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FBAR and U.S. Tax Reporting:

Compliance Requirements for Foreign AssetsUnraveling Foreign Asset and Income Reporting Obligations,

Navigating Available Voluntary Disclosure Programs

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, FEBRUARY 6, 2019

Presenting a live 90-minute webinar with interactive Q&A

Dennis N. Brager, Esq., Certified Tax Specialist, Brager Tax Law Group, Los Angeles

Deborah J. Jacobs, Owner, The Law Office of Deborah J. Jacobs, New York

Asher Rubinstein, Partner, Gallet Dreyer & Berkey, New York

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FBAR and U.S.

Tax Reporting

and CompliancePRESENTED BY

DENNIS N. BRAGER, ESQ.

BRAGER TAX LAW GROUP, A P. C.

About Dennis Brager

Former IRS Trial Attorney

State Bar Certified Tax Specialist

40+ Years of Tax Dispute Experience

with IRS, EDD, BOE, and FTB

Problems

Nationally Recognized Tax

Litigation Attorney

Copyright © 2019, Brager Tax Law Group

The New Updated Voluntary

Disclosure Practice (Son of OVDP)

Set forth in IRS Memo dated November 20, 2018 to be incorporated into the IRM

The Offshore and Domestic Voluntary Disclosure Practice have been merged into one program.

Effective for all disclosures received after September 28, 2018

No set penalty structure – just guidelines

Requires “full cooperation” with the IRS

Resolution by agreement is stressed

Taxpayer may request an appeal with the IRS Office of Appeals


Son of OVDP

Step 1

Taxpayer submits a pre-clearance request to CI on Form 14457 (to

be revised)

Eligibility still determined under IRM 9.5.11.9(12/2/2009)

Taxpayers with illegal-source income are not eligible

Disclosure must be timely, truthful and complete

Taxpayer must cooperate in determining her correct tax liability


Son of OVDP

Step 1

Timely Disclosure Before:

A civil or criminal investigation has begun or the IRS has notified the

taxpayer of its intention to begin an audit/investigation

The IRS has received information from a third-party (e.g., informant,

other governmental agency, or the media) alerting the IRS to the

specific taxpayer’s noncompliance

The IRS has initiated a civil examination or criminal investigation

which is directly related to the specific liability of the taxpayer

The IRS has acquired information directly related to the specific

liability of the taxpayer from a criminal enforcement action (e.g.,

search warrant, grand jury subpoena)


Son of OVDP

Step 2: the Civil Audit

After pre-clearance, the taxpayer will be subject to a civil audit

The VD period is generally 6 years

If the audit is not resolved by agreement, the audit may be

expanded and penalties may be imposed for all years

Requires “management” approval

All required returns (amended?) must be submitted for the

disclosure period

Generally, full payment is expected of all taxes, penalties, and

interest

OICs or Installment Agreements are not ruled out


Son of OVDP

Step 3: Penalty Framework

Fraud Penalty for 1 year only

i.e. 75% under 6663 or 6651(f)

Applies to the year with the highest tax deficiency

May apply fraud penalty to more than 1 year in “limited circumstances”, e.g., where there is no agreement about the tax liability

Willful FBAR penalties will be asserted in accordance with IRM 4.26.16, and 4.26.17

Generally 50% of the highest balance during the 6-year period should not be imposed

Note the reversed burden of proof

Information return penalties will not automatically be imposed

Examiners will take into account the imposition of other penalties and resolve the examination by agreement

Copyright © 2019, Brager Tax Law Groupc

Statute of Limitations as a Strategy

You can’t decide about whether to extend the SOL unless

you know what the SOL is.

You can’t decide on whether or not to make a voluntary

disclosure or enter Streamlined unless you know what the SOL

is.

An agreement to extend the SOL for income taxes is not valid

unless it is executed by the taxpayer AND the IRS before the

SOL would have otherwise expired.

A client can waive the SOL with respect to FBAR violations

before or after the SOL has otherwise expired.


FBAR Statute of Limitations

Six years from the date that the FBAR is due without

regard to whether it was filed late or not at all.

Originally, the due date was June 30th and no

extensions were permitted.

Beginning with the 2016 tax year, the FBAR is due April

15th and extensions to October 15th have been

granted without any request being made.

Check calendar in close cases


Income Tax

Statute of Limitations Issues

General 3-Year Rule

6-Year Rule

Unlimited Statute of Limitations


When Must an Assessment

Be Made?: Income Taxes

I.R.C. § 6501(a): The general rule is that a tax may not be

collected until it has been assessed, and it must be within 3

years of the filing of the return, regardless of whether the return is

timely filed or filed late.

If the return is filed late, the 3 years begin to run from the date

the return is filed.

Returned filed early: the deemed filing date will be the statutory

due date, generally April 15th.

Returns filed on extension: the filing date will be considered the

date of delivery


Major Exceptions Related to

Income Taxes

Willful attempt to evade tax: IRC Section 6501(c)(2): Unlimited

No return (Substitute For Returns (SFRs) don’t count): Unlimited

The SOL doesn’t begin to run until the return is filed.

Extension of the SOL by agreement: IRC Section 6501(c)(4)

Substantial Omission of Income: IRC Section 6501(e): 6 years

NOL Carrybacks or Capital Loss Carrybacks: IRC Section 6501(h). Tied to loss year

IRC Section 6501(e)(2)(A): Failure to report income from certain foreign assets: 6 years

Failure to notify Secretary of certain foreign transactions:

IRC Section 6501(c)(8): 3 years after the IRS is provided with the

information


Exception – False Returns or Intent to

Evade Tax or Fraudulent Return Filed

Where a false return is filed with the intent to evade tax, the tax

may be assessed or collection may occur at any time after the IRS has been filed. IRC § 6501(c)(1).

IRS must prove by clear and convincing evidence that the

taxpayer’s return was false or fraudulent along with the requisite

intent to evade tax.

