Tax

U.S. taxpayers with undisclosed foreign financial assets should take advantage of the Offshore Voluntary Disclosure Program (OVDP) before the program closes on September 28, 2018. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.

More than 56,000 taxpayers have used one of the programs to voluntarily comply since the OVDP’s initial launch in 2009, paying a total of $11.1 billion in back taxes, interest, and penalties. The number of taxpayer disclosures under the OVDP peaked in 2011 when about 18,000 people came forward; however, the number steadily declined through the years, falling to only 600 disclosures in 2017.

The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past non-compliance related to unreported foreign financial assets and failure to file foreign information returns.

Tax Enforcement

Stopping offshore tax noncompliance remains a top priority of the IRS and taxpayers should note that the IRS will continue to use other tools besides voluntary disclosure to combat offshore tax avoidance such as taxpayer education, Whistleblower leads, civil examination and criminal prosecution.

Since 2009, IRS Criminal Investigation has indicted 1,545 taxpayers on criminal violations related to international activities and remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics, according to Don Fort, Chief, IRS Criminal Investigation.

Streamlined Procedures and Other Options

A separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance. The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers; however, the program may end at some point.

The implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with U.S. tax obligations have raised awareness of U.S. tax and information reporting obligations with respect to undisclosed foreign financial assets. Because the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue offering the following options for addressing previous failures to comply with U.S. tax and information return obligations with respect to those assets:

• IRS-Criminal Investigation Voluntary Disclosure Program;
• Streamlined Filing Compliance Procedures;
• Delinquent FBAR submission procedures; and
• Delinquent international information return submission procedures.

For more information about the options available for U.S. taxpayers with undisclosed foreign financial assets, please contact the office.

• By Leon Clinton
• June 22, 2018

Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from the IRS here’s what to do:

Don’t panic. You can usually deal with a notice simply by responding to it. Most IRS notices are about federal tax returns or tax accounts.

Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do.

Your notice will likely be about changes to your account, taxes you owe or a payment request. However, your notice may ask you for more information about a specific issue.

If your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

If you don’t agree with the notice, you need to respond. Write a letter that explains why you disagree and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response.

For most notices, there is no need to call or visit a walk-in center. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call. If you need assistance understanding an IRS Notice or letter, don’t hesitate to call the office.

Always keep copies of any notices you receive with your tax records.

Be alert for tax scams. The IRS sends letters and notices by mail and does NOT contact people by email or social media to ask for personal or financial information. If you owe tax, please call to find out what your options are.

• By Leon Clinton
• June 19, 2018

In yet another new twist on an old scam–this time affecting non-resident aliens and international taxpayers–criminals are using a fake IRS Form W-8BEN to solicit detailed personal identification and bank account information from victims. Here’s how the scam works:

1. Criminals mail or fax a letter indicating that although individuals are exempt from withholding and reporting income tax, they still need to authenticate their information by filling out a phony version of Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting.

2. Recipients are then asked to fax the information back to the scammers.

3. While Form W-8BEN is a legitimate U.S. tax exemption document, it can only be submitted through a withholding agent. A withholding agent may be an individual, corporation, partnership, trust, association, or any other entity, including any foreign intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance companies.

4. In the past, fraudsters have targeted non-residents of the U.S. using Form W-8BEN as a lure to get personal details such as passport numbers and PIN codes. IRS Form W-8BEN does not ask for any of that information. The phony letter or fax also refers to a Form W9095, which does not exist. Furthermore, the IRS doesn’t require recertification of foreign status.

Scam variations

Non-resident alien and international taxpayers should be alert to bogus letters, emails, and letters that appear to come from the IRS or your tax professional requesting information. Scam letters, forms, and e-mails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. These phishing schemes may seek personal information, including mother’s maiden name, passport, and account information in order steal the victim’s identity and their assets.

Remember, the IRS does not:

• Demand that people use a specific payment method, such as a prepaid debit card, gift card or wire transfer.
• Ask for debit or credit card numbers over the phone.
• Demand immediate tax payment. Normal correspondence is a letter in the mail and taxpayers can appeal or question what they owe.
• Threaten to bring in local police, immigration officers or other law enforcement to arrest people for not paying.
• Revoke a license or immigration status. Threats like these are common tactics scam artists use to trick victims into believing their schemes.

If you have been a victim of an IRS phone scam or any IRS impersonation scam, please contact the office immediately. You should also report it to the Treasury Inspector General for Tax Administration at its IRS Impersonation Scam Reporting site and to the IRS by emailing phishing@irs.gov with the subject line “IRS Impersonation Scam.”

• By Leon Clinton
• June 16, 2018