Asher Rubinstein on “Squawk Box” – CNBC Asia, discussing foreign investments and offshore asset protection.
Asher Rubinstein's Recent Media Appearances on Offshore Tax and Asset Protection
Asher Rubinstein’s Recent Media Appearances on Offshore Tax and Asset Protection
First, Asher was interviewed on the Swissinfo News website, the international news portal of the Swiss Broadcasting Corporation, and was quoted in a November 19, 2009 article regarding offshore tax evasion.
Second, Asher was interviewed by The Wealth Net (Wealthnet.com) and appeared in a November 23, 2009 article regarding offshore tax compliance.
Finally, Asher’s article titled “Creating a Safety Net for Landlords and Property Owners”, regarding asset protection for real estate owners and investors, was published in the December 3, 2009 issue of Real Estate Business OnLine.
Contact us for copies or to discuss.
New Jersey Offshore Voluntary Disclosure Program
New Jersey Offshore Voluntary Disclosure Program
Following the lead of the IRS Offshore Voluntary Disclosure Program, New Jersey recently established an Offshore Voluntary Disclosure Program of its own. Rather than advising clients to summarily apply to the New Jersey Voluntary Disclosure Program, we investigated whether New Jersey had a legal basis to tax foreign income, as opposed solely to income within the State.
On the federal level, the Internal Revenue Code (IRC) contains a blanket, wide-reaching statute which states that “all income from whatever source derived” is considered gross income and is subject to taxation (IRC §61). On this basis, the IRC taxes all income, global, offshore sources included. Thus, offshore income is subject to federal tax.
There is no similar all-encompassing statute in the statutes of New Jersey. Title 54A of the New Jersey Statutes, New Jersey Gross Income Tax Act, Section 54A:2 1 states: “Imposition of tax. There is hereby imposed a tax for each taxable year . . . on the New Jersey gross income as herein defined of every individual.” [Emphasis supplied] Chapter 5, Section 54A:5-1, defines “New Jersey gross income” as:
- (c) Net gains or income from disposition of property. Net gains or net income, less net losses, derived from the sale, exchange or other disposition of property, including real or personal, whether tangible or intangible as determined in accordance with the method of accounting allowed for federal income tax purposes. (1) For the purpose of determining gain or loss, the basis of property shall be the adjusted basis used for federal income tax purposes.
- (e) Interest, except interest [such as municipal bond interest excluded]
- (f) Dividends, “Dividends” means any distribution in cash or property made by a corporation ….
The above definition does not specifically include income earned outside of New Jersey.
Chapter 6 of the New Jersey Statutes contains specific exclusions from “New Jersey gross income”. However, none of the specific exclusions in Chapter 6 cover foreign income.
Thus, the law is unclear because New Jersey Statutes do not expressly include foreign income, nor do they specifically exclude foreign income, from taxation.
Clients wishing to be sure that they are not running afoul of the (vague) law may decide to enter the New Jersey Voluntary Disclosure Program, and declare and pay tax, interest and a 5% voluntary disclosure penalty(2) on offshore income. Other clients may elect to challenge New Jersey’s taxation of foreign income.
Inasmuch as the IRS routinely shares information with various state tax departments, if you have made voluntary disclosure to the IRS regarding an offshore account, and do not disclose that account to the New Jersey Division of Taxation, it is likely that New Jersey will learn about the account from the IRS, in which case you might face significant fines and penalties.
Based on the above, and in light of the lack of clarity with respect to whether foreign income is properly taxable by New Jersey, we suggest that New Jersey clients with offshore accounts should participate in the New Jersey Voluntary Disclosure Program and disclose their foreign accounts to New Jersey. The New Jersey Division of Taxation has set December 31, 2009 as the deadline to submit a letter stating:
- The taxpayer’s name and address;
- Tax identification number(s) (state and federal);
- Type of tax, years affected and an estimate of tax due;
- Explanation of the circumstances;
- Whether the taxpayer applied to the IRS Voluntary Disclosure Program;
- A certification that the taxpayer will cooperate with the Division of Taxation to establish the correct tax liability and pay all taxes, interest and the 5% voluntary disclosure penalty;
- Appointment of Representative Form M-5088-R.