Subsequent filing of a “correct amended” return will not start the 3-year assessment statute under IRC § 6501(a), unless it is filed

prior to the due date of the return. Badaracco v. Commissioner,

464 U.S. 386 (1984)


Extended SOL Triggered by Failure to Timely

File Foreign Information Reporting Forms, or

Disclose Income from Specified Foreign

Financial Assets IRC Section 6501(c)(8), as amended by the HIRE Act, provides that if certain information related

to foreign transactions is not provided to the IRS, then the SOL remains open “with respect to any tax return, event, or period to which such information relates.” That is, the SOL is extended for the entire tax return.

Prior to amendment, IRC Section 6501(c)(8) provided that the SOL only remained open “with respect to any event or period to which such information relates,” but not the entire tax return.

If, however, the taxpayer is able to show the failure to file the required foreign information reporting form was due to reasonable cause and not willful neglect, the extended SOL only applies to the item or items that should have been reported on the foreign information reporting form, and not the entire tax return.

Effective date: Returns filed after March 18, 2010, or returns filed on or before that date if the SOL had not already expired.

The HIRE Act also amended IRC Section 6501(c)(8) to provide that the failure to file IRS Form 8938 to report foreign financial assets is an additional basis for extending the SOL for 3 years from the date such information is reported to the IRS.

Generally, Form 8938 was first required with respect to 2012 tax years.

Originally, only individuals were required to file Form 8938

Beginning with 2016 tax years, “Specified Domestic Entities” as well as individuals must file Form 8938

The SOL extension is applicable not only in the case of the non-filing of the appropriate form, but if the information listed on the form is incomplete. See e.g. Treas. Reg. Section 1.1298-1(d).


Extended SOL Triggered by Failure

to Disclose Income from Specified

Foreign Financial Assets

Amendment to IRC Section 6501(e) regarding omission of

income from foreign assets:

IRC Section 6501(e)(1)(A)(ii) provides that if a taxpayer omits or fails

to report more than $5,000 of gross income attributable to a

“specified foreign financial asset” (as defined in IRC Section 6038D),

a 6-year SOL applies to the entire tax return.

For purposes of the SOL extension, the filing threshold

($50,000/$75,000 for single; $150,000 for joint) for filing IRS Form 8938

are not taken into consideration. Thus, a taxpayer may not be

required to file Form 8938 but could still be subject to an extended

SOL under IRC Section 6501(e).


International Reporting Forms that Trigger

the Extended Statute of Limitations

IRS Form Reporting Obligation IRC Section

Form 926 Non-recognition transfers to foreign corporations 6038B

Form 3520 Gratuitous transfers to foreign trusts and U.S. owners of foreign trusts 6048(a), (b)

Form 3520-A Distributions received by U.S. persons from foreign trusts 6048 (c)

Form 5471 U.S. persons who control foreign corporations 6038

Form 5471 U.S. persons who become officers or directors of a foreign corporation and certain 10% or more shareholders

6046

Form 5472 U.S. Corporations 25% or more foreign owned 6038A

Form 8621 Shareholder of a PFIC 1298(f)

Form 8858 Foreign Disregarded Entities 6038, 6038B

Form 8865 U.S. persons with certain 10% or more ownership changes 6046A

Form 8865 U.S. persons who control foreign partnerships 6038

Form 8938 Specified persons required to report specified foreign financial assets 6038D


Extension of SOL Based

Upon John Doe Summons

IRC § 7609(e)(2) suspends limitations for

assessment under IRC § 6501 for the John Doe

class on the 6-month anniversary of service of the summons until final resolution of response or a

withdrawal of the summons.

John Doe Summons Outstanding for more than 6

months include:

UBS

Stanford

HSBC India

Coinbase, Inc.


Best Practices for Advising

Non-Compliant Taxpayers

Understand the law, including recent case law

and IRS guidelines, if any.

Make sure you carefully question your client about the facts.

Advise clients of the potential criminal risks.

Each year of a multiple-year case must be

addressed.

Prepare a spreadsheet of possible penalties under

different alternatives

Alert the client to worst case scenarios.


Best Practices for Advising

Non-Compliant Taxpayers

(Cont’d)

Do not rely on the unverified facts set forth by your client.

Instead, review all back-up documentation including prior

tax returns, relevant bank statements, and emails.

Obtain copies of any organizer that your client filled out and sent back to the tax preparer

Take into account unlimited SOL for most Foreign

Information Reporting Forms, as well as other SOL issues

If your client states that he or she relied on a third party,

interview that person (usually the tax preparer)

File a Freedom of Information Act (FOIA) Request if an

appeal is necessary, or sometimes during an audit.


25

WEBINAR ON

“FBAR AND U.S. TAXREPORTING AND COMPLIANCE”

February 6, 20191:00-2:30 PM EDT

Presenter: Deborah J. JacobsThe Law Office of Deborah J. Jacobs

45 Rockefeller Plaza, Suite 2000New York, NY 10111

(212) 332-3248www.jacobstaxlaw.com

http://www.jacobstaxlaw.com/

26

Deborah J. Jacobs, Owner The Law Office of Deborah J. Jacobs

▪ Since 2009, Ms. Jacobs has devoted a significant portion of her practice to international tax compliance matters--primarily in the areas of Offshore Voluntary Disclosure, Dual Citizenships, FBAR Compliance, and FATCA Compliance. She has had frequent speaking engagements on the Offshore Voluntary Disclosure Programs, most recently speaking at an American Bar Association Tax Section Meeting and as a panelist for Strafford and Bloomberg BNA Webinars. She also has been quoted in Tax Notes Today and Politico’s Morning Tax on related issues.

▪ In addition, Ms. Jacobs has more than 28 years of experience in all aspects of international tax practice, including issues related to Subpart F, PFIC, repatriation, foreign tax credit, and tax treaty planning. Her cross-border transactional experience includes mergers and acquisitions, post-merger/acquisition integrations, cross-border financings, private equity transactions, and structured finance.

