IRS Yanks OVDPDeal From Taxpayers With Secret Bank Leumi Accounts – Forbes onforb.es/VMlXCI – Kicks those previously accepted out!
— U.S. Citizen Abroad (@USCitizenAbroad) March 7, 2013
The Internal Revenue Service this week sent faxes to tax attorneys nationwide informing them that clients who were previously accepted into its criminal amnesty program for those who disclose once-secret offshore accounts, have “upon further review” been disqualified. The faxes, signed by John R. Tafur, director of of Global Financial Crimes at the IRS’ Criminal Investigation division, affect dozens of American taxpayers who had undisclosed accounts at Bank Leumi le-Israel Ltd., Israel’s largest bank, says Robert E. McKenzie, apartner at Chicago’s Arnstein & Lehr , who queried fellow top tax attorneys on a private email listserve after he received one such fax this week. He called the IRS’ reversal “scary” and “extraordinary”. Edward M. Robbins Jr., of Hochman, Salkin, Rettig, Toscher & Perez, the big West Coast tax defense firm, confirmed in an email to Forbes that “numerous” Leumi related rescission letters have been received.
Complete article is here.
@Mike Tarantes… you mentioned dormant accounts. The one thing I am still trying to find out with absolute certainty (and indeed perhaps nobody knows for sure) is whether closing an account before an IGA or FFI agreement comes to your country is effective in shielding it from being reported on. Of course for large accounts the money has to go somewhere, making it more difficult, but surely for small accounts people must be considering it. The question is whether it works.
@Not that Lisa ……. Statute of Limitations extensions are in order (including new ones that may be necessary as you have waited so long to get to this point)….. Since you do not have to give the IRS these extensions (you are still fully cooperating ) and why should you after all these “bait and switches“ — has anybody done that and what was the immediate reaction from the IRS/examiner?
@ HKGS…. yes I was trying yesterday to write about my dormant accounts and how difficult it was to actually close them . I would have thought that the banks were happy to get ridd of me because having 4 month to finally succeed with many letter,faxes and phone calls necessary – and I can tell you that it certainly was a lot easier to open those accounts ! Now regarding your question – if it was me I would where possible go in person and make that final withdrawal , if not possible make a transfer to a relative etc. ,you should have them all closed by 12/2013 after that you are playing russian roulette.(implementation on paper and in reality of FATCA are two seperate things) Keep in mind if you have failed to file an FBAR for accounts that did not pay any interest make a QD. Unfortunately it all depends on your specific situation – like how many accounts with what kind of max. annual balance , how much interest if any was paid or was it a term life insurance account with a cash surrender value etc.
@Not that Lisa ….. I remember you had your “Donal Trump“ moment with your tax lawyer after paying him > $20k for his learning curve during the early stages of OVDI . Did you not ever wish when you looked at those monthly billing statements that you would have liked to see a written “transcript“ of those mysterious phone conversations your lawyer had with the IRS/agent and was billing you $600/h ? Can someone tell me ( sorry but up till now I never had to have any contact with any type of lawyer before 🙂 ) why there is so little regulation and oversight when it comes to their service and billing practices. I said this before but for anybody caught up in QD,VD,OVDI/P you are the bait, collateral damage, fish fertilizer, revenue enhancer – nobody can realy be trusted.
I agree with Mike; Caveat Emptor!!
I was very fortunate to have found an accountant who is genuine but could have wound up with a shark (especially as was so vulnerable and desperately scared when I first became aware of the mess).
Mike Tarantes: You are totally wrong about Mark Matthews (“he does not get it with his one size fits all approach”). The statement you refer to, “The government has no intention of letting up in its relentless pursuit…” is, unfortunately, just fact, and Mark Matthews’ background makes it sadly all the more believable.
Thanks @ Mike Tarantes. It’s actually pretty interesting. One account I hadn’t previously FBAR’d because it was more or less an escrow account of sorts for paying my mortgage, and had a max balance of 2k and maybe about 75 cents of interest per year. I wish I could close this one… trouble was when we sold our place it suddenly had a lot of money. I thought about getting tricky and moving it into a previously FBAR’d account, but I figured I could make a better non-willful case if I really was questions. Wish I had planned it out better but it’s done now. My CPA actually advised to just go forward rather than QD (but he said QD was probably not terribly risky, just a bit riskIER). I’ve been lucky that I’ve FBAR’d my other accounts (though probably not terribly well). My main worry now is that somehow that big new account raises some alarms and they notice I don’t have the “new account” box ticked on the 8938 of my return. Otherwise the sale is covered in the return so I’m not too worried. The other account I have is more of the retirement account ilk, and that’s the one which would be easier to make go away…. It’s small and would never have had owed taxes on any of the returns, but it’s been around long enough to require the max period of amended FBAR’s and returns (well four really, as I never started FBAR’ing until 2008… oh how I wish it was 2008 again :P). At any rate, none of it is worth going into a VD program for
Just had a though in fact. I wonder if the IRS secretly wishes minnows didn’t enter program. They can never say it, but obviously they are never going to get their $8b wasting time going after people like us.
