MIAMI TAX ATTORNEYS
Miami Tax Attorneys with Experience
Proven Track Record with OVDI and FBAR
Here at the Law Office of Aramis Hernandez, we recognize that IRS problems are complex and multifaceted. Clients who face such challenges require knowledgeable and experienced attorneys if they are to get the best possible results.
If you live in the Miami area and are facing an IRS problem or a tax situation, call us now at 305-374-7744.
Your questions, concerns, and doubts must be addressed with the counsel of an experienced professional. By making a call to us, you are ensuring that you’ll receive advice from attorneys who know the ins and outs of these cases. The Law Office of Aramis Hernandez has the solution to your tax problems.
IRS AMNESTY FOR FAILURE TO REPORT OVERSEAS ACCOUNTS (FBAR)
Information about IRS Amnesty for Failure to Report Overseas Accounts (FBAR) and the 2012 Offshore Voluntary Disclosure Initiative (OVDI):
The IRS and other organizations of the U.S. Government are currently engaged in efforts to bring taxpayers who have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws.
Background
Under the U.S. Department of Treasury FBAR regulations, “United States persons” are required to file an annual FBAR if:
1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
“United States persons” means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Important: The term “United States residents” includes U.S. citizens working abroad, green card holders, and other U.S. visa workers employed anywhere in the world; as well as visitors to the U.S. if they meet certain residency qualifications. This latter category includes many people in the Miami area who qualify as “resident taxpayers” and must report, for U.S. tax purposes, their worldwide income.
This means, for example, if you are “visiting” here from, say, Venezuela, and you have a bank account in Caracas, you qualify as a resident taxpayer just by spending six months in the U.S., and you must report your offshore bank accounts.
The question about FBAR arises on Schedule B of Form 1040, and the report has to be mailed to the Department of the Treasury by June 30 of each year. Even if the taxpayer does not complete a Schedule B, he or she is still expected to know about the above requirements.
Penalties for perjury on Schedule B and/or not submitting the FBAR on time can be extremely punitive, and criminal sanctions can apply. Failure to comply with these regulations constitutes a breach of the Bank Secrecy Act, and Homeland Security will be apprised of each offense.
IRS Actions to Ensure Compliance
In the 2009 Offshore Voluntary Disclosure Program, some 15,000 taxpayers entered the program before it ended on Oct. 15, 2009, and another 3,000 came in late but were accepted. This program was relatively lenient compared to the 2011 and 2012 programs, which are supported by a host of information gathering initiatives, and slightly higher interest penalties.
We generously call this an “amnesty,” but there is nothing forgiving about it. If you had overseas accounts for any year between 2003 and 2011 that you have not reported, then run, don’t walk, to an international tax attorney and get an initial filing lodged A.S.A.P. If you do not, you may be looking at huge fines, confiscation of all the money in your overseas accounts, attachment of your U.S. income, loss of your U.S. assets – and significant prison time.
This initiative enables noncompliant taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution. When a taxpayer truthfully, promptly, and completely complies with all provisions of the voluntary disclosure practice, the IRS will not recommend criminal prosecution to the Department of Justice.
The Process
Entering successfully in the 2012 OVDI requires completion of three stages, all done through your attorney:
Stage I – Pre-Clearance
Your attorney will fax a Power of Attorney on your behalf to the IRS Criminal Investigation Lead Development Center in Philadelphia requesting a pre-clearance for you to enter the program. A positive response should indicate that a civil examination of your tax affairs has not been initiated already and/or that you are not already under criminal investigation.
The IRS warns that pre-clearance does not guarantee a taxpayer’s acceptance into the 2012 OVDI. Taxpayers must continue to truthfully, promptly, and completely comply with all provisions of the 2012 Offshore Voluntary Disclosures Initiative.
If a negative response is received, this is a warning that something positive needs to be done. Your attorney will attend to that by immediately contacting local IRS Criminal Investigation.
Stage II – Pre-Clearance – Request for Initial Data
With a positive response in hand, we have 30 days to complete and submit the “Offshore Voluntary Disclosures Letter” to the OVDI coordinator, also in Philadelphia. This “letter” is actually a multi-page document briefly outlining the years and amounts that you have held offshore, the reasons for it, and background as to potential tax liability. Although this sounds tedious, we have procedures in place to start accumulating that material from the moment we commence Stage I. Whatever the result of the Stage I application, we are going to need that data to assist you.
