties associated with 26 U.S.C. § 6046 (Form 5471 and Schedule O).  Failure to comply with 26 U.S.C. § 6046 will subject the taxpayer to another $10,000 penalty for each failure for each reportable transaction. Additionally, if the failure to report or file continues for more than 90 days after the date the IRS mails notice of this failure, an additional $10,000 penalty will apply for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. This additional penalty is limited to a maximum of $50,000.

Form 5471 Non-Compliance May Result in Criminal Penalties

In addition to civil penalties under 26 U.S.C. § 6038 and 26 U.S.C. § 6046, criminal penalties may apply to Form 5471 filers in certain circumstances. In particular, a willful failure to file an accurate Form 5471 may activate the  broad provisions of 26 U.S.C. § 7203 (“Willful failure to file return, supply information, or pay tax”), 26 U.S.C. § 7206 (“Fraud and false statements”), and 26 U.S.C. § 7207 (“Fraudulent returns, statements, or other documents”).

Form 5471 Penalties and Persons Other Than the Filer

In situations where the filer should have filed Forms 5471 for other persons, but failed to do so, Form 5471 penalties may be extended to these other persons.

Contact Sherayzen Law Office For Help With Form 5471 Penalties and Compliance

If you partially or fully own a foreign corporation, you may be subject to the Form 5471 requirements.  As explained in this article, failure to timely and/or correctly comply with Forms 5471 may result in steep Form 5471 penalties.

This is why you should contact the experienced Form 5471 tax professionals of Sherayzen Law Office.  We can help you  prepare and file your Form 5471 as part of your annual compliance as well as help deal with the Form 5471 voluntary disclosure. So, Call Us Now to Schedule Your Confidential Consultation!

Costa Rica Corporations and U.S. Tax Reporting

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It has become common for U.S. citizens to engage in business abroad through a foreign corporation.  Costa Rica is definitely one of the most favored countries in Central America, partially due to its reputation for stability.  It is important to understand, however, that U.S. citizens who engage in business abroad through a foreign corporation must comply with very important tax reporting requirements.   In this article, I will try to briefly go over some of the most common US tax reporting requirements that may concern U.S. owners of Costa Rica corporations.

Form 5471

IRS Form 5471 is the most direct reporting requirement that U.S. owners of Costa Rica corporations may face.  Form 5471 may undoubtedly be considered as one of the most complex U.S. tax forms, both in its content as well as its scope.

As of the time of this writing, there are four non-exclusive (i.e. a taxpayer can belong to multiple categories at the same time) categories of filers of Costa Rica corporations who must file Form 5471.  Determining the categories, if any, to which a taxpayer belongs is a legal decision and a very important one since the number and severity of the reporting requirements directly depends on the number of  categories applicable to the taxpayer.

If the taxpayer is required to Form 5471 for Costa Rica corporations, then he must do so by attaching the completed Form 5471 with all of the numerous attachments to his tax return.

Failure to file Form 5471 for Costa Rica corporations may have severe consequences.  Explore this article for more information on Form 5471 penalties.

Form 8938

IRS Form 8938 is a newcomer to the world of U.S. tax compliance – in fact, the tax year 2001 is the first year that the form must be filed with the taxpayer’s U.S. tax return.

Form 8938 should be filed only if certain threshold requirements are met.  In case the taxpayer already disclosed the information regarding the specified foreign asset on Form 5471, Form 8938 should be filed to cross-reference Form 5471.  Explore this article to learn more about Form 8938.

FBAR

As long as the basic threshold requirement is met, the Report on Foreign Bank and Financial Accounts (“FBAR”) may be required if the taxpayer is the owner of a foreign corporation and has signatory authority (either as an officer of the corporation or an owner) over the corporate accounts.

It is highly important to comply with the FBAR requirement because the FBAR contains perhaps the most severe penalty structure of any other reporting requirement in the entire Internal Revenue Code (IRC).