My Canadian lawyer, who I happen to think is a decent guy, consults with Matthews on a regular basis. The Canadian government also thinks well enough of him to also consult with him as he was invited to Ottawa in May of last year. John Weston MP in a letter to me last year: “Thank you for your letter. I share your concerns about the IRS’s actions in pursuing Canadians who also have US Citizenship.
“I have taken the initiative among Government Caucus members to consolidate information concerning this matter and have worked closely with the Honourable Jim Flaherty, our Minister of Finance, who has taken our concerns forward effectively. Among other things, I arranged for prominent US tax attorney Mark Matthews to come to Ottawa on May 30, 2012 to brief Caucus members concerning these matters. Mr. Matthews not only works with Canadians who have US tax problems but he also served previously as Deputy Commissioner at the IRS.”
None of these things prove he isn’t an “arrogant &$@%#*, however. There’s no law firm who’d know OVDI better than Caplan & Drysdale, considering they helped the IRS design it 🙁
@Mike Actually, I paid double that amount and my lawyer never had one conversation with the IRS. It seems I was paying a rookie associate to read through every line of my bank accounts and ask me what the expense was, e.g. What is this payment to “electricityco”? Rookie associates love to bill hours. The only thing they did with this info was to tell me that, yes, I had lived a totally normal law abiding life abroad. As if I did not know that.
One time I asked if I should declare an account and that cost me USD 500.
I am the only one who has had conversations with IRS Revenue Agents and I find them easier to deal with than the lawyers. I may have a bit of Stockholm Syndrome, but my agent is very clear, helpful and professional. I feel that the goal is to achieve compliance and we are trying to work out the details together. This is all I ever wanted. Let’s see what the final outcome will be.
@Not that Lisa, it’s ironic how individual IRS agents might well be privately more sympathetic than some of these posh attorneys. They must realise the absurdity though have their hands are tied; whereas the attorney sharks just want their fish.
@bubblebustin I got new information yesterday, that a Revenue Agent may grant an FTA, but it must be asked for during the examination. So make sure you do that. I do not know if I will need the FTA, but it will be interesting to see how my agent responds if I do need it. I did ask for it in writing during the exam in OVDI and I will do so again if my opt out is approved. Remember, people in the 2009 OVDP who had asked in writing for reasonable cause consideration before the FAQ allowing this was withdrawn did have a base for arguing with the IRS that reasonable cause should be granted in OVDI. So it is best to cover all bases and ask for the FTA in writing during any exam inside or outside of OVDI.
Also, there is a view that once someone is out of OVDI and their case becomes a normal tax case, normal rules apply and interest will be calculated automatically by the system. While it is true that prepayments do not accrue interest, the question is how the payments are classified once you are out of OVDI. At this point, I have decided to wait and see what I am assessed. I will deal with it at that time.
@not that Lisa!
I can’t tell you how much I appreciate this information. Our TAS agent said she couldn’t do anything for us until we received a response from the IRS and to contact her as soon as we do. Hopefully she hasn’t retired by now :-(. She told us at that time that TAS was negotiating within OVDI, which I found odd.
@Londoner says ………… You are totally wrong about Mark Matthews … nice try to defend him
but I was actually being very polite about expressing my opinion and experience with this gentleman.
You can have your own opinion which is fine but stop lecturing me.
@ bubblebustin ….. if I remember correctly than TAS was negotiating for “just me“ within OVDI just prior to opt out . I thought TAS wouldn`t take your case before there are some numbers on the table from the examiner which demonstrate economic harm etc….but I assume you filled out form 911 anyway from the start – did you already get a case # ?
@ not that Lisa … I paid double that amount and my lawyer never had one conversation with the IRS… I am so sorry to hear that 🙁 I think I would have gone bananas watching this and receiving these monthly billing statements . I wonder when I have my “Donald Trump“ moment .
@ monalisa1776 …… be happy that you found a genuine,trustworthy,experienced though expensive CPA but what else is new.
I am still convinced that in most cases to hire a tax attorney is the last thing one should do but everybody has to do their own cost/benefit analysis.
