Practice Limited to Taxation


Posted on 03/23/2013

Two high level IRS Criminal Investigation (CI) officials participated an American Bar Association, Tax Section, Webinar, “Criminal Tax Enforcement Hot Topics: The IRS Perspective,” (March 20, 2013).

  • § Edward “Ted” Cronin is the Division Counsel/ Associates Chief Counsel (Criminal Tax) in the IRS Office of Chief Counsel.
    § Paul A. Camacho is Special Agent-in-Charge, IRS Criminal Investigation

Without ascribing statements specifically to either IRS official, the sense of the comments about the IRS Offshore perspective is:

  • § International is second only to Identity Theft as the top priority for IRS CI activity.
    § IRS efforts to combat offshore evasion of tax has been re-invigorated by the success the agency has had with:
  • § UBS and Wegelin Bank cases.
    § The participation in and leads created by its Offshore Voluntary Disclosure Initiatives in 2009, 2011 and 2012.
    § The movement of nations in the international community to sign, or negotiate, or, begin discussions concerning Intergovernmental Agreements under FATCA.
    § The OECD impetus for more nations to sign Tax Information Exchange Agreements.
    § The success in overcoming, under the “required records doctrine,” Fifth Amendment objections to subpoenas of U.S. citizens to produce foreign bank records.
    § The growing trend of individual foreign banks to cooperate with IRS is its anti-evasion efforts.
    § The increasingly large Bank Secrecy Act data-base developed using FBARS, SARS and other bank and currency reports that enable IRS to connect the dots between individuals, promoters and institutions involved in offshore evasion or money laundering (described as “tax evasion in progress).
    § The use of attaché offices and training of foreign jurisdiction tax personnel to spot indications of so-called “badges of fraud.”
    § Beginning in 2014, that foreign banks will begin issuing Forms 1099 to U.S. account holders.
    § 90 percent of tax cases ending in a guilty pleas.

The bottom line is that IRS is not letting go of this issue and those who still think they are safely hidden offshore need to rethink their strategy. Alternatives may include:

  • § Entering the 2012 OVDP for those with criminal exposure or who face draconian civil FBAR penalties.
    § Entering the 2012 OVDP and opting out for those who want safety from criminal sanctions but believe the civil penalties outside of the 2012 OVDP will be lower than the 27.5% highest penalty within the program.
    § Filing delinquent returns and FBARS directly with IRS for those who are quite certain of reasonable cause grounds or for the lesser non-willful FBAR penalty scheme, or,
    § Utilizing the 2012 OVDP streamline process for expats who meet certain requirements.

What is clearly evident to all but the blindest of blind – the tax haven world is shrinking and IRS will be picking more low-lying fruit from the offshore tree as more leads are developed and investigated.

Each case involving unreported offshore accounts is unique and a first step in every matter is deciding how to most safely proceed. This involves sound judgment as much as knowledge of the law and process.

© 2013 by Robert S. Steinberg, Esquire
All rights reserved.


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