Subpart “F” Income

If you are an owner of a Controlled Foreign Corporation (“CFC”) and the CFC has subpart “F” income, then you may be required to report subpart “F” income on your personal tax return (e.g. Form 1040).  This income is likely to be treated in a highly unfavorable way by the IRC.

Other Forms

Other forms may be required to be filed as a result of the your ownership of Costa Rica corporations.   Most of these additional tax reporting requirements are triggered by various transactional activities conducted by the corporation or between you and your corporation.  You should consult an international tax attorney for detailed analysis of your specific situation.

Contact Sherayzen Law Office for U.S. Tax Compliance Requirements if You Own Shares of Costa Rica Corporations

If you own a corporation in Costa Rica or you intend to do so, you should contact Sherayzen Law Office.  Owner Eugene Sherayzen will analyze your particular situation, determine what U.S. tax reporting requirements apply to you and help you comply with them, and offer a rigorous ethical tax plan designed to make sure that you do not overpay your U.S. taxes under the current IRC provisions.

The Location of Your International Tax Lawyers Austin Texas

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Choosing your lawyer among International Tax Lawyers Austin Texas is not a simple task, especially for a US taxpayer thinking about doing an offshore voluntary disclosure. One of the critical questions often arises is whether it is better to retain an international tax lawyer in Austin or in Minneapolis if you live in Austin? It is also related to a broader question: is the location of your international tax lawyer important?

Let’s analyze this question in the context of retaining one or more International Tax Lawyers Austin Texas.

International Tax Lawyers Austin Texas: US International Tax Law and Geography

One of the most critical aspects of US international tax law is that it does not respect national or state borders. Rather, it focuses on the individual taxpayer; if the taxpayer is a US person, then he is subject to US international tax law.

Another important aspect of US international tax law is that it applies uniformly (with a few exceptions, such blockades, sanctions, et cetera) irrespective of where the individual taxpayer is.

This means that, if you are in Austin and searching for International Tax Lawyers Austin Texas, it does not matter whether your lawyer is physically located in Austin, Minneapolis or Buenos Aires. The knowledge of international tax law of your lawyer and the application of that law to your specific case does not depend on the physical location of your lawyer.

International Tax Lawyers Austin Texas: Expertise and Experience in International Tax Law is the Critical Criteria, Not Geography

Based on this logic, it is easy to see that the geographical location of your International Tax Lawyers Austin Texas is not the most important factor in your decision to retain an attorney. Rather, it is a lawyer’s expertise in international tax law that should drive your decision.

If you feel comfortable with the lawyer’s grasp of the subject matter and his experience in handling cases involving issues similar to the ones involved in your case, then these factors should be the critical factors on which your decision to retain the an international tax lawyer should be based.

International Tax Lawyers Austin Texas: “Face-to-Face” Meetings Obstacle Has Been Overcome By Modern Technology

There is a common misconception that your international tax lawyer must be near you in order to understand you and be able to render advice.

About a third of my clients are overseas and, additionally, more than a third of my clients are located in the United States but outside of Minnesota, leaving me with only about a quarter of my clients physically located in Minnesota. Yet, this factor never influenced the outcome in any of my cases.

In the modern world of Video Skype Conferences, the value of the face-to-face meetings has deteriorated and, in most cases, completely disappeared.

Contact Sherayzen Law Office for Help With International Tax Issues

Hence, if you are searching for International Tax Lawyers Austin Texas, contact the international tax law team of Sherayzen Law Office (physically based in Minneapolis, MN). Our team of international tax professionals has developed deep expertise in international tax law based on the help that we have rendered to hundreds of US taxpayers worldwide.

So, if you have international tax issues with respect to undeclared foreign accounts, international tax compliance or international tax planning, please contact an experienced international tax attorney, Mr. Eugene Sherayzen of Sherayzen Law Office for comprehensive legal and tax help.

Call Us Today to Schedule Your Confidential Consultation!