TIGTA PRESS RELEASE 2014 – 03 is reproduced below in its entirety.

TIGTA Warns of “Largest Ever” Phone Fraud Scam Targeting Taxpayers

WASHINGTON — The Treasury Inspector General for Taxpayer Administration (TIGTA) today issued a warning to taxpayers to beware of phone calls from individuals claiming to represent the Internal Revenue Service (IRS) in an effort to defraud them.

“This is the largest scam of its kind that we have ever seen,” said J. Russell George, the Treasury Inspector General for Tax Administration.  George noted that TIGTA has received reports of over 20,000 contacts and has become aware of thousands of victims who have collectively paid over $1 million as a result of the scam, in which individuals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials.

“The increasing number of people receiving these unsolicited calls from individuals who fraudulently claim to represent the IRS is alarming,” he said.  “At all times, and particularly during the tax filing season, we want to make sure that innocent taxpayers are alert to this scam so they are not harmed by these criminals,” George said, adding, “Do not become a victim.”

Inspector General George urged taxpayers to heed warnings about the sophisticated phone scam targeting taxpayers, noting that the scam has hit taxpayers in nearly every State in the country.  Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer.  The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.

The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes.  And the IRS won’t ask for payment using a pre-paid debit card or wire transfer.  The IRS also won’t ask for a credit card number over the phone.

“If someone unexpectedly calls claiming to be from the IRS and uses threatening language if you don’t pay immediately, that is a sign that it really isn’t the IRS calling,” he said.

The callers who commit this fraud often:

  • Use      common names and fake IRS badge numbers.
  • Know      the last four digits of the victim’s Social Security Number.
  • Make      caller ID information appear as if the IRS is calling.
  • Send      bogus IRS e-mails to support their scam.
  • Call      a second time claiming to be the policy or department of motor vehicles,      and the caller ID again supports their claim.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:

  • If      you owe federal taxes, or think you may owe taxes, hang up and call      the IRS at 800-829-1040.  IRS workers can help you with your payment questions.
  • If you don’t owe taxes, call and report the incident to TIGTA at  800-366-4484.
  • You  can also file a complaint with the Federal Trade Commission at       Add “IRS Telephone Scam” to the comments in your complaint.

TIGTA and the IRS encourage taxpayers to be alert for phone and e-mail scams that use the IRS name.  The IRS will never request personal or financial information by e-mail, texting or any social media.  You should forward scam e-mails to  Don’t open any attachments or click on any links in those e-mails.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes winner) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

Read more about tax scams on the genuine IRS website at


Never, never convey your personal information to anyone cold-calling you on the telephone.  Find out what company or governmental agency the caller purports to represent.  Ask what they are calling about and hang up without offering any information or answering questions.  Obtain the company or agency telephone number from a reliable independent source and call back to inquire about the call and you will learn whether the call was legitimate or not.

Robert S. Steinberg, Esquire

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On January 9, 2014, Nina Olsen, National Taxpayer (TA) Advocate Delivered her annual report to congress. The report severely criticized the current version (2012) of IRS’s OVDP for unfairly and disproportionately penalizing benign non-filers and non-filers with small offshore balances.

The TA analyzed results from the 2009 OVDP.

Based on the 2009 program analysis, the TA report highlights several perceived deficiencies in the present program that retains most of the 2009 program guidelines and procedures:

  • The program imposes excessive penalties on taxpayers whose failure to file was due to reasonable cause or not “willful.”
  • Taxpayers with smaller non-reported foreign account balances are disproportionately penalized compared to those with larger balances. The 2009 OVDP median offshore penalty was about 381 percent of the additional tax assessed for taxpayers with median-sized account balances, and 580 percent of the tax assessed for taxpayers with the smallest account balances (i.e., the bottom 10 percent, with an average $44,855 account balance).
    • Taxpayers who “opted out” of the OVDP program and agreed to subject themselves to audits fared better but still faced penalties of nearly 70 percent of the tax and interest.
    • The sole remedy offered by IRS for benign non-filers is to enter the program and then “opt-out” and be audited.  Those electing this route, however, face uncertainty as to the amount of FBAR penalty and whether other income tax issues and penalties will be imposed (e.g., civil fraud penalty)
    • The so-called “Streamlined Program” for non-resident U.S. citizens is excessively burdensome and unfair to non-willful non-filers in that:
      • It still requires a voluminous submission (questionnaire, three years of Forms 1040 and six years of FBARS).
      • Is closed to U.S. residents, and,
      • Fails to provide certainty as to which taxpayers will be deemed “high risk” not eligible for streamlined treatment versus “low risk” and eligible.  Thus, those making a streamlined disclosure may still be subject to the most severe penalties.
      • While the government has imposed new complicated and confusing duplicate reporting requirements (Form 8938 and FBAR), IRS has cut-back its educational programs to inform taxpayers of these responsibilities.
      • The new electronically filed FBAR form lacks sufficient space for submitting detailed “reasonable cause” or “non-willful” explanations, allowing only 750 characters of text to be transmitted.

