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Fort Lauderdale Tax Law Blog

Renouncing your citizenship? You may have to pay for that

Three weeks ago we wrote about expatriate Americans who are frustrated about the Foreign Account Tax Compliance Act. As one of the few countries that continues to tax its citizens even when they aren't living in the country, it is understandably difficult for expatriates to want to comply with American tax law. And what many people fail to remember is that these laws apply to both the Americans who were raised in the U.S. and chose to leave the country and to those Americans who were born with American citizenship, but never truly lived in the U.S.

It should be no surprise then, that some dual citizens are renouncing their American citizenship and retaining whatever other citizenship they possess. For some Canadians, this means going to an American consulate or embassy and filing the paperwork to give up their U.S. citizenship.

Former lawyer convicted of tax fraud for creating tax shelters

Nearly everyone in Fort Lauderdale is required to pay taxes, but there are some people who choose to avoid paying taxes or underpay taxes. If they are caught, these individuals may face serious criminal charges, years in prison and be ordered to make large restitution payments. What this also means is that anyone who is charged with some kind of tax crime will likely want to work closely with a tax lawyer to help clear his or her name or risk the possibility of stiff punishment.

Let's use the case of a former lawyer as an example of just what can happen if convicted of a tax crime. It should be noted that this lawyer's crimes happened outside of Florida, but because tax law is federal law, these actions would also constitute crimes in Florida. The 63-year-old lawyer was convicted of creating tax shelters to help his wealthy clients avoid paying taxes.

America's unintentional tax criminals

While most Americans don't especially look forward to paying their taxes, they realize that they must. Of course, there are those who refuse to pay their taxes or try to hide their foreign income, but a majority of Americans, both here and abroad, recognize the need to pay their taxes. Unfortunately for Americans living abroad, there are an increasing number of issues associated with taxation that has meant many people may be unintentionally breaking America's tax laws.

And it doesn't look like U.S. tax laws are going to get any simpler in the near future, as the Foreign Account Tax Compliance Act rules go into effect this month. What this law does is require that foreign banks send information about their American customers' accounts to the Internal Revenue Service.

Will fewer federal tax loopholes lead to more investigations?

A handful of senators are looking to reform the federal tax code and, in the process, eliminate a number of the loopholes. While many businesses have long asked for a lower corporate income tax, something Senator Ron Wyden has proposed, might an elimination of tax loopholes cause an increase in investigations into corporate tax crimes? Because Wyden and other senators have not yet started the process of rewriting the tax code, it is not entirely clear what the impact will be, but corporations may find themselves needing the help of tax attorneys if they come under suspicion.

Unfortunately for many Fort Lauderdale businesses, corporate taxes are not that easy to figure out. Even when a company uses an accountant or accounting firm, there is the possibility of errors, which could lead to an audit or accusations of criminal tax behavior.

Alleged FBAR violations result in still penalties for Florida man

An 87-year-old Florida man has been assessed a 150 percent penalty concerning his alleged willful failure to file a Report of Foreign Bank and Financial Accounts form. Because of this purported failure, he is being required to pay a penalty in proportion to the annual value of his Swiss account for 2004, 2005 and 2006. This penalty amounts to $2 million which would be 50 percent of the annual value of the account for each of those years. The man's attorney stated this was the largest penalty of this kind ever at least in terms of percentage.

The IRS and other federal authorities have been aggressively prosecuting perceived offshore tax evasion. The FBAR penalties concerning these offshore accounts have often exceeded criminal fines. Such prosecution has also motivated a number of taxpayers to enroll in the IRS amnesty program in an effort to lessen the threat of prosecution by federal agents.

Laws evolving concerning sales taxes for online retailers

As Florida does not have a state income tax, the state sales tax becomes an extremely important topic when it comes to taxes generated. One company at the center of the state sales tax discussion has been Amazon.com, a company that until recently paid no sales tax at all for online purchases.

Amazon now is required to pay these taxes due in part to the company building warehouses in Florida. Other online retailers are also required to pay this sales tax, but as of yet the filling out of the form concerning these taxes has only been done voluntarily. Few online retailers actually have been filling out the form.

IRS to rewrite rules concerning non-profit 501(c)(4) groups

Because the Internal Revenue Service found itself to be at the center of a controversy concerning actions taken against politically-engaged non-profit groups, the agency will likely be rewriting a number of its rules concerning this topic. The IRS was claimed to have been scrutinizing certain non-profit groups in an unfair manner.

The proposed rules that are in place received more than 140,000 public comments - the most comments ever for draft federal regulations and an indication that the proposals generated controversy from the very beginning. The chairman of the House Oversight and Government Reform Committee noted that what he called "the flawed IRS rule" was heavily criticized by First Amendment advocates from both ends of the political spectrum. He also credited those submitting the comments with putting the federal officials on notice that there were problems with the proposal.

According to Eric Holder, no bank is "too big to jail"

Attorney General Eric Holder Jr. recently announced that there is no bank considered "too big to jail." In light of Credit Suisse AG pleading guilty to conspiracy charges, this appears to be no idle boast. Holder suggests that all banks could face potential prosecution from the U.S. Justice Department if there is suspicion that information is being concealed regarding offshore bank accounts.

Credit Suisse AG manages $1,437 billion in assets. It had new assets at year-end of approximately $36 billion. Credit Suisse also has operations in over 50 countries, has been in business since 1856 and is considered the 26th largest bank on the planet. Yet Credit Suisse found itself paying $2.6 billion in penalties. It also paid $196 million to the Securities Exchange Commission for alleged securities law violations.

Rules allow IRS to look back more than 3 years in certain cases

While during most tax audits the IRS will only look back three years, there are a number of instances where this time can be greatly extended. For example, if the IRS determines that 25 percent of income was excluded from returns they may then look back six years. The time period will also be increased if $5,000 in foreign income is purportedly omitted from reporting. Also, the IRS can look back as far as they wish if no tax return was ever filed.

In one particular collection case the IRS was able to go back 30 years. The taxpayer in question was claimed to have been responsible for 30-year-old payroll tax penalties.

IRS notification concerning FATCA recently released

We've mentioned before how the provisions of the Foreign Account Tax Compliance Act will soon come into force. FATCA was actually passed in 2010 and the provisions have been delayed, but it would be a mistake to be lulled into complacence by mistakenly believing that enforcement will never come.

FATCA concerns the reporting of foreign accounts belonging to U.S. taxpayers. It places requirements upon foreign financial institutions to make certain that account information is reported on to federal officials. The IRS has now sent out a notification that specific scrutiny will be conducted concerning accounts opened after July 1, 2014 and before January 15, 2015 at these institutions. During this period the IRS will check to see if "reasonable efforts" were made by these institutions to document the status of such accounts.

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