The IRS will review the letter and notify us by mail whether the voluntary disclosure has been preliminarily accepted or declined. Provided we have been truthful and complete in this outline, then there is no reason to expect a problem at this stage.
Stage III - Complete Voluntary Disclosure Package
Depending on your offshore history, the amounts involved, and several other factors, we will now complete a detailed updating of FBAR reporting and tax for the years in which you had overseas accounts. For this exercise, we will employ financial experts to ensure the reporting is accurate but does not overstate your position.
You should also start gathering all of your foreign account statements and other documentation for all of the years covered by your voluntary disclosure.
The Risks
The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts. Moreover, this information is increasingly available to the IRS under tax treaties and through submissions by whistleblowers, and it will only become more available as the
IRS, Homeland Security, the Department of Justice, the U.S. Treasury, the FBI, and other organs of the U.S. government are actively engaged in a coordinated effort to control the worldwide reporting of foreign financial assets controlled by American persons. The scope of control these agencies now have is considered by many to be overreaching and internationally unprecedented.
Activities include:
Foreign Account Tax Compliance Act (FATCA), enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. The legislative intent of FATCA is to ensure there is no gap in the ability of the U.S. government to determine the ownership of U.S. assets in foreign accounts, but it is obviously part of a huge initiative to help balance the budget. FATCA becomes fully effective in January 2013, but the effects are being felt already.
Alongside foreign banks, FATCA also affects brokers, investment companies, and fund structures – an estimated 50,000 to 100,000 financial intermediaries worldwide. Other financial market participants, such as stock exchanges and clearing houses, must also deal with FATCA. Banks and other financial institutions must decide whether they want to continue providing services to U.S. persons as direct or indirect customers and whether U.S. securities are part of their product portfolio and proprietary trading. If so, an agreement has to be signed with the IRS. The identification of U.S. persons is very challenging because not only are U.S. citizens and persons residing in the U.S. included in this group, but so are green card holders or persons who have stayed in the U.S. for several consecutive days during the past three years, thus meeting the “substantial presence test.”
This is causing large numbers of overseas banks to ask their U.S. account holders to move their accounts (to where?), and more and more international banks will no longer do business with Americans.
Whistleblowers
This IRS program is in full swing and there have been substantial convictions and fines during the past few months.
Attack on Major Banks
A 2009 attack on Swiss giant UBS yielded a fine of $780 million and the release of 4,500 U.S. account-holder names to the IRS. The Department of Justice had accused UBS of aiding U.S. account holders evade as much as $20 billion of combined U.S. income tax.
At a time when Treasury estimates that two-thirds of all U.S. currency resides overseas, one can understand the government’s interest in repatriating illegal monies that could help shore up the domestic economy.
Currently, HSBC is a major target, especially since it has a large network of banks in the U.S. (making them susceptible to asset-freezing) and the government has issued a “Joe Doe Summons” on HSBC India. This has already yielded Indian-American convictions and fines.
The Benefits
Benefits include prison avoidance and the ability to bring your foreign bank accounts back to the U.S. while remaining in compliance. Even after paying fines and back taxes, you can spend your money in comfort and sleep well at night. And, when the time comes, you can leave it to your heirs. Who wants to inherit an offshore illegal bank account – and possibly go to prison for it?
If you are facing possible tax challenges, you need an experienced and helpful lawyer who stays abreast of changing taxation laws and can help you secure your financial future. Our lawyers have experience and expertise in accounting, bankruptcy, and tax law, and are admitted to the United States District Court, the United States Tax Court, and the United States Supreme Court. They are qualified to represent you before the IRS in any matter, including assistance in repatriating funds from foreign bank accounts, asset protection trusts, and stockbrokers.
IR-2011-14SP, 8 de febrero de 2011
WASHINGTON — El Servicio de Impuestos Internos (IRS) anunció hoy una iniciativa especial de divulgación voluntaria diseñada para regresar dinero del extranjero al sistema tributario de los EE.UU. y ayudar a las personas con ingresos de cuentas en el extranjero que no han sido divulgado y a ponerse al día con sus impuestos. La nueva iniciativa de divulgación voluntaria estará disponible hasta el 31 de agosto del 2011.