▪ A more detailed profile of Ms. Jacobs can be found on her law firm’s website at http://jacobstaxlaw.com/lawyer/aboutus/Attorney-Profile_pa10075.htm

▪ Ms. Jacobs can be reached at 212-332-3248 or at [email protected]

http://jacobstaxlaw.com/lawyer/aboutus/Attorney-Profile_pa10075.htm

mailto:[email protected]

27

Streamlined Filing Compliance Procedures

• On March 13, 2018, the IRS announced that it will end the Offshore Voluntary Disclosure Program (the “OVDP”) on September 28, 2018. However, the IRS has said that the Streamlined Filing Compliance Procedures will remain available after the 2014 OVDP closes. Caution: these programs could be closed at any time.

• Only Taxpayers that can certify under penalties of perjury that their conduct was non-willful may use the Streamlined Filing Compliance Procedures.

• The Streamlined Filing Compliance Procedures has helped about 65,000 taxpayers come into compliance.

• The Streamlined Filing Compliance Procedures are available to both non-resident and resident U.S. taxpayers who can demonstrate that their conduct was non-willful.

28

What is the Purpose of theStreamlined Filing Compliance Procedures?

• The Streamlined Filing Compliance Procedures were designed to provide options to help both U.S. taxpayers residing overseas, AND in the U.S., comply with their U.S. tax obligations.

• The two programs are:

(1) the Streamlined Domestic Offshore Procedures (“SDOP”) and

(2) the Streamlined Foreign Offshore Procedures (“SFOP”)

• Compared to the Former 2012 Streamlined Program, the SDOP and the SFOP include a broader section of non-compliant, but non-willful, U.S. taxpayers.

• For the first time, U.S. resident taxpayers who are out of compliance with reporting their foreign source income or, who have failed to file international information returns such as the FBAR, could now participate.

29

General Eligibility for theStreamlined Filing Compliance Procedures

• The Streamlined Filing Compliance Procedures are designed only for individual taxpayers, including estates of individual taxpayers. However, it should be noted that an estate might have a difficult time demonstrating the non-willfulness of a deceased individual.

• To be eligible for the SFOP: the taxpayer must meet the definition of a “non-resident taxpayer” and filed delinquent or amended income tax returns. All penalties are waived.

• To be eligible for the SDOP: the taxpayer must fail to satisfy the “non-residency” criteria and file amended income tax returns. There is a 5% miscellaneous penalty on assets reportable on an FBAR or Form 8938.

• Taxpayers must certify under penalties of perjury: that their conduct for the failure to report all income, pay all tax and file all information returns, including FBARs, was due to non-willful conduct.

30

Inherent Risks in theStreamlined Filing Compliance Procedures

• Once a taxpayer makes a submission under either of the Streamlined Procedures (i.e., the SFOP or the SDOP), she/he may not participate in the 2014 Offshore Voluntary Disclosure Program (OVDP).

• If the IRS receives or discovers evidence of willfulness, fraud, or criminal conduct on the part of the taxpayer, the IRS could open an examination or investigation that could lead to civil fraud penalties, FBAR penalties, information return penalties, or even a referral to Criminal Investigation. But, a taxpayer can reduce the risk of a false certification by fully disclosing all facts.

• In addition, the IRS has said that there will be no pre-clearance protection under the Streamlined Procedures.

• Accordingly, taxpayers who are concerned that their failure to report income, pay tax, and/or to file required information returns was due to willful conduct should seriously consider participating in the OVDP.

31

Inherent Risks in theStreamlined Filing Compliance Procedures, con’t

• When the Streamlined Filing Compliance Procedures came into effect in 2014, a number of willful taxpayers tried to convince practitioners that they were, in fact, non-willful.

• Given the end of the 2014 Offshore Voluntary Disclosure Program (“OVDP”), it is likely that some willful taxpayers will try to enter the Streamlined Filing Compliance Procedures rather than go the new voluntary disclosure route.

• Practitioners need to be wary of taxpayers trying to pass themselves off as non-willful by thoroughly vetting prospective clients.

32

The Non-Willful Certification Statement for theSDOP (Form 14654) and SFOP (Form 14653)

• Under the FAQs (13 for the SDOP/6 for the SFOP), Taxpayers must include a narrative statement of facts setting forth the specific reasons for a failure to report all income, pay all tax, and submit all required information returns, including FBARs.

• Taxpayers must include the whole story including both favorable and unfavorable facts.

• Specific reasons, whether favorable or unfavorable, should include the Taxpayer’s personal background, financial background, and anything else the Taxpayer believes is relevant to his/her failure to report all income, pay all tax, and submit all required information returns, including FBARs.

33

The Non-Willful Certification Statement for theSDOP (Form 14654) and SFOP (Form 14653), con’t

• The Taxpayer should provide a complete story about his/her foreign financial account/assets:

1. What is the source of the funds in all of your foreign financial accounts/assets?

2. Was the account/asset inherited?

3. Did the Taxpayer open the account while residing in a foreign country?

4. Did the Taxpayer have a business reason to open or use the account?

5. What contacts did the Taxpayer have with the account/asset including withdrawals, deposits, and investment/management decisions.

• If the Taxpayer (or return preparer) inadvertently checked “no” on Schedule B, the Taxpayer should provide an explanation.

34

The Non-Willful Certification Statement for theSDOP (Form 14654) and SFOP (Form 14653), con’t

• If the Taxpayer owned or controlled a foreign entity (eg. corporation, trust, partnership) and failed to properly report ownership of the entity or control of the entity, the Taxpayer should explain why he/she failed to do so, including whether the Taxpayer had any knowledge of his/her reporting obligations.

• If the Taxpayer relied on a professional advisor, then he/she should provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background on how the Taxpayer came into contact with the advisor and frequency of communication with the advisor.

• If married taxpayers submit a joint certification and have different reasons for their non-compliance, then each should provide the individual reasons separately in the statement of facts.

35

What is Non-Willful Conduct?

• In order to participate in the SFOP or the SDOP, a Taxpayer must certify under penalty of perjury that his/her conduct was non-willful.

