Billionaires Behaving Badly Again, Gets No Jail Time, Massive Penalties

If you wondering how billionaires like Warner, the creator of Beanie Babies, can avoid paying taxes on billions, you'll want to read my latest book, Offshore Transparency by C, Ingraham RTRP.  This book explains in detail how billionaires like Warner have successfully avoided millions in taxes over the decades.


CHICAGO (AP) -- The billionaire creator of Beanie Babies was sentenced to two years of probation, but no prison time, on Tuesday for tax evasion on $25 million in income he had stashed away in Swiss bank accounts.
 

H. Ty Warner, 69, appeared somber but composed as he made a brief statement before receiving his sentence in a Chicago federal courtroom, apologizing and saying he felt "shame and embarrassment" for what he had done.

He could have been sentenced to up to five years in prison, and prosecutors were seeking prison time for Warner, who pleaded guilty last year to a single tax evasion count.

U.S. District Judge Charles Kocoras, however, sentenced Warner to probation and 500 hours of community service, praising the toy magnate for the charity work he's done.

Kocoras said his decision was difficult, but he added, "Society will be better served by allowing him to continue his good works."

The judge said Warner's "public humiliation" and "private torment" as a result of his criminal prosecution was a punishment he's already paid.

Warner was among the highest-profile prosecutions in the federal government's push to go after Americans concealing income from the IRS overseas, often in Switzerland. Prosecutors say at one point, Warner was concealing as much as $107 million.

Beanie Babies first appeared in the mid-1990s, triggering a craze that generated hundreds of millions of dollars for Westmont, Ill.-based TY Inc., of which Warner is the sole owner. Forbes recently put his net worth at $2.6 billion.

The small, plush toys have heart-shaped name tags and are made to resemble bears and other animals. Some are designed to look like cartoon or comic book characters. As collectibles, some fetch thousands of dollars.

Warner maintained a secret offshore account starting in 1996 with the Switzerland-based financial services company UBS. He earned $3.1 million in gross income in 2002 through the account, but didn't report it, prosecutors say.

Grab a copy today, Offshore Transparency it all facts, but reads like a crime mystery.  Both entertaining and enlightening, you'll be amazed at what wealthy taxpayers have been doing for years.

Understanding Tax Avoidance Which is Seen as a Human Rights Violation

The facilitation of tax avoidance strategies could constitute a violation of international human rights law, according to a new report by the International Bar Association.

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The report, released Tuesday by the London-based organization of international legal practitioners, bar associations and law societies at the IBA’s annual conference in Boston, argues that some tax strategies cross the line into “tax abuses” that may violate internationally accepted norms of human rights. Prepared by the IBA’s Human Rights Institute Task Force, the report contends that the actions of states that encourage or facilitate tax abuses, or that deliberately frustrate the efforts of other states to counter tax abuses, could constitute a violation of their international human rights obligations, particularly with respect to people’s economic, social and cultural rights.

The report, Tax Abuses, Poverty and Human Rights, asserts that tax practices contrary to the letter or spirit of international and domestic tax laws and policies have a significant negative impact on the realization of human rights in developing countries. Profits flowing out of developing countries can thus deprive governments of the resources that they need to alleviate poverty and uphold international human rights standards.

The IBA report draws on case studies from Brazil, the Isle of Jersey and Southern Africa, examining where to draw the line between legitimate tax avoidance maneuvers and immoral tax practices. The report highlights concerns over the “morality” of sophisticated tax planning strategies, in which corporations and wealthy individuals end up paying little or no money in taxes. Among the types of tax behavior seen as potentially abusive are transfer pricing and other cross-border intra-group transactions, the negotiation of tax holidays and incentives, the taxation of natural resources and the use of offshore accounts.

“The fact that sophisticated tax planning strategies are technically legal is no longer a justification for their use,” said Yale University professor Thomas Pogge, who chairs the IBA Human Rights Institute Task Force. “The impact of tax abuses, facilitated by secrecy jurisdictions, on global poverty is tremendous. The international community has not only a legal obligation but also a moral duty to ensure that states use the maximum resources available to fulfill the civil, political, economic and social rights of citizens.”