Offers-In-Compromise are agreements between a taxpayer and the Internal Revenue Service that settle the taxpayers’ tax liabilities for less than the full amount owed. The IRS looks to doubt as to collectability, doubt as to liability, and exceptional circumstances as causes to consider that the collection of the tax would create an economic hardship or would be unfair and inequitable. Results vary between lowering the amount due to allowing payment over a certain time period.
Our tax attorneys are helping clients benefit from a new IRS policy – the 2011 Streamlined Offer in Compromise Program.
The expanded Streamlined Offer in Compromise program includes:
• Fewer requests for additional financial information
• When necessary, requests for additional information by phone, not by mail
• Greater flexibility when considering your ability to pay
Qualifying taxpayers are:
• Wage earners
• The unemployed
• Self-Employed taxpayers with no employees and gross receipts under $500,000
Eligibility requirements are:
• Your total household income is $100,000 or less, and
• The amount you owe is less than $50,000 when your offer is filed
POWER OF ATTORNEY
The IRS Form 2848 allows a licensed attorney to represent a taxpayer and create a situation where the IRS deals directly with the attorney and does not bother the taxpayer. This also establishes the attorney-client confidentiality that is so critical to representation before the IRS.
See: Attorney-Client Confidentiality
ATTORNEY-CLIENT CONFIDENTIALITY
This right, which belongs to the client – meaning the attorney cannot break it without risk of losing his professional license – is one of the most valuable assets that the client obtains when he hires a lawyer.
Clients are strongly warned not to confer with a CPA or other tax professional before meeting with a tax attorney. Only a licensed attorney enjoys the
Treasury Circular 230 contains rules governing the recognition of tax attorneys, certified public accountants, enrolled agents, and other persons representing taxpayers before the IRS. Attorneys are eligible to practice before the IRS by right, but other individuals have to apply for enrollment and maintain certain additional qualifications and training. Starting in 2011, the IRS has made it more difficult for non-attorneys to enroll and takes a more adversarial role in corresponding and communicating with non-attorneys.
I received a letter from the IRS. Am I going to jail?
No, you most likely are not going to jail - but you absolutely do need to open and read the letter, because the Internal Revenue Service will not just go away.
There is an understandable tendency on the part of many people to not want to open and read correspondence from the IRS, particularly when they think the letter contains bad news. But the letter may not contain bad news. If it does and you do not respond, on the other hand, you will only make the matter worse - perhaps much worse.
Most importantly, many Internal Revenue Service letters trigger the running of statutory time periods. This means that you must take some action within the time frame specified in the letter. If you do not act within the time period set forth, you may lose very important rights. Thus, it is imperative that you read any correspondence from the IRS as soon as possible. This cannot be stressed enough.
The most important factor to bear in mind is that you are dealing with professionals who have but one goal in mind: to collect as much tax as possible from you, even if it means intimidating you, threatening you with prison, or taking away your children (yes, they have done that). How do you deal with a professional? You hire one yourself – a local tax attorney who is not afraid of the IRS and knows how to meet them on their own terms. Many times, the tax attorney will have far better tax knowledge than the IRS officer and can gain ground where you might have lost out.
See also: Tax Court
The Ultimate Defense Against Unfair IRS Tax Assessment & Collection
Working with an attorney who has admission to practice before the United States Tax Court is an important benefit for a client who may be behind on taxes or face other IRS adversity. A client who receives a “90-day letter” from the IRS demanding immediate payment on a tax debt has only two legal choices to challenge the matter. The client can pay the taxes stipulated and then take the case to federal court; or they can challenge the case in Tax Court without paying any taxes upfront. Tax Court runs in a rather informal manner and the taxpayer may have a better chance of success there.
Understanding Tax Controversy & Tax Court
1. The Beginning: an Audit
The Internal Revenue Service must assess a tax before it can proceed to collect the tax. Usually, before proposing a deficiency, the IRS conducts an audit.
2. The 30-Day Letter
If the IRS auditor determines that additional tax is due, a 30-day letter will be issued. The 30-day letter informs the taxpayer of the amount and basis of the proposed deficiency. The taxpayer has 30 days from the date of the letter to request a conference with an appeals officer of the IRS Appeals Division.
The 30-day letter contains the instructions on how to appeal. Unfortunately, this step is often overlooked or not properly followed.
