International Tax Law Archives

Liechtenstein Bank Pays $23.8 Million to U.S. in Non-Prosecution Agreement

The United States has agreed to forego criminal prosecution against the bank, Liechtensteinsche Landesbank AG, for opening and maintaining bank accounts for U.S. taxpayers from 2001 through 2011 and assisting U.S. taxpayers in evading their U.S. tax obligations. In addition, new Liechtenstein legislation has resulted in U.S. taxpayer names being turned over to the Department of Justice.

IRS extends FATCA Registration Date

The FATCA registration website is projected to be accessible to financial institutions on August 19, 2013. Other key dates for registration, however, will be extended by six months. After the FATCA registration website opens, a financial institution will be able to begin the process of registering by creating an account and inputting the required information for itself, for its branch operations, and, if it serves as a "lead" financial institution, for other members of its expanded affiliated group. All input information will be saved automatically in the registration system and associated with the financial institution's account. 

OECD Recommends Steps to G8 to End Offshore Tax Evasion

The Organization for Economic Cooperation and Development (OECD) has identified four steps necessary for transparency and the automatic exchange of information regarding financial accounts through a cost effective and secure system, in an effort to end offshore tax evasion. On June 18, 2013, the OECD issued a report regarding the need to create a more equitable and transparent global tax system to the Group of Eight (G8), a forum for the governments of eight of the world's eleven largest national economies.

GAO Recommends Changes to Catch Tax Evasion by Offshore Account Quiet Disclosures

Early this year, the United States Government Accountability Office (GAO) identified an area of tax evasion the IRS may have missed. Specifically, taxpayers with undisclosed offshore accounts who have attempted to come into compliance quietly, and not through one of the IRS' voluntary disclosure programs, may be getting away with paying lower tax, interest and penalties than the taxpayers would pay by participating in one of the offshore compliance programs.

Disproportionate Penalties for FBAR Non-Filers

In the National Taxpayer Advocate's 2012 Report to Congress, it issued data highlighting the disproportionate penalties to account holders with undisclosed offshore accounts who participate in the IRS' Offshore Voluntary Disclosure Program (OVDP). Generally, if a taxpayer has an aggregate of more than $75,000 at any time during the year in undisclosed accounts, the taxpayer in the OVDP program will be required to pay a 27.5 percent penalty on the highest account balance for one of the years included in the offshore voluntary disclosure. Some taxpayers barely pass the $75,000 threshold while others greatly exceed that amount. In the recent report, OVDP participants in the 10th percentile with accounts of $78,315 paid penalties that were greatly disproportionate to those in the 90th percentile with accounts in excess of $4 million. For those in the 10th percentile, they paid at least 575 percent of the tax, interest and penalties on their unreported income. Contrast that with those in the 90th percentile who paid only 86 percent or less.

Express Delivery FBAR Address and Mandatory Electronic Filing of FBAR Forms

As you likely are aware, FBARs are due June 30th, which is a date that cannot be extended, even when June 30th is on a weekend, as it is this year. Therefore, FBARs are due to be received by the Department of the Treasury in Detroit, Michigan, by Friday, June 28th. On page one of the FBAR, a post office box is listed for mailing. However, if you want to send your FBAR by FedEx or UPS, you may send FBARs by express delivery to:

Willful Failure to File an FBAR Penalty is 50% Per Year

The U.S. is seeking to recover 50% of the account balance for each of the four years taxpayers willfully failed to file an FBAR report in United States v. Zwerner (SD FL No. 13-cv-22082-CMA). The U.S. asserts the Zwerner's hid between approximately $723,000 and $845,000 per year from 2004 through 2007 in their offshore Swiss bank account, and because of this, the United States is entitled to ½ of the balance per year (resulting in a total of more than twice the maximum value of the account). The penalty for failing to file an FBAR varies depending on whether the failure was non-willful or willful. Regardless, the penalties are assessed per account, per account holder, per year of violation. So if a taxpayer has three joint accounts that have gone unreported for three years, the taxpayers could be 18 separate penalties assessed.

Mexican Land Trust arrangements deemed not to be Trusts under Treasury Regulation section 301.7701-4(a)

Revenue Ruling 2013-14 describes a typical Mexican Land Trust (MLT), or fideicomiso, and concludes that the arrangement is not a trust within the meaning of § 301.7704-4(a). 

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