If you would like us to represent you in connection with the New Jersey Voluntary Disclosure Program under the same terms and conditions as our representation before the IRS, we request that you contact us, sign and return the M-5088-R form to us as soon as possible.
* * *
1. The linkage between New Jersey and the federal tax system is further established in NJ Stat. §54A:8-3, Accounting periods and methods, which sets the taxable year and accounting methods for New Jersey income tax purposes the same as under the IRC.
2. Otherwise, the penalty for tax fraud may be as high as 50%, as well as the likelihood of criminal prosecution.
Get Ready for a One-Two Punch: More Taxes and More IRS Audits
Get Ready for a One-Two Punch: More Taxes and More IRS Audits.
It’s apparent that the government needs money. We have to pay for federal bailouts of banks, insurers, the automobile industry and other troubled sectors. We have to pay for healthcare reform. We have to pay for our foreign military engagements. State and local governments need money also, and lower real estate values means lower property tax revenue.
When the government needs money, it calls on the Treasury Department. The Treasury Department obtains revenue from its tax collector – the IRS. The IRS collects all sorts of taxes: income tax, estate tax, capital gains tax, self employment tax, gift tax, generation skipping tax, etc.
There are various pending measures to raise taxes, at the federal, state and local levels, to finance all of the various government initiatives and programs. Get ready, because taxes are definitely going up.
In addition to raising taxes, the government is also more aggressively enforcing tax laws, tightening or closing loopholes and pursuing tax evaders. The IRS is stepping up its investigations of possible tax abuse and tax evasion. One example: the IRS’ recent success against UBS for facilitating offshore tax fraud, followed by criminal tax fraud indictments against Americans with supposedly “secret” offshore accounts. Other examples include pursuing improper “tax shelters” and other abusive transactions, and increasing audits and tax investigations.
Taxpayers are not only at risk of discovery by the IRS; they face an increased danger of being turned in by private informants seeking recently enlarged rewards. Since 2006, the IRS has increased tipster rewards to 15 – 30% of taxes, penalties and interest collected. In 2008 alone, informants disclosed $65 billion of allegedly unreported income to the IRS, in several thousand submissions. Foreign tax haven banks offer an opportunity for underpaid employees to get rich by becoming IRS informants. Additionally, taxpayers are at risk of being turned in by ex-partners, ex-spouses, ex-companions, ex-employees, litigation/arbitration adversaries, estranged children, or anyone else with a grudge who senses an opportunity to get even and get a reward.
The government’s need for cash, and its pursuit of tax dollars, has been well-publicized. See, for example, “IRS Brings New Focus to Auditing the Rich”, The Wall Street Journal, October 28, 2009 (stating that the IRS is not only looking at the 1040 returns filed by wealthy Americans, but “the entire economic picture of the enterprise controlled by the wealthy individual”); “New York, Needing Cash, Pursuing Tax Delinquents”, New York Times, November 10, 2009 (discussing the hundreds of thousands of tax warrants filed, across a diverse spectrum of individuals and businesses, and the millions of open and active tax cases by the New York State Tax Department); “IRS Begins Major Initiative To Audit 6,000 Companies”, Mondaq, November 24, 2009 (“all companies, large and small, as well as for-profit and not-for-profit, are within the potential scope of the IRS’ new initiative”).
What should you do?
First, work with competent, experienced tax counsel, who utilize proven, tax-compliant strategies.
Second, have tax counsel conduct a “friendly audit” – review your financial activities, bookkeeping and record keeping procedures, and accounting practices to uncover and correct sensitive areas before they are discovered in an IRS audit. Become essentially “audit proof”.
Rubinstein & Rubinstein, LLP has earned a reputation for experience, expertise and creativity in the development of sophisticated tax-compliant domestic and offshore tax strategies, designed to maximize asset preservation and to minimize taxes. We have been instrumental in the development of creative, tax compliant domestic and offshore strategies for the elimination, deferral or minimization of capital gains tax, income tax and estate tax.
If you are being audited or investigated by the IRS or a state tax authority, hire legal counsel with a proven track record of success against the government.
