Steven L. Cantor, Cantor & Webb
Daniel W. Levy, McKool Smith
February 6, 2015
Cross-Border Tax Enforcement
Developments and Trends –
Where Are the U.S. Department of
Justice and the IRS Headed?
Trends & Developments
• International Data Exchange Service (“IDES”)
• The “bad bank” list was expanded in December to include: Sovereign Management & Legal Ltd. (Panama) and Bank Leumi (Israel)
• Tax Advocate: problems remain with the IRS offshore voluntary disclosure program
• IRS panel at Florida Bar/FICPA International Tax Conference: disclosure programs are not going to be available forever
• Hiding funds in offshore accounts now included on IRS list of “Dirty Dozen” tax scams
Trends & Developments (cont.)
• Department of Justice’s Swiss bank program expected to result in resolutions and data transmission in first half of 2015
• Among data to be provided are transactional details for transfers to other banks (“leaver lists”)
• DoJ and IRS expected to use data provided by Swiss banks to make requests (TIEA, MLAT) to other countries
• Greater coordination of IRS and Department of Justice in administering OVDP
• Cross-border tax enforcement expected to remain a big priority for IRS-Criminal Investigation and Tax Division
• Are IRS and DoJ moving beyond Switzerland? If so, to where? • Continued use of “John Doe” summons process – allows IRS to
obtain information about unidentified taxpayers
• To date, IRS has targeted correspondent bank accounts of two Caribbean banks – Butterfield and CIBC First Caribbean
• Recently (December 2014), IRS sought records related to Sovereign Management & Legal, Panama-based company service provider • Implications of IRS/DoJ attacks on non-U.S. banks correspondent
bank accounts are massive (e.g., Wegelin correspondent bank seizure)
• Arrest of Caymans investment professionals/Turks & Caicos
lawyer (March 2014)
• DoJ resolution with Liechtenstein asset manager that had
Caymans insurance subsidiary (April 2014)
• Civil forfeiture of funds held by Swiss lawyer/fiduciary that were
used to buy real estate in the Bahamas (April 2014)
• Criminal prosecution of Russian national living in U.S.; accounts
held in Switzerland in the name of Bahamian entities and
initially funded by transfers from UBS Bahamas (March 2014)
o Streamlined Foreign Offshore Program – for taxpayers
whose failure to file was the result of non-willful conduct -
3 years of income tax returns, 6 years of FBARs, must pay
tax and interest, but no penalties;
o Streamlined Foreign Domestic Program – for taxpayers
whose failure to file was the result of non-willful conduct -
3 years of income tax returns, 6 years of FBARs, must pay
tax and interest and a 5% penalty based on value of
foreign accounts and other unreported foreign assets;
o Offshore Voluntary Disclosure Program – 8 years of income tax returns, 8 years of FBARs, must pay tax, interest and tax penalties (failure to file, late payment, accuracy), and a 27.5% penalty (or 50% if account at a “bad bank”) based on value of foreign accounts and other unreported foreign assets. Full payment must be made at time of submission.
o Offshore Voluntary Disclosure Program with Opt Out - 8 years of income tax returns, 8 years of FBARs, must pay tax, interest and tax penalties (failure to file, late payment, accuracy). Penalties will be determined in accordance with an examination. This may result in penalties less than the 27.5% OVDP penalty, but risk of “willful” FBAR penalty. Full payment (including the 27.5% penalty) must be made at time of submission.
o Delinquent Information Return Procedure – if no additional tax owed, submit 6 years of unfiled information returns with “reasonable cause” explanation. If reasonable cause accepted, no penalties.
o Delinquent FBAR Procedure – if no unreported income from unreported account(s), submit 6 years of FBARs. No penalties. o All programs are available only if the taxpayer is not already
under IRS investigation and has not received notification from the IRS regarding their reporting/filing failure.
Client has lived his entire life in The Bahamas, but
was born in the U.S. He never had a U.S. Social
Security number but has a U.S. passport.
He never spent a significant amount of time in the
United States, but whenever he travels to the U.S. he
uses his passport.
The client has never filed any taxes in the U.S.
Individual has lived most of their life in The
Bahamas, but was born in the United States.
From the years 1990 until 1997, has lived, worked
and filed tax returns in the U.S.
In 1997, individual went back to The Bahamas and
hasn’t filed anything in the U.S. since.
A client born in the U.S., who moved to The
Bahamas in 2008.
She has filed U.S. income taxes every year until 2008,
and hasn’t filed anything since then.
Client has ten million dollars in Sovereign Bank in
Panama.
Client is from Brazil.
Client has a trust in The Bahamas and owns a
Bahamian corporation that either a) owns an
investment portfolio or b) conducts an act of trader
business.
Trustee consults with us with regard to the FATCA
classification for the trust and for the company.
Contact Information
Steven L. Cantor Cantor & Webb, P.A.
1001 Brickell Bay Drive, Suite 3112 Miami, FL 33131 Phone: (305) 374-3886 Fax: (305) 371-4564 Email: [email protected] Website: www.cantorwebb.com Daniel W. Levy McKool Smith P.C.
One Bryant Park, 47th Floor New York, NY 10036
Phone: (212) 402-9412 Fax: (212) 402-9444
Email: [email protected] Website: www.mckoolsmith.com