The report urges states to implement international standards of transparency and information exchange in tax matters, and businesses to undertake due diligence measures and impact assessment of all operations, including tax planning strategies. Lawyers also need to balance their obligations to defend their clients’ interests with their responsibilities to uphold human rights in their practice, including with respect to tax planning strategies, the report argues.

“The legal profession has an important role to play in confronting the negative effects of tax abuses on human rights,” said Sternford Moyo, who co-chairs the IBA Human Rights Institute and is a member of the task force. “Lawyers have a duty to balance their obligation to their client’s interests with their obligations to uphold human rights and the rule of law.”

The report also takes note of the role of accountants, quoting one unnamed expert interviewed by the task force who observed, “Those who siphon funds out of developing countries can and should know that they are thereby actively diminishing funds that go to efforts to reduce poverty. And those who facilitate tax abuse (e.g., tax havens, secrecy jurisdictions, and certain lawyers and accountants) can and should know that their activities likewise take funds away from efforts to reduce poverty.”

This original article can be found at Accounting Today dot Com

To learn more about legal tax avoidance strategies you may want to read the Book; Tax Loopholes, Tax-Free Living & Retirement by C. Ingraham, RTRP

The IRS Reminds Taxpayers to Report Foreign Assets

The IRS has been extremely gracious with warning U.S. taxpayers to own up to and tell all about their foreign assets and offshore accounts.  It is our belief that this "nice guy" approach will end with Americans going to federal prison over offshore accounts. 

 

When individuals read about American Corporation's Tax Loopholes, they often times, feel like they shouldn't have to report their offshore activities.  This may or may not be a valid argument.  My job is to help individual tax payers understand that you may not have the resources to fight the IRS should they target you.  Plus, not reporting foreign assets and offshore bank accounts, when you are required to, is a crime.

 

It's clear beyond a shadow of a doubt that the IRS is and has been targeting offshore account holders.  Make no mistake about it, individual tax payers caught in this offshore battle won't have the benefits of the Tea Party scandal.  In other words, there will be no protest and no Senate hearing, just the sound of the prison door closing.  IRS is serious about reporting foreign assets and offshore accounts.  I don't know how else to say it!

 

 

IRS Reminds Those with Foreign Assets of U.S. Tax Obligations

WASHINGTON – The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2012, that they may have a U.S. tax liability and a filing requirement in 2013.

The filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for additional information additional information on extensions of time to file.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 17 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. For details, see Publication 4261: Do You Have a Foreign Financial Account? Though this form can be filed on paper, Treasury encourages taxpayers to file it electronically.

Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $57,000 or less can use brand-name software to prepare their returns and then e-file them for free.
Taxpayers with an AGI greater than $57,000 who don’t qualify for Free File can still choose the accuracy, speed and convenience of electronic filing. Check out the e-file link on IRS.gov for details on using the Free File Fillable Forms or e-file by purchasing commercial software.

A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, get help choosing a software provider. Both e-file and Free File are available until Oct. 15, 2013, for anyone filing a 2012 return.

Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map to get answers. An International Tax Topic Index page was added recently. The IRS Tax Map assembles or groups IRS forms, publications and web pages by subject and provides users with a single entry point to find tax information.

International Tax Evasion, IRS Ganging Up With Australia and the United Kingdom to Identify Tax Evaders

OK, now IRS Australia and the United Kingdom is ganging up on taxpayers to find out more about offshore accounts which taxpayers forgot to put on their tax return.  This can't be good.  This press announcement came into my inbox this morning; 05-09-2013.  Realize that the last sentence refers to possible criminal prosecution. 

 

 

IRS, Australia and United Kingdom Engaged in Cooperative Effort to Combat Offshore Tax Evasion

 

WASHINGTON — The tax administrations from the United States, Australia and the United Kingdom announced today a plan to share tax information involving a multitude of trusts and companies holding assets on behalf of residents in jurisdictions throughout the world.

The three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands. The data contains both the identities of the individual owners of these entities, as well as the advisors who assisted in establishing the entity structure.

