FBAR Filing: Tax Practitioners and Professional Responsibility
U.S. Taxpayers, who fail to file FBAR’s to disclose foreign bank accounts, may seek a reasonable cause exception based on their “tax preparer’s” failure to file the FBAR.
Tax Practitioners (Attorneys, CPA’s) must comply with the FBAR rules as part of their due diligence (as to accuracy) obligation under IRS Circular 230 (Section 10.22).
The FBAR (TD F 90-22.1) is not a tax return. The FBAR is an information report required under the Bank Secrecy Act (BSA) 31 USC 5314 (and related regulations CFR 103.24, 103.27). Related records are required under 31 CFR 103.24 and 103.32.
The Practitioners’ professional responsibility does not require that the Practitioner “audit” their client.
The Practitioner must:
1. Make reasonable inquiries in response to Taxpayer’s information of overseas accounts/transactions.
2. A Practitioner may rely on information provided by a client in good faith.
3. The Practitioner must make reasonable inquiries if information appears incorrect, inconsistent or incomplete.
FBAR Filings: Financial Accounts (U.S. Hedge Funds)
In the IRS 6/29/09 FAQ’s regarding FBAR filings, the IRS advised:
1. If a hedge fund is located in the U.S., with foreign operations, a financial interest in the U.S. hedge fund is not an interest in a foreign financial account for FBAR reporting purposes.
2. If a domestic partnership has a financial interest in a foreign financial account, then it may have to file a FBAR.
3. If a U.S. Person who is an officer, employee or partner of the partnership has a financial interest in, or signature or other authority over a foreign financial account then that person may have to file a FBAR.
4. If a person owns an interest in more than 50% of the profits of the partnership or more than 50% of the capital of the partnership, then that person has a financial interest (for FBAR reporting purposes) in the foreign financial accounts of the partnership and may have to file a FBAR.
Jerseyan admits tax fraud charges in probe tied to UBS
By Ted Sherman, Star-Ledger Staff, NJ.com (9/26/09)
A wealthy New Jersey international trader pleaded guilty yesterday to federal tax fraud charges in the wake of a growing criminal investigation tied to UBS AG, the world’s largest private bank.
Juergen Homann, 66, of Saddle River, admitted he failed to file tax forms for six years showing more than $6 million held in secret accounts overseas.
Homann, a naturalized U.S. citizen who also holds a German passport, said he received advice from an unidentified UBS Swiss banker and others on setting up a Liechtenstein foundation used to keep his accounts hidden from the Internal Revenue Service.
He later created a Hong Kong corporation used to orchestrate a sham $5 million loan from his own accounts to a subsidiary of a company he controlled.
Among those who helped him, Homann said, was Swiss lawyer Matthias Rickenbach, who was indicted in August on charges of helping others evade U.S. taxes.
In the proceeding before Judge Stanley Chesler in federal court in Newark, Homann, hands clasped behind his back as he answered questions without hesitation, pleaded guilty to a one-count information charging him with failure to file mandatory reports detailing foreign bank and financial accounts.
Assistant U.S. Attorney Marc-Philp Ferzan told the court Homann is already cooperating with federal prosecutors in its ongoing inquiry of UBS. Homann’s attorney, Cynthia Eddy, declined comment.
Homann was caught up in the federal probe that has targeted hundreds of Americans after admissions by UBS that it helped clients hide nearly $20 billion in assets. Federal authorities say Swiss bankers routinely traveled to the United States to market Swiss bank secrecy to clients interested in evading U.S. taxes.
Click link above for complete article.
IRS Chief Pleased With Offshore Amnesty Haul
by Leroy Baker, Tax-News.com October 16, 2009
US Internal Revenue Service (IRS) Commissioner Doug Shulman has said that he is pleased with the response to the agency’s voluntary offshore bank account disclosure scheme, the deadline for which passed on October 15.
According to Shulman, the IRS received some 7,500 applications for the scheme, with disclosures ranging from USD10,000 to as much as USD100m associated with foreign bank accounts in all corners of the globe.