Rubinstein & Rubinstein, LLP has been advocating on behalf of taxpayers for close to twenty years. Our attorneys have extensive experience in the representation of clients before the IRS and before state tax departments. Such representation has included:
- the review and analysis of tax returns and underlying documentation;
- representation at audits;
- representation in Voluntary Disclosure initiatives;
- negotiation of Offers In Compromise, abatements of penalties and/or interest and installment payment plans;
- protest and/or appeal of determinations of tax deficiency and tax assessments; and removal of tax liens;
- representation of clients in civil and criminal tax investigations;
- litigation on behalf of clients before the U.S. Tax Court.
Increased government spending necessitates increased government revenue. Revenue will be raised via tax increases, as well as aggressive IRS and state action in pursuit of maximum taxpayer dollars. In this context, you need tax lawyers who can help you legally and effectively lower your tax bill. And if you are challenged by the IRS or by a state tax authority, you need effective legal counsel to fight back on your behalf.
Didn’t Voluntarily Disclose Your Offshore Account? What To Do Now, After the End of Foreign Bank Secrecy.
Didn’t Voluntarily Disclose Your Offshore Account?
What To Do Now, After the End of Foreign Bank Secrecy.
by Asher Rubinstein, Esq.
The deadline for the IRS’ Voluntary Disclosure Program for foreign accounts expired on October 15, 2009. If you are the owner of a foreign account, and you did not come forward under the Voluntary Disclosure Program, what are your options?
Option One: come forward now. The IRS will still welcome your voluntary disclosure, even after October 15. In fact, the IRS has welcomed voluntary disclosures long before the most recent, widely publicized program for foreign accounts. The difference is that after October 15, the penalties are not as low. Still, criminal prosecution is usually avoided if you come forward before you are caught. Thus, if you did not enter the Voluntary Disclosure program, you may still come forward; you will pay penalties higher than those before October 15, but they will still be significantly lower than if you don’t come forward and the IRS catches you, in which case jail time for criminal tax fraud is also a frightening possibility.
But some people will not voluntarily come forward. They do not want to disclose their offshore accounts, and they do not want to give any portion of their foreign assets to the IRS. What can they do?
Option Two: convert your account to a tax-compliant structure. We have long counseled the use of tax-compliant strategies to minimize U.S. taxation of foreign accounts. We also advise clients on the legitimization of non-compliant offshore assets. We counsel clients regarding the proper steps to transform a non-compliant offshore account into one that complies with current U.S. laws. Although we cannot erase a non-compliant past, we can ensure full compliance going forward. Such steps may significantly reduce the risk of prosecution for previous violations.
Option Three: do nothing and hope that the IRS does not discover your account. You would be relying on past banking secrecy as a means of future protection. However, as the events of 2009 have proven, foreign banking secrecy no longer exists. We need only look to UBS’ disclosure of thousands of names of Americans with accounts they thought were protected under so-called Swiss banking secrecy, or the proliferation of Tax Information Exchange (TIE) Agreements between the US and numerous foreign “tax havens”. In light of this new world order, sooner or later the IRS will likely find your foreign account and then it will be too late. This “do nothing” strategy is not recommended.
Failing to remedy a non-compliant offshore account by voluntary disclosure (even now) or by converting to a tax-compliant structure, puts you at serious risk of harsh penalties in the event of discovery, including IRS criminal prosecution. As recent events have proven, discovery is very likely. Contact us before the IRS finds you.
Protecting Assets from Divorce: New Law Requires Anticipatory Planning
In New York, under a new court rule and a parallel state law, a couple’s assets are automatically frozen upon the filing or receipt of a summons in a matrimonial action. This new regime necessitates advance asset protection planning if divorce is contemplated.
In the past, if one spouse wanted to protect assets from what he or she perceived as an impending divorce action, he or she could do so, such as by transfering assets to an offshore asset protection trust, provided he or she had not already received a Temporary Restraining Order (TRO) from a court. Now, under the new law, the other spouse need not serve a TRO; the other spouse need only file an action for divorce and marital assets are automatically frozen without a TRO. The new rule prohibiting asset transfers is binding on a plaintiff immediately when the summons is filed, and on a defendant upon receipt of service of the summons.
