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Facts of DOJ tax enforcement for IRS offshore tax enforcement

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    Last week we discussed the public remarks made by Acting Assistant Attorney General Caroline Ciraolo before the before the Congressional Subcommittee on Regulatory Reform, Commercial and Antitrust Law. In these prepared statements, Ms. Ciraolo revealed not only the DOJ’s consistent success in prosecuting tax matters , but also the DOJ’s emphasized areas for tax enforcement. In her statements Ms. Ciralo reconfirmed that offshore tax enforcement remains a high priority for the IRS and DOJ. Furthermore, she discussed the U.S. government’s efforts to combat other forms of tax fraud including Stolen Identity Return Fraud (SIRF), abusive tax shelters, abusive tax promotions, and measures to combat tax protestors.

    In another recently held public forum at NYU, Ms. Ciraolo and Ms. Nanette Davis, a DOJ Tax senior litigation counsel, offered additional insights into the DOJ’s efforts to crackdown on offshore tax evasion. Furthermore they discussed additional aspects of the Swiss bank program, increased scrutiny for quiet disclosures, and an enhanced enforcement focus on businesses that fail to pay over trust fund taxes.

    Swiss and Category 2 Banks to Complete Compliance by Close of 2015

    While in the last blog post we talked about Ms. Ciraolo’s discussion regarding the Swiss Bank Program’s efforts to increase compliance in Switzerland, the categories of financial institutions under the program, and the yet to be ratified “Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income.” At the NYU forum, Ms. Davis further expanded on what steps Swiss banks must take to reduce the penalties they can face under Foreign Account and Tax Compliance Act (FATCA).

    In short, Swiss Banks looking to reduce or eliminate the penalties they face must show that its U.S. linked accounts are “not-undeclared.” The bank must state that its accounts are compliant. The United States government will then verify the accuracy of this assertion by using OVDP disclosures, quiet disclosures, and other sources of offshore tax information. Ms. Davis stated that, under the Swiss Bank Program, some banks have already altered their interpretations of Swiss bank secrecy laws. She claims that many banks have already changed their practices so that they can disclose significantly more information. Ms. Ciraolo stated that she expects all Swiss category 2 banks to be in compliance by the end of 2015.

    Quiet Disclosures & Voluntary Disclosures Will Receive Heightened Scrutiny

    Ms. Davis also revealed that individuals who have utilized one of the voluntary disclosure programs or who will make a quiet disclosure are likely to face increased scrutiny. Individuals who have certified their FBAR or FATCA noncompliance as non-willful when it was actually willful may face enforcement action. The DOJ has stated that it is using the data gathered through its Swiss bank program to identify taxpayers who certified non-willfulness when there was a voluntary or intentional nondisclosure of the account.

    Furthermore, taxpayers who make quiet disclosures should also expect to face increased scrutiny. The DOJ has gone on record stating that data collected through the voluntary disclosure and Swiss bank programs reveals a wealth of information about taxpayers and their tax filings. In this instance, the programs have helped the DOJ more readily identify quiet disclosures. Furthermore, “the patterns of late returns and FBARs are clear in the data.” Taxpayers who have certified non-willfulness when signs of knowing or voluntary action were present should seek the counsel of an experienced tax attorney.

    Businesses to Face Heightened Payroll Tax Enforcement

    Payroll taxes, sometimes referred to as trust fund taxes, are probably most familiar in the form that they often appear on a paycheck: as a FICA or federal deduction. Businesses have an obligation to account for, hold, and pay over these taxes. These funds are actually the property of the government and are merely held in trust and paid over by the employer. According to Ms. Ciraolo, this tax obligation will also be subjected to increased scrutiny. Furthermore, Ms. Ciraolo specifically mentioned that business owners who make egregious tax claims such as failing to pay over the trust fund tax while simultaneously claiming a withheld tax deduction on their personal return will be targeted for enforcement.

    Taxpayers Face Intense Scrutiny

    Today’s taxpayers today are facing a level of scrutiny and tax enforcement that would have seemed unthinkable even a decade ago. Taxpayers who hold offshore accounts or assets must make disclosures or face civil or criminal tax penalties. Likewise, business owners are now expected to face even greater scrutiny in their tax filings. For taxpayers, achieving compliance with the tax code and disclosure laws has never been more pressing. In light of the IRS and DOJ’s numerous pronouncements on the offshore tax and payroll tax issues, taxpayers who continue to attempt to avoid their disclosure and other tax obligations are likely to face criminal tax charges. The Tax Law Offices of David W. Klasing can help taxpayers and businesses address these tax concerns. To schedule a reduced-rate tax consultation, call 800-681-1295 or contact us online.


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