3. The Appeals Process
The major function of the Appeals Division is to determine whether there is a basis for settlement of a tax dispute. This is the place where most cases are settled. Our experience is that the appeals officers are highly knowledgeable in the applicable area. More than 90% of tax disputes are settled at appeals, which is why it is a very important step in your tax controversy.
The Appeals Division has authority to determine tax liabilities and associated penalties for income, estate, and gift taxes, along with several others, including those that are and are not subject to the statutory notice of deficiency procedures.
If an appeals conference is requested and the taxpayer fails to agree to a proposed deficiency determined by the appeals officer, then the Appeals Division will issue the 90-day letter.
Also, if the taxpayer fails to request an appeals conference, a 90-day letter is issued.
4. The 90-Day Letter
Although the procedures described above are not mandatory, the 90-day letter is. The IRS can simply determine a deficiency and send a 90-day letter without first sending a 30-day letter or offering a conference with appeals.
After failing to reach a settlement at appeals, or failing to respond to a 30-day letter, a 90-day letter is issued. In essence, the 90-day letter, also known as a Statutory Deficiency Notice, advises that you must petition the tax court or bring an action in the appropriate district court.
If you do not appropriately respond to a 90-day letter, you will have defaulted and the tax year in question will be forwarded to collections. You now owe the amount disputed shown on the 90-day letter.
5. Collections
Failure to respond to the 90-day letter will result in your tax matter being handed over to collections. Basically, you now owe the tax due on the deficiency notice. To make matters worse, by the time the matter is handed over to collections, a large amount in penalties and interest will also be owed.
Oftentimes, a taxpayer responds to IRS notices by writing to the incorrect agency. We recall an incident where a taxpayer's accountant responded to a 90-day letter by writing to the original appeals officer. Not only was this fruitless, but the matter was handed over to collections.
Once a matter is in collections, the tax year must be reopened. If a tax year is already in collections, you should contact a tax professional.
6. District Counsel: Attorneys for the Government
District Counsel represent the Government at tax court. Once a 90-day letter is properly responded to, by petitioning the Tax Court, your case is docketed and assigned to District Counsel.
Many cases settle with District Counsel. Oftentimes, District Counsel will bring in an Appeals Officer to try to settle the case.
As at the Appeals Division, cases are seldom settled on nuisance value, or for raw dollar amounts. Instead, cases are settled on the expected trial outcome based on factual issues.
7. Tax Court
After receiving the 90-day letter, the taxpayer can petition the Tax Court to decide the matter. Unfortunately, many accountants and lawyers are not familiar with tax controversy procedure and do not respond in the correct manner to the 90-day letter. When this occurs, your file is placed in collections.
Another common misconception is that the assessed tax has to be paid in full in order to petition the Tax Court. A taxpayer never has to pay any portion of the tax liability before petitioning the Tax Court!
8. Should I Hire an Attorney or an Accountant?
It is important to hire a competent representative in light of the situation. In this case, a tax lawyer admitted to the U.S. Tax Court is the only realistic choice. The procedures are complex and only a person proficient in this area should be retained. The most important thing is to get legal advice immediately if you suspect trouble.
If you face a complex tax audit or tax garnishment and require experienced, knowledgeable legal assistance, a Miami civil tax controversy lawyer with our firm may be able to help you avoid excessive penalties and put a stop to wage garnishments and levies on your bank accounts. Dealing directly and single-handedly with the IRS can be extremely stressful. Worse, mistakes can easily be made without an attorney on your side. If you retain a competent attorney, in many cases you may not have to meet with the IRS at all.
For more information on this topic, please review: Tax Court
The IRS now has a high-level Whistleblower program in place which encourages citizens to turn in people who they believe have defrauded the IRS. Whether you are the whistleblower or the victim of any such attack, you need to have a tax lawyer on your side to handle interaction with the IRS.
Whistleblower Informant Award
The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty, and other amounts it collects.
Who can get an award?
The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest, or other amounts from the noncompliant taxpayer.
The IRS is looking for solid information, not an “educated guess” or unsupported speculation. They are also looking for a significant federal tax issue - this is not a program for resolving personal problems or disputes about a business relationship.
What are the rules for getting an award?
The law provides for two types of awards. If the taxes, penalties, interest, and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code Section 7623(b).
