Just had an amnesty application bounced

All you procrastinators out there, wondering what to do and wondering WHEN to do it?

If you want coverage by the voluntary disclosure program currently under way for unreported bank accounts, you have to get to the IRS before they get to you.  I just had one of my applications bounced by the IRS.  Audit flag.  Client hadn’t been contacted yet.

The deal on these is that my client is no worse off for having applied for the amnesty.  The issue was going to come up anyway on the audit, right?  So the net result is that now we will have an audit where the penalties for the unreported income and the unreported foreign bank account will be assessed according to regular audit procedures.  There is also the theoretical risk of criminal prosecution to deal with.

Not fun.

Memo to all personnel:  there is one thing in your control right now.  That is the timing of filing your application for amnesty protection.  Everything else is out of your control.  I would suggest jumping in the pool (metaphorically speaking) immediately.  You gain nothing by waiting.

Win in FAQ #9 amnesty process filing

Today we received a letter from the IRS on an FAQ #9 application.  Total World Domination.    Accepted as filed, meaning no tax, no penalty, no nothing.  We sent the whole package to the IRS in Philadelphia in early June.  That gives you a sense of the time frame.  Though I do see the IRS moving much faster recently.

Get them in, people.  September 23 is coming.

Foreign account amnesty stuff

Lots of new posts over at http://foreignbankaccountamnesty.com.  We’re massively busy with this stuff right now.  The deadline is September 23, 2009, so go over there, take a look around, and call us if you need help coming clean with the IRS on unreported offshore income or financial accounts.

Call me.  Mobile +1-626-437-2500.  Yeah, even weekends.  Iron. Hot. Strike.  Etc.

Process morphs (again) for amnesty program

I’m back from a week at the beach. That’s the reason for the radio silence here. Now back to our regularly scheduled program and updates about the voluntary disclosure program for undisclosed foreign bank accounts.

Here’s the latest change to procedure that we see: send the original Power of Attorney (Form 2848) (warning: PDF) to the Criminal Investigations office where your amnesty file is pending.

Up to now we’ve been happily faxing this form to the IRS (that’s soooo Last Century Technology) then chatting up a storm with the assigned Special Agent. Now we’re back to 18th Century technology — put a piece of paper in an envelope and give it to the U.S. Postal Service.

What the Swiss settlement means

Jack Townsend has — as usual — a thoughtful analysis of the implications of the UBS settlement in which UBS will cough up a few thousand names of U.S. taxpayers.  (Exact details of the settlement haven’t been publicized yet.)

It seems clear to me (and to Mr. Townsend) that the settlement depends on the Swiss government’s own tortured reinterpretation of Swiss bank secrecy laws.  (Translation: they’re scrambling for a fig leaf). Jack says:

I focus on the legal construct that the Swiss will reportedly use to justify the limited disclosures under the exchange of information provision of the U.S. / Switzerland treaty. Switzerland has long distinguished between tax evasion and tax fraud which in U.S. law are synonymous terms. Under Swiss law as interpreted (it’s all about interpretation), tax evasion is not criminalized in Switzerland, but tax fraud is. I don’t know the precise distinction between the two in Swiss law, but gather that tax fraud (crime) is some egregious form of tax evasion (otherwise civil). The egregious form involves more affirmative steps to hide, evade and deceive. So, looking at the speculated shape of the settlement, if the depositor was an ordinary tax cheat setting up a directly owned UBS account, his name and account will not be disclosed, but if the depositor injected gossamer entity structures to further obscure, his name and account will be disclosed. Apparently, Switzerland will now interpret the latter more egregious conduct as tax fraud, permitting it to disclose at the request of the United States.

If, indeed, this is a reinterpretation of Swiss law and mutual assistance treaties (or provisions of treaties), then the reinterpretation would logically apply not just to UBS but to all Swiss financial institutions. Some other Swiss financial institutions have apparently claimed that they are not like UBS (smaller and did not exploit their enablement activity on U.S. soil) and thus that their U.S. depositors’ accounts will not be disclosed. (See the allegations in the Jeff Chernick indictment discussed here.) I am not sure that level of assurance can be given where entities are part of the structuring for the account. And, I expect that the IRS may be licking its chops to make the requests for mutual assistance with respect to other Swiss financial institutions.

Here is what I predict. It has been a long-standing assumption among tax practitioners that bad dog taxpayers should only do business with financial institutions which have no physical presence in the United States. If (hypothetically) you are a foreign bank but you have branches in the U.S., then the U.S. government can play the game of “Tell me a secret or I revoke your bank charter.”

With this settlement (and perhaps a re-negotiation of the treaties between Switzerland and the United States) Swiss banks with no U.S. presence whatsoever will not be immune. The IRS then says “Tell me a secret or the Swiss government will revoke your bank charter.”

So what will people do? Sorry to bring in this analogy but just look at the U.S. diplomatic and military strategy of the last decade or so. How successful has the application of massive military and diplomatic force been in eliminating terrorist organizations? Or if you are young and remember playing with mercury, remember what happens when you have a blob of mercury and you push it with your finger. It breaks up into a bunch of tiny blobs, disburses, and goes in 50 different directions.

Just sayin.’ Moralize all you want. But people are people. Don’t expect the world to conform to what Congress thinks is right.

Let me be clear about me and what I do professionally. Life is too short to mess around. I help people get clean and stay clean. My professional work involves being able to put everything on the table in front of a government agent and get a “You’re completely clean” answer if my client is examined. We’re on the planet once and I don’t intend to spend any of my time in a prison or on the run (mentally or in reality). kthxbai.

You want clean? You want private? You want legal? You want tax-efficient? Call me. Mobile phone +1-626-437-2500.