News about Tax Matters

“Offshore Voluntary Disclosure Program” (OVDP) ending September 28, 2018

Richard Lehman, Tax Attorney - There are many reasons to maintain assets outside the U.S. However, problems arise when such assets have not been notified to the U.S. Internal Revenue Service (IRS). Some U.S. taxpayers may be unaware that such bank accounts must be declared to the IRS. Others may intentionally hide such accounts from the IRS. There is a legal requirement that all of these foreign bank accounts be reported to the United States on an annual basis, and that United States income taxes be paid on all of these bank deposit funds.


For only a short time longer, taxpayers with such foreign bank accounts have the opportunity to report such accounts and come into compliance (with reduced penalties) under the IRS “Offshore Voluntary Disclosure Program” (OVDP). OVDP is a voluntary disclosure program for taxpayers who have hidden foreign bank accounts, and wish to avoid potential criminal liability and/or substantial civil penalties. It begins by providing IRS Criminal Investigation (CI) with the taxpayer’s name, address, taxpayer identification number and date of birth. IRS then issues a “pre-clearance letter” and taxpayers proceed with a more complete disclosure in the form of a summary letter with exhibits (“Offshore Voluntary Disclosure Letter”). But soon this program will end. After September 28, 2018, taxpayers will no longer be able to receive IRS clearance in advance (CI) to avoid severe penalties.

 

It is thus extremely important for taxpayers to take advantage of clearing their unreported foreign bank deposits and other assets in the waning days of the OVDP.


Richard Sam Lehman, a highly respected Tax Lawyer based in Florida, today reminded U.S. taxpayers of this September 28, 2018 deadline for reporting hidden foreign bank accounts, and recommends that affected taxpayers seek expert tax advice based on their specific circumstances.


Richard Lehman explains: “The closing of the OVDP does not indicate any change in IRS enforcement priorities. Investigating offshore tax evasion remains a top priority for the IRS. The IRS enforces offshore compliance with information received under the Foreign Account Tax Compliance Act (FATCA), which is the network of intergovernmental agreements among the U.S. and other countries, as well as sources such as the Department of Justice’s Swiss Bank Program. 


Furthermore, the applies data analytics to make it more difficult to hide bank accounts offshore.”


The Foreign Account Tax Compliance Act (FATCA) requires that foreign financial institutions report the foreign assets held by U.S. taxpayers, or be subject to withholding on withholdable payments. FATCA is an important tool to fight tax evasion through foreign assets, requiring U.S. taxpayers with foreign financial assets outside the United States to report such assets.


Richard Lehman explains that taxpayers who fail to report under the OVDP by September 28 may be subject to much more severe penalties. 

“Depending on a taxpayer’s particular facts and circumstances, the following penalties could apply:  A penalty for failing to file the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”). Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. Even non-willful violations can still be subject to a $10,000 penalty per violation.”


Other penalties that may apply. There is a penalty for failing to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. The penalty for failing to file, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount (with certain exceptions). Further, there is a penalty for failing to file Form 3520-A, Information Return of a Foreign Trust 

With a U.S. Owner. Taxpayers must report ownership interests in foreign trusts. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets.


Richard Lehman concludes that “it is extremely important for taxpayers who have foreign bank deposits and other types of foreign assets to take advantage of the waning days of this program while they still have the opportunity. Otherwise they may face tax evasion charges with prison terms of up to ten years and a fine of up to $500,000. If you control such unreported foreign assets, then now is the time to seek expert tax advice.”


Further information:


Richard Sam Lehman’s video about The IRS’s FATCA, Streamlined Compliance Procedure and other Amnesty Information is at https://www.lehmantaxlaw.com/fatca-streamlined-compliance/


Mr. Lehman’s video about The IRS Offshore Voluntary Disclosure Program is at https://www.youtube.com/watch?v=sQnH7Vx0jRM. This presentation was recorded live on October 2, 2014 during the CPA Academy Live Webinar. The objective of this presentation is to advise practitioners and taxpayers of new IRS' rules and regulations governing the report and the taxation of income from foreign bank accounts and foreign assets; and the penalties and relief provisions resulting from the holding of unreported foreign assets and foreign bank accounts by United States taxpayers.


IRS website about the OVDP https://www.irs.gov/newsroom/2012-offshore-voluntary-disclosure-program


The IRS maintains a web page with Q&A about the closure of the program at https://www.irs.gov/individuals/international-taxpayers/closing-the-2014-offshore-voluntary-disclosure-program-frequently-asked-questions-and-answers


The IRS web page about the Foreign Account Tax Compliance Act (FATCA) is at https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers


New series of six videos on the impact of “Tax Cuts and Jobs Act of 2017”

Renowned tax lawyer Richard Lehman announces his new series of six videos on the impact of “Tax Cuts and Jobs Act of 2017”


Boca Raton, FL (June 2018) Richard Lehman of Lehman Tax Law announced the release of the first of the six videos which will reflect on all the changes that resulted from the “Tax Cuts and Jobs Act of 2017” (also referred to as “Trump Tax Cuts”). Most of the changes introduced by the Act went into effect on January 1, 2018 and will not affect 2017 taxes. Each of the six videos represents an important subject regarding the Internal Revenue Code and they will be relevant to many taxpayers, both foreign and domestic.

Mr. Lehman explains his motivation for developing the explanatory videos. “I have built a national reputation for handling tough tax cases, I want to use my 40 plus years of knowledge to educate and simplify for individuals these confusing and sometime overwhelming tax laws.”


The first video being released explains the impact of the Trump Tax Cuts on Ponzi Scheme theft losses. “A Ponzi scheme is a form of fraud in which a purported businessman lures investors and pays profits to earlier investors using funds obtained from newer investors.” (Wikipedia). A well-known example of a Ponzi scheme is the Bernie Madoff investment scandal discovered in late 2008. 


The Act has eliminated “tax loss carrybacks” to prior years. Therefore, the Ponzi Scheme theft loss may be less valuable for injured taxpayers.  

Explains Mr. Lehman: “This is because the tax rates, upon which tax refunds for Ponzi Scheme losses will be based, have gone down and the percentage of tax that will be refunded will be reduced.” 


The video series consists of the following six subjects:


  • Tax Planning for Recovery of the Ponzi Scheme Clawback
  • Tax Planning for Recovery of the Ponzi Scheme Losses
  • Tax Planning for Foreign Investors in U.S. Real Estate
  • Tax Planning for Foreign Investors who is Immigrating to the U.S.; Pre Immigration Tax Planning
  • The Offshore Voluntary and Streamline Procedures for Unreported Foreign Bank Accounts
  • Tax Planning for the Foreign Investor – General Principles

Mr. Richard Lehman has been practicing in Florida for nearly 40 years. Richard obtained is law degree from Georgetown Law School and he received his Master’s degree from New York University in taxation. Richard Lehman is also a frequent speaker on tax issues and has published several articles on the subject matter. His law firm website is https://www.lehmantaxlaw.com.


The first video of the series “Ponzi Scheme Losses and the 2017 Tax Cut and Jobs Act” (47 minutes long) is available at https://www.youtube.com/watch?v=DXnxsHZtiiI.


Note: These Reports are not intended to be and cannot serve as legal advice. Each taxpayer faces a unique factual situation which must be reviewed by tax advisors and legal counsel before any conclusions can be reached. 


A summary of the 2017 Tax Cut and Jobs Act is on Wikipedia at https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act_of_2017.

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