The IRS also has an award program for other whistleblowers – generally those who do not meet the thresholds of $2 million in dispute or cases involving individual taxpayers with gross incomes of less than $200,000. The awards through this program are smaller, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at Internal Revenue Code Section 7623(a), and some of the rules are different from those that apply to cases involving more than $2 million.
If you decide to submit information and seek an award for doing so, we recommend that you use a tax attorney to protect your identity and also push the award process through. Otherwise, this can be a very time-consuming process.
1. The Beginning: an Audit
The Internal Revenue Service must assess a tax before it can proceed to collect the tax. Usually, before proposing a deficiency, the IRS conducts an audit.
2. The 30-Day Letter
If the IRS auditor determines that additional tax is due, a 30-day letter will be issued. The 30-day letter informs the taxpayer of the amount and basis of the proposed deficiency. The taxpayer has 30 days from the date of the letter to request a conference with an appeals officer of the IRS Appeals Division.
The 30-day letter contains the instructions on how to appeal. Unfortunately, this step is often overlooked or not properly followed.
3. The Appeals Process
The major function of the Appeals Division is to determine whether there is a basis for settlement of a tax dispute. This is the place where most cases are settled. Our experience is that the appeals officers are highly knowledgeable in the applicable area. More than 90% of tax disputes are settled at appeals, which is why it is a very important step in your tax controversy.
The Appeals Division has authority to determine tax liabilities and associated penalties for income, estate, and gift taxes, along with several others, including those that are and are not subject to the statutory notice of deficiency procedures.
If an appeals conference is requested and the taxpayer fails to agree to a proposed deficiency determined by the appeals officer, then the Appeals Division will issue the 90-day letter.
Also, if the taxpayer fails to request an appeals conference, a 90-day letter is issued.
4. The 90-Day Letter
Although the procedures described above are not mandatory, the 90-day letter is. The IRS can simply determine a deficiency and send a 90-day letter without first sending a 30-day letter or offering a conference with appeals.
After failing to reach a settlement at appeals, or failing to respond to a 30-day letter, a 90-day letter is issued. In essence, the 90-day letter, also known as a Statutory Deficiency Notice, advises that you must petition the tax court or bring an action in the appropriate district court.
If you do not appropriately respond to a 90-day letter, you will have defaulted and the tax year in question will be forwarded to collections. You now owe the amount disputed shown on the 90-day letter.
5. Collections
Failure to respond to the 90-day letter will result in your tax matter being handed over to collections. Basically, you now owe the tax due on the deficiency notice. To make matters worse, by the time the matter is handed over to collections, a large amount in penalties and interest will also be owed.
Oftentimes, a taxpayer responds to IRS notices by writing to the incorrect agency. We recall an incident where a taxpayer's accountant responded to a 90-day letter by writing to the original appeals officer. Not only was this fruitless, but the matter was handed over to collections.
Once a matter is in collections, the tax year must be reopened. If a tax year is already in collections, you should contact a tax professional.
6. District Counsel: Attorneys for the Government
District Counsel represent the Government at tax court. Once a 90-day letter is properly responded to, by petitioning the Tax Court, your case is docketed and assigned to District Counsel.
Many cases settle with District Counsel. Oftentimes, District Counsel will bring in an Appeals Officer to try to settle the case.
As at the Appeals Division, cases are seldom settled on nuisance value, or for raw dollar amounts. Instead, cases are settled on the expected trial outcome based on factual issues.
7. Tax Court
After receiving the 90-day letter, the taxpayer can petition the Tax Court to decide the matter. Unfortunately, many accountants and lawyers are not familiar with tax controversy procedure and do not respond in the correct manner to the 90-day letter. When this occurs, your file is placed in collections.
Another common misconception is that the assessed tax has to be paid in full in order to petition the Tax Court. A taxpayer never has to pay any portion of the tax liability before petitioning the Tax Court!
8. Should I Hire an Attorney or an Accountant?
It is important to hire a competent representative in light of the situation. In this case, a tax lawyer admitted to the U.S. Tax Court is the only realistic choice. The procedures are complex and only a person proficient in this area should be retained. The most important thing is to get legal advice immediately if you suspect trouble.
Choosing your attorney is a very important decision. You want to make sure it is a decision you are confident about. At the Law Office of Aramis Hernandez, we offer our prospective clients free one-on-one consultations. That way they can meet us and review our qualifications before deciding to retain us as counsel.