While FBAR penalties are computed as a percentage of account balances rather than tax liabilities, the report offers the comparison to illustrate that the penalties are often Draconian and may deter other taxpayers from coming into compliance.

The TA proposes a three category approach to replace the IRS one-size-fits-all process:

  • Category I would include taxpayers with unreported offshore income less than a threshold of $5,000 (The penalty threshold for substantial understatement under IRC Sec. 6662(d)):  Category 1 taxpayers would pay no FBAR or other information reporting penalties.
  • Category 2 would include taxpayers who under-reported income of more than $5,000 but who believe they acted non-willfully or with reasonable cause:  Category 2 taxpayers would submit the delinquent returns with the tax, interest and income tax penalties along with the non-willful FBAR penalty ($10,000 per violation) or no penalty payment if reasonable cause is believed to exist, together with an explanation.  IRS would audit a small number of these returns.
    • IRS would provide more concrete guidelines when and whether “reasonable cause” will be found.
  • Category 3 would include taxpayers not fitting into Categories 1 or 2.  These willful violators would follow the current OVDP process.


  • Category 1 is a good idea because a threshold would be clear and allow taxpayers to come into compliance without the great uncertainty that presently exists or the feeling that they are being bullied into paying exorbitant penalties.
  • Category 2, as suggested by the TA, will still present problems for taxpayers in determining whether the facts support a “reasonable cause” finding and whether “willful blindness” will apply to color non-overt behavior as willful.  That is, what facts will be required to overcome the presumption that one is charged with knowledge of the content of a tax return signed voluntarily?
    • Perhaps instead a second threshold of higher amount could be included in the program that would treat taxpayers coming within its parameters as non-willful violators but require of them a more voluminous disclosure.
    • Category 3 again requires a professional advisor to determine if the non-filing was due to “reasonable cause “or was non-willful.
    • All in all, apart from non-resident non-willful violators, the OVDP is beneficial to those whose actions raise a concern of criminal violations or who desire certainty as to FBAR penalties or wish to more expeditiously conclude their case.
    •  Others, filing quietly or opting in and out are unfairly threatened with draconian civil penalties under the Bank Secrecy Act regardless of the amount of income tax evaded.
    • The IRS under the BSA has wide latitude in determining the amount of the willful or non-willful penalty which can run from zero to the maximum amounts. The mitigations provisions in the IRM are not very helpful to many because they are based on account balances, not income evaded, and because IRS has not clearly indicated how and when mitigation will apply.
    •  IRS should publish clearer rules and examples to indicate how it intends to administer the FBAR penalty scheme and key the willful penalty (calculated as a percentage of the account balance on the date of violation) to the amount of income not reported on Form 1040 not the value of the account not reported on the FBAR

© 2014 by Robert S. Steinberg, Esquire
All rights reserved.

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On January 6, 2014 the U.S. Government Account Office (GAO) reported to Senator Carl Levin, Chairman, Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, certain information about the participants in the 2009 IRS Offshore Voluntary Disclosure Program (OVDP).  The report examined the state of residence of the participants and countries in which the disclosed foreign accounts were located.

State of Residence

The subcommittee examined 10,500 original 2008 federal income tax returns filed by 2009 OVDP participants.  The three states with the largest number of participants were:








New York






The subcommittee pointed out that the states having the largest number of submissions could be due to these states having taxpayers with higher than average income and the OVDP attracting taxpayers with higher income than generally reported by the average taxpayer.

Countries in which disclosed account was located

The subcommittee also identified 12,889 FBARS that were filed for 2008 by 2009 OVDP participants.  The disclosures of foreign accounts most frequently were located in:







United Kingdom



Canada, France Israel,


484 to 556

4% (per country)

China, Hong Kong

394, 362 respectively

3% (per country)

Taiwan, India

307, 306 respectively

2% (per country)

The above results are not surprising as most of the indictments have come out of California, New York and Florida.  UBS was the initial target of the IRS/ DOJ offshore probe and activity has continued to focus on Swiss banks with 14 of Switzerland’s largest banks now under investigation and 106 other Swiss banks having recently agreed to cooperate with the DOJ and submit names to avert criminal investigations and possible indictments.

Although the IRS / DOJ offshore probe began in Switzerland, IRS and DOJ have extended its reach to Israel, India and other countries. Thus, U.S. persons with unreported accounts in other countries should take no solace from the initial focus on Switzerland, especially those who moved accounts from Swiss banks to Singapore or other non-Swiss financial centers to avert discovery. The IRS data-base is growing as is the likelihood of being discovered.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved

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Suppose a couple who are separated and living apart have submitted a joint Offer in Compromise on an income tax liability owed on a previously filed joint return year.  Now, they are in the process of getting a divorce.  The husband had prepared the Offer but claims not to have a copy of the financial information submitted.  Can the Wife obtain directly from IRS via a Freedom of Information Request a copy of the information submitted by her soon to be ex-husband?