The latest offshore disclosure initiative seems to have been much more successful than a similar scheme administered by the IRS in 2004 known as the Offshore Voluntary Compliance Initiative. Under the 2004 amnesty, only 1,300 individuals came forward and the IRS collected about USD170m in unpaid tax. Shulman, however, has not disclosed how much the 2009 scheme will bring in for the Treasury, but it is certain to be a much higher figure.
The latest amnesty scheme was launched by the agency in March this year, and is just one of the many initiatives being used by the Obama administration to ensure that offshore income, both personal and corporate, is taxed in the US. Under the terms of the 2009 scheme, those making a voluntary disclosure about money held overseas face a penalty of 20% of the highest aggregate value of the account on one day in the last six years. The IRS also removed the threat of criminal prosecution. Ordinarily, if a taxpayer is discovered to have undeclared offshore income or assets, they face penalties up to 100% and possible jail time. The original deadline was set for September 23, but the IRS extended the amnesty until October 15 after it received an influx of requests from tax practitioners who themselves have been inundated with enquires about the scheme from their clients. Shulman warned that no further extensions will be granted, and that the agency will be unlikely to run another amnesty program any time soon.
Buoyed by the success of the 2009 amnesty, Shulman has revealed that the IRS is opening more representative offices abroad in places like Panama, China and Australia, and will also increase staffing levels in existing overseas offices, which include Barbados and Hong Kong.
The agency is also to create a dedicated team of enforcement and investigation officers to chase up wealthy individuals with complex, often international-based, financial arrangements, and President Obama’s 2010 budget includes extra resources for the IRS to hire almost 800 additional enforcement personnel.
Sixth UBS Client Pleads Guilty to Tax Charges
By WebCPA.com Staff
A retired Boeing sales manager is the latest UBS client to plead guilty to filing a false tax return after the Swiss bank agreed to disclose the identities of some of its U.S. clients.
Robert Cittadini of Bellevue, Wash., accepted responsibility for hiding up to $1.86 million in accounts at the Swiss bank and failing to report the income he earned from the accounts on his 2001 to 2003 tax returns. Cittadini also did not file a Report of Foreign Bank and Financial Accounts, or F-BAR form, for each of those years.
Cittadini initially opened an account with UBS in the early 1990s in his own name, but around 2001, Swiss banker Hansruedi Schumaker, who was indicted in August 2009 on conspiracy charges, helped him transfer assets from his UBS account to an account named for Mataropa Finance Limited, a nominee Hong Kong corporation that helped him hide the assets. Swiss lawyer Matthias Rickenbach, also indicted in August, was a director of the Hong Kong entity.
Sentencing in Cittadini’s case is scheduled for Jan. 8, 2010. He faces up to three years in prison and a $250,000 fine. He also has agreed to pay a civil F-BAR penalty based on 50 percent of the highest account balance from 2001 to 2007.
“This is a time of reckoning for those who thought they had found a safe haven for cheating,” said U.S. Attorney Jenny A. Durkan in a statement. “People who avoid paying their fair share hurt all of us who follow the law and conscientiously pay our taxes.”
In February 2009, UBS entered into a deferred prosecution agreement in which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of the agreement, UBS provided the U.S. government with the identities and account information of some U.S. customers of the bank’s cross-border business. Cittadini’s case is the sixth guilty plea arising from that information.
In June 2009, Steven Michael Rubinstein, a Boca Raton, Fla., accountant, pleaded guilty to filing a false tax return. In April 2009, another UBS client, Robert Moran, a Ft. Lauderdale, Fla., yacht broker, pleaded guilty to filing a false tax return. In July 2009, Jeffrey Chernick, of Stanfordville, N.Y., pleaded guilty to filing a false tax return. In August 2009, John McCarthy, a resident of Malibu, Calif., pleaded guilty to failing to report his ownership of and interest in a foreign financial account. In September 2009, Juergenn Homann of Saddle River, N.J., pleaded guilty to failure to file an F-BAR form.
Over the summer, UBS agreed to hand over information on an additional 4,450 U.S. clients under an agreement brokered by the Swiss and U.S. governments.
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