The IRS, Australian Tax Office and HM Revenue & Customs have been working together to analyze this data and have uncovered information that may be relevant to tax administrations of other jurisdictions. Thus, they have developed a plan for sharing the data, as well as their preliminary analysis, if requested by those other tax administrations.

“This is part of a wider effort by the IRS and other tax administrations to pursue international tax evasion,” said IRS Acting Commissioner Steven T. Miller. "Our cooperative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes.”

There is nothing illegal about holding assets through offshore entities; however, such offshore arrangements are often used to avoid or evade tax liabilities on income represented by the principal or on the income generated by the underlying assets. In addition, advisors may be subject to civil penalties or criminal prosecution for promoting such arrangements as a means to avoid or evade tax liability or circumvent information reporting requirements.

It is expected that this multilateral cooperation and coordinated effort will allow many countries to efficiently process this information and effectively enforce any laws that may have been broken. Increasingly, tax administrations are working together in this way to assist one another in identifying non-compliance with the tax laws.

U.S. taxpayers holding assets through offshore entities are encouraged to review their tax obligations with respect to these holdings, seek professional advice if necessary, and to participate in the IRS Offshore Voluntary Disclosure Program where appropriate. Failure to do so may result in significant penalties and possibly criminal prosecution.

Offshore Tax Structures Back in the News!

When you know the IRS even just a little, you fully realize that they are all over this situation and we can expect to see in the news, the arrest of American taxpayers who have participated in such tax evasion structures.

No matter how good the deal sounds, when a group calling themselves International Consortium of Investigative Journalists can analyze your hard drive by using a particular software; and locate information about your finances or your corporation's finances, you have to realize that paying the taxes is the best thing to do.

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Large cache of secret documents reveals that tens of thousands of people, including government officials from around the world, are using offshore companies and trusts to avoid taxes.

 

The documents were unearthed by a group known as the International Consortium of Investigative Journalists, who used sophisticated software to analyze a computer hard drive packed with corporate data, personal information and emails. The information came to light when ICIJ director Gerard Ryle investigated a financial scandal in Australia involving offshore tax havens and corporate fraud.

The investigation found that government officials and their families and associates in more than 170 countries and territories, including Azerbaijan, Russia, Canada, Pakistan, the Philippines, Thailand, Mongolia and the U.S., have embraced the use of covert companies and bank accounts as a way to avoid taxes. Among those named are the Prime Minister of Georgia, Bidzina Ivanishvili, who set up a company in the British Virgin Islands, and the former campaign treasurer for French President Francois Hollande, Jean-Jacques Augier, who used a company in the Cayman Islands to invest in a Chinese company in 2005.

By using complex offshore structures, the taxpayers described in the articles are able to own mansions, yachts, art masterpieces and other assets, gaining tax advantages and anonymity not available to average taxpayers.

Major banks—including UBS, Clariden and Deutsche Bank—have worked to provide customers with entities in the British Virgin Islands and other offshore havens to help them hide assets, according to the group.

“A well-paid industry of accountants, middlemen and other operatives has helped offshore patrons shroud their identities and business interests, providing shelter in many cases to money laundering or other misconduct,” said the ICIJ. “Ponzi schemers and other large-scale fraudsters routinely use offshore havens to pull off their shell games and move their ill-gotten gains.”

For more information, visit www.icij.org/offshore.

The original article can be found at Tax Pro Today

Corporations Moving Profits Offshore

We could not  verify the information written in this article, however, it appears to be more correct, then not.  This is fast becoming a major concern.  When individuals are caught doing this very act, without sharing the information with the IRS AND paying the taxes, they are subject to extensive fines and extended vacations in Federal prisons.
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States Lost $40 Billion in Tax Revenue from Offshore Profit Shifting

Washington D.C. (February 6, 2013)

By Michael Cohn

State budgets across the country collectively lost an estimated $40 billion in tax revenue due to corporations and individuals shifting their profits and income to offshore tax havens, according to a new report.

 

The report, from the U.S. Public Interest Research Group, estimated that states lost $28 billion from the corporate abuse of tax havens and $12 billion from individuals, at a time when many states have been forced to cut their budgets drastically due to shrinking revenue after the financial crisis.