Thus, persons facing the threat of divorce and the threat of a spouse depleting, sequestering or making a claim for assets, must plan ahead. Whereas in the past, asset protection would be rendered impossible once a court issued a TRO, now the mere commencement of a divorce action will serve to freeze all vulnerable assets and render asset protection effectively impossible and unlawful. The bottom line: Don’t wait for a divorce; if the marriage is shaky, protect your assets well in advance.
Wealth Briefing quotes Asher Rubinstein at length on the IRS/UBS litigation
US Tax Victory Against UBS Signals Further Evasion Crackdown
14 September, 2009
Tom Burroughes, Editor in London
A lawyer acting for UBS clients in the US has told WealthBriefing why they are entitled to get information explaining why their details were handed over to US judicial authorities in February.
As reported last week, the Swiss Financial Market Supervisory Authority was told by a judge in Bern, Switzerland, that it must hand over redacted copies on its findings and court filings to three account holders. The judge is examining complaints by customers identified only as W, H and K that the regulator shouldn’t have ordered account details to be sent to the US Internal Revenue Service in February.
“It is not surprising that UBS account holders are challenging Finma’s order to release information about those accounts. Swiss law provides a mechanism whereby account holders may challenge such disclosure of information – before it is disclosed. Also, Swiss law provides for a right of appeal,” Asher Rubinstein, a partner at Rubinstein & Rubinstein, told WealthBriefing in an emailed comment.
“In other words, there exist two levels for challenging the release of information. Yet, in the UBS criminal case, it appears that Finma summarily, unilaterally and without appeal ordered the disclosure of information related to these UBS accounts,” Mr Rubinstein said.
Finma had ordered UBS to send information on some US account holders as part of the bank’s February settlement of a criminal case with the US Justice Department. Details on about 250 clients were sent. The case is separate from the civil case, settled last month, in which around 4,450 client account details will be handed to US authorities.
“From the perspective of Swiss account holders who are facing issues of non-compliance with tax laws, it would have been beneficial to know the criteria by which Switzerland will disclose account information,” Mr Rubinstein said.
“There are many people with non-compliant accounts at UBS, and all of them would like to know the criteria by which UBS will disclose the 4,500 accounts as settlement of the civil litigation. If, for instance, there is a $1 million threshold, then people with accounts less than $1 million might breathe a sigh of relief. But it is precisely for that reason that the IRS is not divulging the criteria, so that all account holders will remain nervous,” he said.
“So too with Finma, account holders are eager to learn of Finma’s criteria for divulging information. The Swiss court ordered that Finma documents be released, but the details of Finma’s decion making, the details of Finma’s criteria of which accounts should be given up, will be redacted,” he continued.
“Like the UBS settlement criteria, Finma’s criteria, at least for now, remain secret. The end result is that account holders cannot rest easy. Of course, the Voluntary Disclosure Program may offer such account holders much better terms than if they are found out otherwise. On the issue of Finma’s criteria, an open question is whether Swiss account holders have a legal right to know what Finma’s criteria are, but that is an issue for Swiss constitutional lawyers to analyze,” he added.
The legal case continues.
Asher Rubinstein quoted in Wall Street Journal / Dow Jones about the US-Switzerland Tax Treaty
3rd UPDATE: US And Switzerland Sign Revised Tax Treaty
By Darrell A. Hughes and Martin Vaughan Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)–U.S. Treasury Secretary Timothy Geithner on Wednesday signed an updated taxation treaty with the Swiss government, a move the U.S. hopes will help it combat offshore tax evasion by U.S. citizens.
The treaty, signed by Geithner and Switzerland Ambassador Urs Ziswiler, provides the U.S. Internal Revenue Service with greater access to information on U.S. account holders at Swiss banks. However, the U.S. must be able to clearly identify the suspected account holder, along with the Swiss bank, according to details the Swiss Finance Ministry released earlier this week.
Another new provision in the treaty would ensure that U.S. holders of individual retirement accounts that include Swiss companies in their portfolio won’t be taxed until the income from that account is distributed. A Treasury official said pension funds are already exempt from withholding taxes, and the revised treaty would extend that treatment to IRAs.
The treaty, effective from Wednesday, is still subject to a lengthy ratification process that includes a review by parliament and interest groups such as business associations. It must also be ratified by the U.S. Senate.