Yes, @Mike, I was indeed very fortunate to have found someone genuine. @Not that Lisa, I am appalled that if I’m correct, they charged you $40,000 without even liasing for you. Pure extortion.
HKGS –
I wonder if the IRS secretly wishes minnows didn’t enter program.
It seems fallacious to assume that the IRS has any concern for efficiency. Any growth in the empire of Irrational Repressive Shakedown is by definition good. Even one minnow adds a few grams to the bureaucratic bloat. Established fright tactics mean that some minnows will seek out the drag net and hand over all. The more work that piles up, stacks of paper backlogged in warehouses, the more justification to hire more IRS staff. Fiscal metastasis to mirror the ponzi economy.
@bubblebustin … @ Not that Lisa,
Wish I could find a good lawyer in Canada or US. I’m trying to find my way through this bizarre mess called US tax compliance and whether or not to enter OVDI. So far I’ve had no luck with finding a tax lawyer on either side of the border that knows what they are talking about and that doesn’t just immediately see dollar signs for them and charge me for conversations that aren’t productive. After wasting a few thousands dollars, I’ve discovered that their so-called “professional advice” was based on an incomplete understanding of all the tax implications. I need a competent tax lawyer that can advise me about my options, if any, besides entering the hell of OVDI and then a competent accountant to help me with amending returns as needed. Does anybody have any suggestions where/how to find these professionals?
@Not that Lisa,
In one of your recent comments you mentioned an FTA? What is that?
@albatross
Expensive, but someone that does know the system inside and out, is Jack Townsend. He also maintains a list of OVDI type attorneys, but I can not speak to how good any of them are. No one is better than you in learning via your own due diligence, so don’t pay them to go to school on you!
@albatross
I could be wrong, but I think FTA means First Time Abatement?
@Albatross
I’m in a airport and can’t get a good download but try searching “Internal Revenue Manual first time penalty abatement”
Bank Leumi customers are being rejected from the OVDI program although they previously had been accepted, according to the attorney Jack Townsend and as reported by JustMe above. The following may be somehow related to this. The Swiss “SonntagsZeitung” reports today that Bank Leumi reserved $91 million in 4Q 2012 which is thought to be for settlement with the DOJ. A tax attorney in Los Angeles is quoted that he believes that Bank Leumi is number one on the hit list. The newspaper also reported that all tax attorneys they contacted advised that the bank would not be indicted as Wegelin was. The story is in German for anyone interested:
http://www.sonntagszeitung.ch/wirtschaft/artikel-detailseite/?newsid=245920
@albatross FTA stands for First Time Abate and is described in IRM 20.1.1.3.6.1. It is not available to you as long as you are in OVDI. If you opt out, it will not help you to reduce FBAR penalties. It can only be requested for the abatement of Failure to File (FTF) and/or Failure to Pay (FTP) penalties. These are penalties that are assessed based on the amount of tax owed. Most tax professionals don’t spend much time worrying about abating tax penalties as these are usually less than the amounts of FBAR penalties and the time they have to spend on this may cost more than can be abated. However, if you are a minnow, every little bit counts and in the case of bubblebustin, who had to pay a huge tax penalty on taxes owed on the sale of her house, it is another avenue to explore in addition to reasonable cause.
The FTA is not well known and not used by most IRS Revenue Agents. The TAS has more familiarity with it.
The FTA can only be granted if you have not had any penalties assessed in the 3 years prior to the year you want the tax penalty abated.
Issues that may come up if you ask for an FTA when you opt out of OVDI, or even in a regular audit are:
– if the Revenue Agent has the right to grant this abatement, or if it is only granted by a Collections Agent after it is assessed. My examiner thinks it is a collections abatement. The TAS is of a different opinion. They think a Revenue Agent can grant it.
– it appears that if a Revenue Agent is to grant this abatement, it must be requested during the exam.
– there is question if the FTA can be granted more than once. For example, let’s say you had a tax penalty in 2003 and then no other tax penalties until 2010. You meet the conditions for the application of the FTA in both of those years. Technically, it should be granted twice. Some Revenue Agents do not agree with that view.
Those are the basics of the FTA. There are likely a few more nuances. What is clear is that the FTA is under utilized and may be worthwhile for certain minnows to request when they opt out of OVDI.
If one qualifies for the Streamlined Program, then the FTA is irrelevant as all penalties are waived if you are accepted into that program.
Thank you @ Not that Lisa, @bubblebustin, and others, for sharing what you know on this and other threads. There is precious little other information to be had.