• The IRS has said that “non-willful conduct” for the new Streamlined Programs is “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”

• The IRS also has said that it will give no further definition of non-willful conduct forpurposes of the SFOP or the SDOP (other than that stated above). It has said that the concept of willfulness is well documented in case law and expects practitioners to apply those definitions, as well as relevant portions of the IRS Manual in advising clients on whether their conduct fits within the definition of non-willfulness.

36

What is Non-Willful Conduct?, con’t

• What kind of evidence is relevant to demonstrate “non-willfulness” for purposes of the SDOP and the SFOP when the definition of non-willful conduct ranges from negligent conduct to conduct resulting from a good faith misunderstanding of the law?

• How does a taxpayer actually prove that he/she did not know about including offshore income on his/her U.S. tax return or that he/she never knew about the FBAR filing requirement? What kind of supporting evidence does the taxpayer need to show?

• In determining whether the taxpayer can legitimately certify that he or she is non-willful, ALL relevant facts and circumstances should be analyzed to determine whether the taxpayer’s conduct is really non-willful.

37

What is Non-Willful Conduct? Use of an Accountant/Tax Preparer

Questions relevant to a finding of non-willfulness:

• Did the taxpayer use an accountant or paid return preparer to prepare the tax returns?

• If so, was the taxpayer given a tax organizer? If yes, did the taxpayer fill it out truthfully? Does the taxpayer have a copy of the organizer?

• If the taxpayer did not receive an organizer from the tax advisor, was he/she asked about the existence of any offshore accounts or assets, or about any foreign source income?

• If the advisor did not ask the taxpayer the above questions, did the taxpayer affirmatively tell the accountant or tax return preparer about the existence of any offshore accounts, offshore assets, or foreign source income?

38

What is Non-Willful Conduct? Taxpayer’s Knowledge and Level of Sophistication

• Did the taxpayer have any knowledge of the foreign source income, foreign accounts or foreign assets? Why was there income?

• What is taxpayer’s level and type of education?

• Does the taxpayer have any specialized knowledge of tax rules or finance or the fact that the U.S. requires U.S. persons to report income on a worldwide basis on their tax returns?

• Does the taxpayer know anything about an FBAR or international information returns, such as a Form 5471?

39

What is Non-Willful Conduct? Taxpayer’s Connection to the Country, etc.

• Was the taxpayer a citizen or resident of the country where the accounts/assets were/are located? If not, why were the accounts opened in that country?

• If the taxpayer opened the account, did he/she do so with a U.S. passport, if applicable? Was the account opened in a jurisdiction with no bank secrecy laws?

• What were/are the sources of the funds in the accounts?

• Is the source of funds traceable to previously taxed income? Were the funds an inheritance? Were the funds from taxpayer’s work in the country where the accounts are located?

40

What is Non-Willful Conduct? Activities in the Offshore Account

• What type of activities took place with respect to the accounts? Deposits, withdrawals, wire transfers? If so, how frequent were these activities?

• Were there any trades in the accounts? If so, who managed the accounts?

• Was there a credit card associated with the account? If so, did the taxpayer ever use it? If so, how frequently?

• Did the taxpayer receive regular statements from the bank? If not, did a relative or friend receive statements or did the bank have instructions not to send any statements to the taxpayer?

41

What is Non-Willful Conduct? Activities in the Offshore Account, con’t.

• Has the account ever been moved? If so, why? Was it moved to a tax transparent country or to a jurisdiction with a tradition of bank secrecy?

• Was an entity used when the account was opened? If so, did the bank require the use of an entity? Was it used to disguise the true identity of the account owner?

42

The Concept of Willful Blindness

• The IRM defines willfulness in the FBAR context as “a voluntary, intentional violation of a known legal duty.” (IRM 4.26.16.4.5.3).

• Under the concept of “willful blindness,” willfulness may be attributed to a person who has made a conscious effort to avoid learning about the FBAR reporting requirements.

• Key Question: Under all the facts and circumstances, should the taxpayer have inquired about the reporting of a foreign financial account and/or its income? Or should the accountant or tax preparer have made an effort to explain what kinds of foreign accounts and assets are reportable?

• What if the wrong box is checked on Schedule B? Implications? The mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, by itself, to establish that an FBAR violation was due to willful blindness.

43

Differences Between the SDOP and the SFOP

The primary differences between the SFOP and the SDOP are:

1. Residency vs. non-residency: in the SFOP, the taxpayer qualifies as a non-resident U.S. taxpayer, whereas in the SDOP, the taxpayer qualifies as a resident U.S. taxpayer;

2. Penalties: in the SFOP, all penalties are waived--the taxpayer only needs to pay taxes and interest due over a three-year period. In the SDOP, the taxpayer must pay taxes and interest due over a three-year period AND a 5% miscellaneous penalty on the highest account balances of the taxpayer’s offshore assets (using a six-year look back period and the year-end balances); and

44

Differences Between the SDOP and the SFOP, con’t.

3. Information returns: Paragraph 21.8.1.27.2.1 (9)(6) of the Internal Revenue Manual instructs account managers to refer any SDOP case with five or more foreign information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, or 8621) to LB&I OVDP Compliance. The five information return threshold is a combination of all years filed. (This referral threshold does not apply to the SFOP).

Example: Taxpayer’s submission contains three Forms 5471 for 2011 and three Forms 5471 for 2012. This submission would be referred to LB&I since the total number of information returns submitted is six.

45

Eligibility Requirements for the SFOP

In addition to the general eligibility requirements discussed before,

the Taxpayer must:

1. Meet the applicable non-residency requirement (for joint filers, both spouses must meet the applicable non-residency requirement);

2. Have failed to report the income from a foreign financial asset

and failed to pay tax on it;

3. May have failed to file an Information Return, such as an FBAR; and

4. Such failures resulted from non-willful conduct.

46

Non-Residency Requirement of the SFOP

Individual U.S. citizens or lawful permanent residents (e.g., Green Card

Holders) or their estates meet the applicable non-residency requirement if:

1. In any one or more of the most recent three years for which the U.S. tax return due date (or properly extended due date) has passed, the taxpayer did not have a U.S. “abode” and the taxpayer was physically outside the U.S. for at least 330 full days.