The U.S. pact effectively represents Switzerland’s 11th such agreement, and, together with a 12th with an undisclosed country expected to be signed Thursday, means the alpine nation is close to being removed from a grey list drawn up by the Organization for Economic Cooperation and Development, or OECD.
Earlier this year, Switzerland was included on the OECD’s grey list of countries, such as Austria, Chile and Singapore, that hadn’t yet implemented a key article of the OECD Model Tax Convention aimed at combating tax evasion. In the wake of the financial crisis, increasingly indebted governments have come down harder on tax evaders and the lack of financial transparency associated with tax havens.
Tax evasion isn’t solely an American issue, Geithner said. “It is a global issue requiring global coordination.”
He later added that the agreement “strengthens our longstanding relationship with Switzerland and will help serve as an example for others around the world.”
The treaty revisions were negotiated in the midst of a legal battle over the identities of UBS AG (UBS) clients who are suspected of evading U.S. taxes through secret Swiss accounts.
The U.S. has been trying to pierce the veil of Swiss banking secrecy to get the identities of U.S. tax cheats who used Swiss accounts to dodge taxes. In a settlement agreement reached in August, UBS, with the blessing of the Swiss government, agreed to provide the IRS with names of roughly 4,450 of its American clients.
The IRS was initially seeking access to data on more than 50,000 UBS clients.
Geithner said the revised treaty will help resolve disputes between U.S. and Swiss tax authorities by “providing binding mandatory arbitration in cases where tax authorities have been unable to find a resolution after a reasonable period of time.”
With world leaders convening in Pittsburgh for the G20 summit, Geithner plans to highlight the progress being made, with hopes of “building on this progress in the coming months and years,” he said.
The new U.S.-Swiss treaty is based on model language from the OECD, which some transparency advocates criticize as too lenient on secrecy jurisdictions.
Heather Lowe, Legal Counsel at advocacy group Global Financial Integrity, said the treaty still stipulates that very specific information on suspected tax evaders be provided by the country requesting information. And it explicitly states that the agreement doesn’t commit the parties to automatically or spontaneously turn over information.
But Lowe said the agreement makes progress on preventing Switzerland from falling back on its national laws – under which tax evasion is not a crime – to shield information. It includes a clause, not found in the OECD language, stating that authorities shall have power to enforce disclosure of information required by the treaty “notwithstanding…any contrary provisions in its domestic laws.”
Despite the symbolic importance for Switzerland, some observers questioned how much the strengthened agreement will add to the ability of the U.S. to catch tax evaders.
“In light of the UBS settlement, the treaty is almost superfluous,” said Asher Rubinstein, a partner in the law firm of Rubinstein & Rubinstein.
While the treaty requires the U.S. to provide specific information about suspected tax evaders in information requests, a John Doe summons can be used by the Justice Department without any information on individuals. “The U.S. doesn’t need the treaty if it can just issue another John Doe summons,” Rubinstein said.
-By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684;
IRS Extends Deadline for Foreign Bank Account Disclosure . . . or Not?
IRS Extends Deadline for Foreign Bank Account Disclosure . . . or Not?
by Asher Rubinstein, Esq.
Rubinstein and Rubinstein separates itself from other attorneys by our attention to detail and committment to our clients. Thus, when we read today’s news report that the IRS has extended the deadline for application to the Foreign Account Voluntary Disclosure Program, we noted that many other practioners added that the FBAR deadline was extended as well. That is not precise and not correct. The FBAR deadline is extened to October 15, but only for taxpayers who have already reported foreign income and already paid tax on that foreign income. For many people, their foreign account was not reported, and tax not paid, which means that they now have until October 15 to apply for the Voluntary Disclosure Program, but the FBARs are still due by September 23!
While it would have made more sense had the IRS made a uniform extension for both Voluntary Disclosure and the FBAR, it is our job to work within the regulations as they exist, to advise clients accordingly, and to pay special attention to IRS inconsistencies that can lead to costly client errors.
Our recommendation remains: if you have a non-compliant foreign bank account, you should enter the Voluntary Disclosure Program and file the FBARs. Be guided by the correct deadlines, and which deadline applies to your particular facts. Contact us for more information.