The $40 billion roughly equals the total amount spent by all state and local governments on firefighters in 2008, and enough money to cover the educational costs for 3.7 million children for one full year.

“Tax dodging is not a victimless offense,” said Dan Smith, tax and budget advocate for the U.S. PIRG Education Fund, who co-authored the report. “When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice. States should be using that money to benefit the public.”

At the national level, offshore profit shifting cost federal taxpayers $150 billion each year, more than enough to cover the scheduled spending cuts set to take effect in a few weeks.

“Offshore tax abuses undermine public confidence in our tax system,” said Rep. Lloyd Doggett, D-Texas, a senior member of the House Ways and Means Committee, who appeared at a U.S. PIRG press conference Tuesday. “They add to both the deficit and the tax burden imposed on small businesses and individuals that play by the rules. In quantifying the enormous cost to our economy of tax haven abuse, U.S. PIRG has once again offered valuable work. More state and federal action is required to ensure that the cost of necessary security and other public services is shared fairly.”

As of 2008, at least 83 of the top 100 publicly traded corporations in the U.S. used tax havens, according to the Government Accountability Office. At the end of 2011, 290 of the top Fortune 500 companies reported that they collectively held $1.6 trillion offshore, according to a report from the advocacy group Citizens for Tax Justice.

Among the examples cited in the reports, Google used accounting techniques nicknamed the “Double Irish” and the “Dutch Sandwich,” involving two Irish subsidiaries and one in Bermuda, to help shrink its tax bill by $3.1 billion from 2008 to 2010. Wells Fargo paid no federal income taxes in 2008, 2009 and 2010, despite being profitable all three years, largely due to its use of 58 offshore tax haven subsidiaries.

Microsoft avoided $4.5 billion in federal income taxes over three years by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. The company pays its Puerto Rican subsidiary 47 percent of the revenue generated from its American sales, despite the fact that those products were developed and sold in the U.S.

Why Do the Wealthy Set Up Offshore Accounts in the First Place

Someone sent us an email and asked "Why would a taxpayer set up an offshore account if they plan on paying the taxes, no matter what?"  Click here to read the original post on why the wealthy set up offshore accounts  (Plus you have to remember that some offshore accounts are set up in countries where there are NO taxes for individuals or corporations - And, the right hand doesn't always need to know what the left hand is doing!)

This is a valid question, and surely comes from someone who uses the Tax Charts to determine their tax liability each year. 

When you are blessed with a seven figure asset base, and an annual income to match your seven figure asset base, your taxes are calculated a little differently then a regular W-2 or 1099-MISC tax return, which does not include capital gains.

A lot more tax laws come into play and sometimes, there are disagreements on what the intent of the tax law actually is.  If the IRS views the tax law one way and your tax attorney viewed the law another way, and prepared your taxes accordingly, the IRS would send a letter adjusting the amount of taxes owed, and it you didn't comply within a set amount of time, they can and will levy your bank account. End of discussion!

The less money you earn, the more secure you are in how much you owe or don't owe the Department of Treasury.  Wealthy people have a lot of concerns when it comes to how much they can save in taxes.  And, some times these issues can end up in court.  And, we are almost sure, attorneys  may test the IRS, in order to see if they can save the client millions in taxes

This subject is above my pay grade, however, I hope I have answered the questions to your satisfaction. www.taxeswilltravel.com

FATCA Act Will Allow Offshore Accounts to Take 30 Per Cent Out of Your Foreign Bank Account?

 

Foreign Account Tax Compliance Act (FATCA) and Form 8938

The following information is extremely important to tax payers who have offshore assets, accounts and dealings.  It is highly suggested that you read, and contact your Tax Attorney if this applies to you.  Congress is playing “big brother” and countries who do not play, may become “the capital” of offshore accounts Feels like money is shifting. ----

The Foreign Account Tax Compliance Act (FATCA) is an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts. Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season. In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

To properly comply with these new reporting requirements, an FFI will have to enter into a special agreement with the IRS by June 30, 2013. Under this agreement a “participating” FFI will be obligated to:

(1)   undertake certain identification and due diligence procedures with respect to its accountholders;

(2) report annually to the IRS on its accountholders who are U.S. persons or foreign entities with substantial U.S. ownership; and

(3) withhold and pay over to the IRS 30-percent of any payments of U.S. source income, as well as gross proceeds from the sale of securities that generate U.S. source income, made to (a) non-participating FFIs, (b) individual accountholders failing to provide sufficient information to determine whether or not they are a U.S. person, or (c) foreign entity accountholders failing to provide sufficient information about the identity of its substantial U.S. owners.