2. Neither temporary presence of the taxpayer in the U.S. nor maintenance of a dwelling in the U.S. by an individual necessarily means that the taxpayer’s “abode” is in the U.S.

47

What is a U.S. Abode?

• The SFOP looks to the definition of Abode in IRC Section 911(d)(3) and Treas. Reg.§ 1.911-2(b).

• Abode has been defined as one’s home, habitation, residence, domicile, or place of dwelling.

• It does not mean your principal place of business.

• Abode has a domestic rather than a vocational meaning and does not mean the same thing as “tax home.”

• The location of your abode often will depend on where you maintain your economic, family, and personal ties.

• You are not considered to have a tax home in a foreign country for any period in which your abode is in the U.S.

48

What is a Non-Resident for Purposesof the SFOP?

• Example One: Taxpayer was born in the U.S. but moved to France with his parents when he was six years old, has lived in France ever since, and does not have a U.S. abode. Taxpayer meets the non-residency requirement applicable to individuals who are U.S. citizens or green card holders.

• Example Two: Assume the same facts except that Taxpayer moved to the U.S. and acquired a U.S. abode in 2012. The most recent 3 years for which the Taxpayer’s U.S. tax return due date (or properly extended due date) has passed are 2013, 2012 and 2011. Taxpayer meets the non-residency requirement applicable to individuals who are U.S. citizens or green card holders because in one or more of the most recent three years for which the U.S. tax return due date has passed, the taxpayer did not have a U.S. abode.

49

Non-Residency Requirement For Taxpayers who are not U.S. Citizens or Green Cardholders

• The SFOP provides a different non-residency requirement for taxpayers who are not U.S. citizens or green card holders.

• Taxpayers in this category will meet the non-residency requirement if, in any one or more of the last three years for which the U.S. tax return due date (or properly extended due date) has passed, the

taxpayer did not meet the “substantial presence” test.

50

Non-Residency Requirement For Taxpayers Who are not U.S. Citizens or Green Card Holders, con’t.

• Example: Taxpayer is not a U.S. citizen or a green card holder. Taxpayer was born in Italy and resided in Italy until May 1, 2012, when her employer transferred her to the U.S. Taxpayer was physically present in the U.S. for more than 183 days in both 2012 and 2013. The most recent 3 years for which the taxpayer’s U.S. tax return due date (or properly extended due date) has passed are 2013, 2012 and 2011. While Taxpayer did meet the substantial presence test for 2012 and 2013, she did not meet it for 2011.

Result: Taxpayer meets the non-residency requirement for purposes of the SFOP.

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The SFOP ProcedureOnce it is determined that a Taxpayer is eligible to participate in the SFOP, the Taxpayer must:

• File delinquent or amended tax returns, together with all required information returns for each of the most recent three years and pay any tax and interest due;

• File delinquent or amended FBARs for each of the most recent six years; and

• File a Certification in which the Taxpayer certifies under penalty of perjury that the failure to file tax returns, report all income, pay all tax, and submit all information returns, including FBARs was due to non-willful conduct.

There are special rules if the Taxpayer is seeking relief for failure to elect deferral of income from retirement plans.

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Eligibility Requirements for the SDOP

In addition to the general eligibility requirements discussed before, the Taxpayer must:

1. FAIL to meet the applicable non-residency requirement (for joint filers one or both spouses must FAIL to meet the applicable non-residency requirement);

2. Have previously filed a U.S. tax return for each of the most recent 3 years for which the U.S. tax return due date (or properly extended due date) has passed;

3. Have failed to report gross income for a foreign financial asset and pay tax on it and may have failed to an information return, such as an FBAR, with respect to such asset; and

4. Certify that such failures resulted from non-willful conduct.

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The SDOP Procedure

Once it is determined that a Taxpayer is eligible to participate in the SDOP, the Taxpayer must:

• File amended tax returns, together with all required information returns for each of the most recent three years and pay any tax and interest due;

• File delinquent FBARs for each of the most recent six years; and

• File a Certification in which the Taxpayer certifies under penalty of perjury that the failure to file tax returns, report all income, pay all tax, and submit all information returns, including FBARs, was due to non-willful conduct.

There are special rules if the Taxpayer is seeking relief for failure to elect deferral of income from retirement plans.

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The SDOP Miscellaneous Penalty

• In addition to paying any tax and interest due, a taxpayer participating in the SDOP must pay a 5% miscellaneous penalty on the highest aggregate balance/value of the Taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered FBAR period.

• In this case, year-end account balances and year-end asset values are used in lieu of the highest balances over the course of the year—and the 5% penalty is assessed on the highest year.

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Assets Included in the Miscellaneous Penalty

• For the six years covered in the FBAR period, all foreign financial accounts (as defined in the instructions for FinCEN Form 114) in which the taxpayer has a personal financial interest that should have been, but were not reported on an FBAR.

• For the three years covered in the tax return period, all foreign financial assets (as defined in the instructions for Form 8938) in which the taxpayer has a personal financial interest that should have been, but were not reported on Form 8938.

• For the three years covered in the tax return period, all foreign financial accounts/assets (as defined in the Instructions for FinCEN Form 114 or IRS Form 8938) for which gross income was not reported for that year.

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Assets Included in the Miscellaneous Penalty

• All of the assets that meet the definition of foreign financial assets in the instructions for Form 8938 and not reported on that form should be included in the 5 percent penalty, unless the taxpayer reported them on timely filed Forms 3520 or 5471. (If they are reported on timely filed Forms 3520 or 5471, they do not have to be reported on Form 8938 for the same tax year.)

• The penalty base includes the stock in the corporation, but not the underlying financial accounts, unless the entity is a disregarded entity for federal tax purposes. If the corporation is a disregarded entity, then the Taxpayer must report the underlying foreign financial accounts.

