The value of Bitcoin has surged 125% in 2017 alone. In addition to its value ascent, it has also gained in legitimacy. While it was once the currency of choice on the illicit Silk Road “dark web”, shut down by the U.S. Department of Justice in 2013, Bitcoin is now accepted for payments by Amazon.com and other mainstream businesses. Whether you’ve weathered the Bitcoin roller coaster or invested recently, you must ensure IRS compliance for Bitcoin.
The IRS has taken an interest in Bitcoin for various reasons. First, Bitcoin is largely unmonitored and stands apart from the traditional structure of U.S. banking with 1099 forms and regular reporting. There is a huge mass of Bitcoin value that is relatively unknown to the IRS, and gains in value are essentially hidden from the IRS, and the IRS doesn’t like that. In addition, Bitcoin has a large potential for tax non-compliance, both… Read More
The Wall Street Journal article, “The Tax Man Cometh and, Holy Cow, He Means Business” (WSJ, June 3-4, 2017), despite its provocative title, doesn’t break new ground on the IRS attack on offshore accounts. Instead, it offers us the following lessons:
The IRS has obtained a vast amount of information from sources that include foreign banks, the Panama Papers and the Foreign Account Tax Compliance Act (FATCA). Additional sources include Tax Information Exchange Agreements (TIEs), foreign bankers and other people’s voluntary disclosures. According to the IRS, there are hundreds of US taxpayers subject to criminal tax charges in relation to their offshore accounts, and thousands more subject to large civil fines and penalties.
There are also opportunities to come forward before the IRS gets a taxpayer’s name, in return for lower penalties. If a taxpayer willfully hid foreign assets and income (for instance, a taxpayer who set… Read More
Asher Rubinstein will be a featured speaker in an upcoming Strafford live webinar, “FBAR and U.S. Tax Reporting and Compliance Requirements for Foreign Assets” scheduled for Tuesday, June 20, 2017 at 1pm EST. We have a limited number of complimentary registrations for clients and friends of the firm.
The IRS has made modifications over the past several years to the programs that allow for late reporting of previously undisclosed offshore assets. At the same time, the IRS continually reaffirms its commitment to cracking down on U.S. taxpayers failing to disclose foreign assets. Taxpayers and their advisers must act quickly to take advantage of the benefits of a pre-emptive disclosure, before the IRS learns of the foreign asset from a foreign financial institution, a foreign banker, FATCA (Foreign Account Tax Compliance Act) report, tax treaty with a foreign government or alternative means of discovery.
The two most… Read More
Are you prepared for the possibility that your assets – – your home, your savings, your business – – could be taken from you by litigants, creditors, the government, potentially even your spouse? That could happen if you are a business owner, property owner, guarantor or a perceived “deep pocket”. If you are a potential target of a lawsuit or other legal threat, you owe it to yourself and your family to consider asset protection.
Asset protection is the safeguarding of wealth and assets from attack by future, unsecured creditors. The assets and wealth that we can protect is a broad class: your home, bank and investment accounts, business interests, professional practices, real estate including your home and investment properties, commercial properties, jewelry, cars, boats, art and other personal property, intellectual property and virtually anything else of value that you may wish to preserve for yourself and your family.
We… Read More
A recent article in the New York Times, “Workers Find Winning a Wage Judgment Can Be an Empty Victory” (April 13, 2017), discusses a proposed new law that would allow a lien against a business accused of improperly withholding wages from its workers. The law is known as a sweat law or securing wages earned against theft law.
The problem: the theft is merely alleged, not proven. If the law is passed, employees with grievances against their employers – – irrespective of whether the grievances are valid or frivolous, retaliatory or vexatious, and before any finding of wrongdoing – – will be able to tie up the employers financially. This would be crippling for the employers and could lead to significant cash flow and credit issues. Such consequences could happen on the basis of a mere claim against the employer, however flimsy or unfounded. As the New York Times… Read More
In 2014, Credit Suisse pleaded guilty in U.S. federal court to facilitating tax fraud by Americans via secret bank accounts in Switzerland. This was among the largest guilty pleas ever by a foreign bank, and Credit Suisse agreed to pay $2.6 billion in fines to the U.S. and New York State. (Our previous report from 2014 is here, along with a Bloomberg Businessweek article that quoted Asher Rubinstein in 2014.) Now, Credit Suisse is again facing similar allegations, this time for the bank’s “Israel desk” facilitating tax fraud by Israeli-Americans.
The current accusations stem from the Department of Justice prosecution of Dan Horsky, who held joint U.S. and Israeli citizenship and kept millions of dollars in cash and stock accounts at unreported Credit Suisse accounts in Switzerland. Mr. Horsky pled guilty, cooperated with DOJ and provided information about Credit Suisse that could result in a new prosecution or… Read More
Annual tax season is upon us, and we remind readers of important tax reporting requirements that must be met with respect to foreign assets.