The above information can be found on the IRS web site at: http://www.irs.gov/businesses/corporations/article/0,,id=236667,00.html

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Important Note:  It is NOT illegal to have an offshore bank account or offshore assets, however, it IS illegal not to put this information on your annual tax return. 

Taxpayers who are legal often times are NOT trying to hide money from the IRS, they simply have placed the money in accounts where the IRS or no other agency, can touch!

To date, if the IRS sent a bank levy order to an offshore bank account, very little if anything would happen.  However, if that same levy is sent to an U.S. bank, the money would be taken out of your account and sent to the IRS.

Of course when the IRS knows that you have assets in an offshore account, we believe, they may be lest tolerant of your delay to pay your tax liability when requested to do so. 

This sort of information is above our pay grade.  Please contact your tax attorney to discuss how this will affect you.

Urgent Announcement from the IRS - Also Which Group Will Be Targeted Next by the IRS

OK people, the IRS is starting to make a left turn, and what this means is:  The next group of people they will be targeting are U.S. taxpayers who are living overseas, or offshore.  It has been concluded that the Voluntary Disclosure Program is a success, and now they are starting phase II of the master plan.

Based on the IRS's actions in the last five years, it appears that they are throwing out an International "net" over offshore accounts of U.S. taxpayers, and now they have put it in writing that the "net" will be expanded to include U.S. taxpayers who live outside the United States (clearly stated at the bottom of the statement)

Below is the IRS statement, word for word, with no changes to the content of the announcement.
If you are an expat, and have not filed taxes for several years, we can help. Just click on the Contact Us button on the left of this blog, or click here. 

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Received:  June 26, 2012
WASHINGTON — The Internal Revenue Service today announced that its offshore voluntary disclosure programs have exceeded the $5 billion mark and released new details regarding the voluntary disclosure program announced in January, including tightening the eligibility requirements.

"We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore," said IRS Commissioner Doug Shulman. "People are finding it tougher and tougher to keep their assets hidden in offshore accounts."
Shulman said the IRS offshore voluntary disclosure programs have so far resulted in the collection of more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs. In addition, another 1,500 disclosures have been made under the new program announced in January.

The voluntary disclosure programs are part of a wider effort by the IRS to stop offshore tax evasion and ensure tax compliance This includes beefed up enforcement, criminal prosecution and implementation of third-party reporting through the Foreign Account Tax Compliance Act (FATCA).
The IRS also closed a loophole that’s been used by some taxpayers with offshore accounts. Under existing law, if a taxpayer challenges in a foreign court the disclosure of tax information by that government, the taxpayer is required to notify the U.S. Justice Department of the appeal.

The IRS said that if the taxpayer fails to comply with this law and does not notify the U.S. Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the Offshore Voluntary Disclosure Program (OVDP). The IRS also put taxpayers on notice that their eligibility for OVDP could be terminated once the U.S. government has taken action in connection with their specific financial institution.

Additional details of these eligibility issues are available in a new set of questions and answers released today on the current OVDP, which was announced in January (see IR-2012-5). The IRS reopened the OVDP following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs.

This program – which helps bring people back into the tax system -- will be open for an indefinite period until otherwise announced. The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward.

Under the current OVDP, the offshore penalty has been raised to 27.5 percent from 25 percent in the 2011 program. The reduced penalty categories of 5 percent and 12.5 percent are still available.
The IRS also announced a plan to help U.S. citizens residing overseas to catch up with tax filing obligations and assistance for people with foreign retirement plan issues. See IR-2012-65 also issued today.