• The same principal would apply to assets that are held in a foreign partnership or trust.

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• IRS Delinquent International Information Return Procedures• IRS Delinquent FBAR Procedures• IRS Penalties if Discovered• “Quiet” Disclosures• Prospective Compliance• Reporting Requirements for Bitcoin/Crypto Currency

February 6, 2019

PRESENTER: ASHER RUBINSTEIN, ESQ.GALLET DREYER & BERKEY, LLP845 THIRD AVE, 5th FLOOR NEW YORK, NEW YORK [email protected]

mailto:[email protected]

http://www.gdblaw.com/

IRS DELINQUENT INTERNATIONAL INFORMATION RETURN PROCEDURES

Taxpayers who do not need the protections of a voluntary disclosure (i.e., who

are non-willful) or the Streamlined Filing Compliance Procedures to file

delinquent or amended tax returns to report and pay additional tax, but who:

• have not filed one or more required international information returns,

• have reasonable cause for not timely filing the information returns,

• are not under a civil examination or a criminal investigation by the IRS, and

• have not already been contacted by the IRS about the delinquent information

returns

should file the delinquent information returns with a statement of all facts establishing

reasonable cause for the failure to file.

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IRS DELINQUENT INTERNATIONAL INFORMATION RETURN PROCEDURES

What are “informational returns”? Examples: IRS Form 5471 (Controlled Foreign Corporation)

IRS Form 3520, 3520-A (Foreign Trusts, Foreign gifts)

IRS Form 8938 (Foreign Assets)

IRS Form 8621 (PFICs)

Thresholds: - nonwillful

- no unreported foreign income?

- reasonable cause

Foreign Income: “Taxpayers who have unreported income or unpaid tax are not precluded from filing delinquent

international information returns.”

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“WILLFUL”

- IRM 4.26.16.6.5.1. (11-06-2015)

- “the test for willfulness is whether there was a voluntary, intentional violation of a known legal duty”

- must be supported by evidence of willfulness

- burden is on the IRS to establish

- “willfulness is shown by the person’s knowledge of the reporting requirements and the person’s

conscious choice not to comply with the requirements. In the FBAR situation, the person only need

know that a reporting requirement exists. If a person has that knowledge, the only intent needed to

constitute a willful violation of the requirement is a conscious choice not to file the FBAR.”

- case law:

- Williams, 489 F.App’x 655 (4th Cir. 2012)

- McBride, 908 F. Supp. 2d 1186 (D. Utah 2012)

- Bohanec, 118 AFTR 2d 2016-5537 (DC CA 12-8-2016)

- Bussell, 120 AFTR 2d 2017-5444 (CA 9 10-25-2017)

- Bedrosian, 2017 U.S. Dist. Lexis 56535 (ED PA 2017)

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“REASONABLE CAUSE”

- Based on on facts and circumstances

- Used all ordinary business care and prudence to meet filing obligations but was nevertheless unable

to do so

- Illness/death

- Inability to obtain records

- CPA negligence/bad advice

- Documentation in support of reasonable cause

- As part of the reasonable cause statement, taxpayer must certify that any entity (e.g. trust,

corporation) for which the informational returns are being filed was not engaged in any tax evasion

- Penalty of perjury

- If IRS does not accept explanation of reasonable cause, IRS may impose penalties!

- IRM 20.1.1.3.2. Reasonable Cause

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IRS DELINQUENT FBAR SUBMISSION PROCEDURES

Taxpayers who do not need the protections of a voluntary disclosure (i.e., who are non-willful) or the

Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay

additional tax, but who:

- have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN form 114,

previously Form TD F 90-22.1),

- are not under a civil examination or a criminal investigation by the IRS, and

- have not already been contacted by the IRS about the delinquent FBARs

should file the delinquent FBARs according to the FBAR instructions.

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IRS DELINQUENT FBAR SUBMISSION PROCEDURES

- Note that reasonable cause is not a requirement (unlike the IRS Delinquent International Information

Return Procedures, which do require reasonable cause)

- Include a statement explaining why you are filing late

- Additional tip: state no tax loss

- File FBARs electronically at FinCEN

- The IRS will not impose a penalty for failure to file FBARs if taxpayer properly reported on his/her tax

returns, and paid all tax on, the income from the foreign financial accounts reported on the

delinquent FBARs.

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Penalties if IRS Discovers a Taxpayer’s Foreign Account

First, HOW might the IRS discover a taxpayer’s undeclared foreign assets?

- Audit/Examination

- FATCA (Foreign Account Tax Compliance Act)

- Treaty Request

- Cooperation between governments

- John Doe Summons

- Bank settlement (DOJ - Swiss Bank Program)

- Whistleblower (LGT Bank, HSBC)

- Hacks/Leaks (Panama Papers 2016, Paradise Papers 2017, Mathewson/Guardian

Bank, Cayman 1999)

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CIVIL PENALTIES:

What are some of the civil penalties that might apply if the IRS discovers undeclared foreign assets or the IRS examines a

taxpayer?

Depending on a taxpayer’s particular facts and circumstances, the following penalties could apply:

FBAR Penalties

A penalty for failing to file FBARs, Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial

Accounts. United States citizens, residents and certain other persons must annually report their direct or indirect financial interest

in, or signature authority (or other authority that is comparable to signature authority) over, a financial account that is maintained

with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign financial accounts

exceeded $10,000 at any time during the year.

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 financial account per violation. See 31 U.S.C. § 5321(a)(5).

Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

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New (2015) IRM (Internal Revenue Manual) FBAR penalty guidance:

Under 31 USC 5321(a)(5)(C), the IRS is permitted to assert willful penalties equal to 50% of the highest aggregate balance foreach year. However, newer guidance from the IRS places further maximum limitations on willful penalties, stating that “in mostcases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance ofall unreported foreign financial accounts during the years under examination” (emphasis added), i.e., one 50% penalty, ratherthan 50% per year. This guidance is found in IRM 4.26.16.6.5.3 (11-06-2015). 4.26.16.6.5.3 (11-06-2015) states:

4.26.16.6.5.3 (11-06-2015)Penalty for Willful FBAR Violations – Calculation

1. For violations occurring after October 22, 2004, a penalty for a willful FBAR violation may be imposed up to thegreater of $100,000 or 50% of the amount in the account at the time of the violation, 31 USC 5321(a)(5)(C). Forcases involving willful violations over multiple years, examiners may recommend a penalty for each year forwhich the FBAR violation was willful.

2. After May 12, 2015, in most cases, the total penalty amount for all years under examination will be limited to50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years underexamination. In such cases, the penalty for each year will be determined by allocating the total penalty amount toall years for which the FBAR violations were willful based upon the ratio of the highest aggregate balance for eachyear to the total of the highest aggregate balances for all years combined, subject to the maximum penaltylimitation in 31 USC 5321(a)(5)(C) for each year.

Note: Examiners should still use the mitigation guidelines and their discretion in each case to determine whether a lesserpenalty amount is appropriate.

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3. Examiners may recommend a penalty that is higher or lower than 50 percent of the highest aggregateaccount balance of all unreported foreign financial accounts based on the facts and circumstances. In noevent will the total penalty amount exceed 100 percent of the highest aggregate balance of all unreportedforeign financial accounts during the years under examination. The examiner’s workpapers must support allwillful penalty determinations and document the group manager’s approval. (Emphasis added.)

By including the phrase “in most cases,” the IRM equips IRS Examiners with discretionary power, essentially making itimpossible to know, for sure, the penalty amount that will be asserted for willful violations. In fact, the IRS goes evenfurther, specifically providing for Examiner discretion in 4.26.16.6.7 (11-06-2015):

4.26.16.6.7 (11-06-2015)FBAR Penalties - Examiner Discretion

1. The examiner may determine that the facts and circumstances of a particular case do not justify asserting apenalty.

2. When a penalty is appropriate, IRS penalty mitigation guidelines aid the examiner in applying penalties in auniform manner. The examiner may determine that a penalty under these guidelines is not appropriate orthat a lesser penalty amount than the guidelines would otherwise provide is appropriate or that the penaltyshould be increased (up to the statutory maximum). The examiner must make such a determination with thewritten approval of the examiner’s manager and document the decision in the workpapers.

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3. Factors to consider when applying examiner discretion may include, but are not limited to, the following:

A. Whether compliance objectives would be achieved by issuance of a warning letter.

B. Whether the person who committed the violation had been previously issued a warning letter orassessed an FBAR penalty.

C. The nature of the violation and the amounts involved.

D. The cooperation of the taxpayer during the examination.

4. Given the magnitude of the maximum penalties permitted for each violation, the assertion of multiplepenalties and the assertion of separate penalties for multiple violations with respect to a single FBAR,should be carefully considered and calculated to ensure the amount of the penalty is commensurate tothe harm caused by the FBAR violation.

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The IRM guidance discussed above leaves open the possibility for the Examiner to assess willful penalties equal to 50%

of the aggregate balance in each year.

4.26.16.6.4 (11-06-2015)

Penalty for Nonwillful FBAR Violations

1. For violations occurring after October 22, 2004, a penalty, not to exceed $10,000 per violation, may be imposed onany person who violates or causes any violation of the FBAR filing and recordkeeping requirements. 31 USC5321(a)(5)(B).

2. The penalty should not be imposed if:

A. The violation was due to reasonable cause, and

A. The person files any delinquent FBARs and properly reports the previously unreported account.

3. Examiners have discretion in determining the penalty amount and should use the mitigation guidelines in makingtheir determinations. See the discussion of the mitigation guidelines below. See Exhibit 4.26.16-1. Examiners shouldtake the facts and circumstances of each case into account when determining if a warning letter or penalties thatare less than the mitigation guidelines are appropriate. The purpose of FBAR penalties is to promote compliancewith the FBAR reporting and recordkeeping requirements.

Question: What is a “violation”?

IRS interpretation: Each account on the FBAR. So, e.g., six accounts on one FBAR = six violations = $60,000!

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However, 4.26.16.6.4.1 (11-06-2015) provides that “in most cases” the penalty shall be limited to $10,000 per year.4.26.16.6.4.1 (11-06-2015) states:

4.26.16.6.4.1 (11-06-2015)Penalty for Nonwillful Violations – Calculation

1. After May 12, 2015, in most cases, examiners will recommend one penalty per open year, regardless of thenumber of unreported foreign accounts. The penalty for each year is limited to $10,000. Examiners shouldstill use the mitigation guidelines and their discretion in each case to determine whether a lesser penaltyamount is appropriate.

2. For multiple years with nonwillful violations, examiners may determine that asserting nonwillful penaltiesfor each year is not warranted. In those cases, examiners, with the group manager’s approval afterconsultation with an Operating Division FBAR Coordinator, may assert a single penalty, not to exceed$10,000, for one year only.

3. For other cases, the facts and circumstances (considering the conduct of the person required to file and theaggregate balance of the unreported foreign financial accounts) may indicate that asserting a separatenonwillful penalty for each unreported foreign financial account, and for each year, is warranted. In thosecases, examiners, with the group manager’s approval after consultation with an Operating Division FBARCoordinator, may assert a separate penalty for each account and for each year. The examiner’sworkpapers must support such a penalty determination and document the group manager’s approval.

4. In no event will the total amount of the penalties for nonwillful violations exceed 50 percent of the highestaggregate balance of all unreported foreign financial accounts for the years under examination.

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Form 8938 Penalties

Beginning with the 2011 tax year, a penalty for failing to file Form 8938, Statement of Specified Foreign Financial Assets,

reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign

securities, and interests in foreign entities, as required by IRC § 6038D.

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for

each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum

of $50,000 per return.