If you had signature authority or a financial interest (e.g., ownership) in a foreign financial account (including a bank account, securities account, brokerage account, etc.) at any time during 2016, you must “check the box” on your IRS Form 1040, Schedule B, Part III, Line 7. If your foreign account(s) were valued at more than $10,000 in the aggregate, you must also “check the box” on line 7 regarding the FBAR form, FinCEN 114 (see item 5, below). This requirement is applicable to taxpayers who had beneficial ownership of, or signature authority or other authority over, such financial accounts in a foreign country. Even if you closed the accounts during 2016, you must still “check the… Read More
In the latest step by the IRS to address taxation issues in the digital on-line economy, the IRS has filed its first enforcement against convertible virtual currency, targeting tax abuse of “Bitcoin” transactions. On November 20, 2016, a Federal Court in California authorized the IRS to issue a “John Doe” summons to Coinbase, Inc., a web-based global digital currency wallet and platform. The IRS has in the past successfully used the John Doe summons to obtain information from financial institutions (e.g., UBS, HSBC and Cayman Islands banks) for a broad class of U.S. clients who are not individually named but who the IRS has reason to believe have utilized the financial institution to improperly evade tax. The John Doe summons seeks records from 2013 through 2015 for any Coinbase user with a US address, telephone number, e-mail domain, etc., and all records related to disbursement of funds to any… Read More
If you are the owner of a foreign account or other foreign financial asset that has not been properly reported to the IRS, what are your options now?
Option One: come forward now. The IRS Offshore Voluntary Disclosure Program (OVDP), still remains open. Criminal prosecution is usually avoided if you come forward before you are caught. In addition, the penalties are much higher outside the OVDP in the event you are caught by the IRS. You may be caught because of FATCA, an investigation, an audit, an information request to a foreign bank, a subpoena upon a foreign bank, or another person’s disclosure of account info. Thus, if you have not entered the Offshore Voluntary Disclosure Program, you may still come forward; you will pay penalties, but the penalties will still be significantly lower than if you don’t come forward and the IRS catches you. In that case,… Read More
Year-end is a good time to reflect upon your estate planning wishes, whether they are current and whether your survivors will be able to efficiently inherit. To this end, we offer the following questions to direct you:
Please contact us for assistance with your estate planning.… Read More
The year 2016 was an epic year in the offshore world due to the leaks of confidential offshore financial information known as the “Panama Papers”. In addition, in 2016, more countries began to report offshore financial information to the IRS under FACTA (the Foreign Account Tax Compliance Act).
Also in 2016, the IRS and U.S. Department of Justice (DOJ) continued to successfully attack offshore banking “secrecy”, moving beyond Switzerland to other foreign jurisdictions. “Going offshore” for the purposes of hiding money from the IRS is now impossible. Going offshore for asset protection from civil creditors and for tax minimization is still viable and effective, but must be tax-compliant.
Further Erosion of Offshore Bank Secrecy and Encouraging Tax Compliance
While major changes are likely on the Federal level following national elections last month (see our post here on tax changes post-elections) including the repeal of the federal estate tax, many states will still retain their own estate tax. Readers should keep in mind that on the state level, the exclusions from state estate taxes can be much lower than on the federal level. In New York, the current estate tax exemption is $4,187,500.00 and rises to $5,250,000 on April 1, 2017. New York estates valued at 105% (or greater) of the exemption lose the exemption entirely. In Connecticut, the exemption is now $2 million and the estate tax ranges from 7% to 12%, depending on the amount above the Connecticut estate tax exemption. (Connecticut, along with Minnesota, are the only two states in America which also impose a gift tax.)
On September 30, 2016, New Jersey Governor Chris Christie… Read More
Donald Trump has promised to rewrite the U.S. tax code, much like Ronald Reagan did in 1986. With a Republican House and Senate, a tax code overhaul is likely. Trump’s plan is likely to include:
Each year, we begin our end-of-year suggestions with a reminder to clients who own FLPs, LLCs and family business ventures, that they should take advantage of year-end gifting to lower estate taxes. This year the message is even more crucial, because discounted gifting of family enterprises is about to go away entirely. The recent election results will not alter (at least for now) this change in tax law.
Take Advantage of Year-End Gifting to Lower Estate Tax – Before the Law Changes: New IRS Regulations Eliminate the Ability to Discount the Value of FLP and LLC Gifts to Family Members
In August 2016, the IRS finally issued proposed regulations that will eliminate (or severely limit) the ability to discount the value of transfers of interests in closely held entities (FLPs, LLCs, family corporations) to family members. Such “leveraged gifting” has been an extremely important and common method… Read More
Throughout 2016, the IRS and Department of Justice (DOJ) have continued to aggressively pursue offshore tax fraud investigations of many foreign banks in countries across the world. Moreover, according to the DOJ Tax Division, DOJ is “now fully staffed [with] 370 attorneys and 500 employees to pursue the department’s priorities, including offshore enforcement.” Now, more than ever, U.S. taxpayers are subject to the risk of criminal prosecution and various financial penalties if they fail to report foreign assets.
Taxpayers may, however, eliminate these risks by voluntarily becoming tax-compliant through the IRS’s Offshore Voluntary Disclosure Program (OVDP), but they must do so before the IRS learns about the unreported foreign assets. There are many ways for the IRS to learn about unreported foreign assets. The Foreign Account Tax Compliance Act (“FATCA”), a U.S. law passed in 2010, requires foreign banks and financial institutions to automatically report to the IRS… Read More