Form 3520 Penalties

A penalty for failing to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain

Foreign Gifts. Taxpayers must also report various transactions involving foreign trusts, including creation of a foreign

trust by a United States person, transfers of property from a United States person to a foreign trust and receipt of

distributions from foreign trusts under IRC § 6048. This return also reports the receipt of gifts from foreign entities

under IRC § 6039F.

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 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five

percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

Form 3520-A Penalties

A penalty for failing to file Form 3520-A, Information Return of Foreign Trust With a U.S. Owner. Taxpayers must also

report ownership interests in foreign trusts, by United States persons with various interests in and powers over those

trusts under IRC § 6048(b).

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 determined to be owned by the United States person.

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Form 5472 Penalties

A penalty for failing to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign

Corporation Engaged in a U.S. Trade or Business. Taxpayers may be required to report transactions between a 25

percent foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United

States and a related party as required by IRC §§ 6038A and 6038C.

The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable

transactions, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days

after the taxpayer is notified of the delinquency.

Form 926 Penalties

A penalty for failing to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Taxpayers are

required to report transfers of property to foreign corporations and other information under IRC § 6038B.

The penalty for failing to file each one of these information returns is ten percent of the value of the property

transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

Form 8865 Penalties

A penalty for failing to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. United

States persons with certain interests in foreign partnerships use this form to report interests in and transactions of the

foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions and changes in

foreign partnership interests under IRC §§ 6038, 6038B, and 6046A.

Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure

continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return,

and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

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Fraud Penalties

Fraud penalties imposed under IRC §§ 6651(f) or 6663. Where an underpayment of tax, or a failure to file a tax return,

is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75

percent of the unpaid tax.

Failure to File (FTF) Penalties

A penalty for failing to file a tax return imposed under IRC § 6651(a)(1). Generally, taxpayers are required to file

income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent

for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed

25 percent.

Failure to Pay (FTP) Penalties

A penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2). If a taxpayer fails to pay the

amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on

the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains

unpaid, not exceeding 25 percent.

Accuracy Penalties

An accuracy-related penalty on underpayments imposed under IRC § 6662. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.

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CRIMINAL PENALTIES

What are some of the criminal charges a taxpayer might face if the IRS discovers undeclared foreign assets or if the IRS

examines the taxpayer?

Possible criminal charges related to tax matters include tax evasion (IRC § 7201), filing a false return (IRC § 7206(1))

and failure to file an income tax return (IRC § 7203).

Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties

under 31 U.S.C. § 5322.

Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. §

286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).

A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000.

Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000.

A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000.

Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.

A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000.

A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.

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“QUIET” DISCLOSURES

“Noisy” Disclosures OVDP/SDOP/SFOP

- Formal procedures/requirements

- Penalties

“Quiet” Disclosures Submission of amended tax returns and FBARS

Outside OVDP/SDOP/SFOP

Goal: NO PENALTIES

But: NO PROTECTION!

OVDP FAQ 8: Q. What happens if a taxpayer simply files amended returns reporting income from

previously undisclosed foreign financial assets without making a voluntary disclosure

(commonly referred to as a “quiet disclosure”)?

A. All quiet disclosures will be reviewed and will be subject to civil or criminal penalties as

determined under existing law.

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“QUIET” DISCLOSURES

EVEN IF TAXPAYER WAS NON-WILLFUL WHEN INITIALLY FAILED TO REPORT FOREIGN ASSETS, IF

TAXPAYER KNOWINGLY SUBMITS A QUIET DISCLOSURE, TAXPAYER IS NOW WILLFUL.

IRS COULD IMPOSE WILLFUL PENALTIES!

IRS COULD PROSECUTE FOR TAX FRAUD!

- IRS HAS CAUGHT QUIET DISCLOSURES AND HAS PROSECUTED THE TAXPAYERS!

- TAXPAYERS WHO HAVE MADE A QUIET DISCLOSURE IN THE PAST CAN USE STREAMLINED

PROCEDURES.

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!

PROSPECTIVE COMPLIANCE

- START COMPLIANCE NOW, GO-FORWARD COMPLIANCE

- DO NOT CORRECT NON-COMPLIANT PAST (e.g., OVDP, SDOP, SFOP)

- WHY NOT CORRECT NON-COMPLIANT PAST? TO AVOID PENALTIES

- RISK OF AUDIT/EXAM FOR PRIOR YEARS AND IMPOSITION OF PENALTIES

- CAN IRS ASSESS WILLFUL PENALTIES BASED ON KNOWLEDGE OF

FORWARD REPORTING REQUIREMENTS?

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BITCOIN/CRYPTO AND THE IRS

IRS INTEREST IN BITCOIN: 1. CRYPTO IS LARGELY UNMONITORED

1099s MAY NOT BE ISSUED

2. RELATIVELY HIDDEN FROM IRS; GAIN UNKNOWN TO IRS

3. POTENTIAL FOR TAX NON-COMPLIANCE

- ANONYMOUS

- IRS REPORTING (FORM 8938, FBAR, FORM 8949

FOR CAPITAL GAINS)

IRS NOTICE 2014-21: BITCOIN IS PROPERTY, SUBJECT TO INCOME/CAPITAL GAINS TAX (FORM

8949)

A BITCOIN WALLET IS AN ACCOUNT → FORM 8939, FBAR, EVEN IF NO GAINS.

IS A FOREIGN BITCOIN FUND A PFIC? → FORM 8621.

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IRS ENFORCEMENT: - IN 2015, ONLY 802 TAXPAYERS REPORTED BITCOIN INFO

ON FORM 8949

- AUDITS

- “JOHN DOE” SUMMONS AGAINST COINBASE

(LIKE FOREIGN ACCOUNTS AT UBS, HSBC, CAYMAN BANKS)

- IRS IS TRAINING CRIMINAL INVESTIGATION (CI) AGENTS:

TAX EVASION, MONEY LAUNDERING

- WHAT CAN WE EXPECT? ADDITIONAL SUMMONSES

TO OTHER EXCHANGES, WALLETS, INVESTIGATIONS INTO

OTHER CRYPTO CURRENCIES

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