Chief Counsel Advice Number 201404010 provided to the IRS Centralized Offer in Compromise unit advised that the information could not be disclosed citing Internal Revenue Code Section 6103(e)(8) which governs the disclosure of tax return information.

That section provides:

(8) Disclosure of collection activities with respect to joint return

If any deficiency of tax with respect to a joint return is assessed and the individuals filing such return are no longer married or no longer reside in the same household, upon request in writing by either of such individuals, the Secretary shall disclose in writing to the individual making the request whether the Secretary has attempted to collect such deficiency from such other individual, the general nature of such collection activities, and the amount collected. The preceding sentence shall not apply to any deficiency which may not be collected by reason of section 6502 (dealing with statute of limitations on collection of tax debts).

Thus, IRS, upon written request, IRS will disclose only:

    •  Whether IRS has attempted to collect the deficiency from the other former or separated spouse.
    • The amount, if any, collected from the former or separated spouse.
    • The current collection status such as a “taxpayer delinquent account TDA),” or “installment agreement in effect or suspended.”
    • If suspended, the reason for the suspension of the installment payment agreement such as being unable to locate the taxpayer or for financial hardship.

Section 6103, however, does not authorize disclosure of personal information about a former or separated spouse including information about the other spouse’s:

    •  Employment.
    • Income, or.
    • Assets.

RSS Comments:

  • The other spouse would certainly like to know about the employment, income and assets disclosed to IRS with the Offer in Compromise.  Both Form 656, Offer in Compromise, and Form 433-A (OIC) Collection Information Statement for Wage Earner and Self-Employed Individuals are signed under express penalties of perjury.  Form 433-A could be compared with the Financial Affidavit filed by the other spouse in the divorce proceeding.
  • The obvious caveat here is not to allow a joint offer to be submitted without carefully reviewing the offer and receiving a copy of the offer and all supporting information.
  • Failing that, discovery of such information might be obtained from the other spouse’s tax return preparer or attorney if a return preparer or attorney assisted with the preparation of the offer.  Since the offer is joint, absent disclosure that only one spouse was being represented, the preparer or attorney would be representing both spouses and would be required to provide to each original documents relating to the offer.
  • Such joint representation, however, presents conflict of interest issues for the preparer or attorney that could result in malpractice claims, especially if the offer was submitted after the parties separated or initiated divorce proceedings.  For, submission of the offer tolls, during the offer’s pendency, the running of the statute of limitations on collection of tax debts and the waiting period before a bankruptcy filing during which tax debts are not dischargeable.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved

Posted in DIVORCE, IRS COLLECTIONS, TAX | Tagged , , , , | Leave a comment


My post of September 6, 2013, “Heat on Offshore Tax Evaders Turned up: DOJ Offers Swiss Government Sanctioned Deal to Smaller Swiss Banks,” described in some detail the Swiss Bank Settlement Program (SBSP) under which Swiss banks not already under DOJ criminal investigation could avoid possible prosecution by entering the SBSP.  To qualify a bank had to file papers by December 31, 2013 indicating its intent to enter the program and agreement to cooperate with DOJ by submitting, along with other information, names of US depositors.  Those banks accepted into the program that have violated US. Law would receive a non-prosecution agreement, and, unlike the now defunct Wegelin Bank, thereby avoid indictment.

On February 4, 2014, the DOJ announced that 106 Swiss banks have requested participation in the SBSP.  These banks will not be prosecuted by the DOJ only if they comply with the terms of the SBSP.  Thus, you can be sure that the banks will strictly adhere to the program’s requirements.

With so many banks participating, the DOJ and IRS are about to haul in a huge treasure trove of information about U.S. depositors and , persons who assisted U.S. depositors in evading U.S., tax including, account managers, client advisors, asset managers, financial advisors, trustees, fiduciaries, nominees, attorneys accountants or any other individual or entity that helped U.S. depositors evade tax.  These names and contacts will result in prosecutions of many of the named individuals.  The names and contracts will also be entered into the IRS E-Trak data-base that assists IRS in identifying other offshore tax scofflaws.

Many Swiss banks entering the program have or will be submitting letters to their clients informing them of the bank’s participation and advising them to enter the IRS Offshore Voluntary Disclosure Program (OVDP).

What does this development mean for those still out in the cold?

The DOJ has said, “The Tax Division is committed to using every tool available to identify, investigate and prosecute those who hide income and assets in offshore bank accounts.” (See DOJ Press Release, “First Deadline Approaches for Participation in the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks,” 12/12/2013).

  • Clearly, the DOJ is not pulling its bloodhounds off the search for those hiding unreported offshore bank accounts.
  • Clearly, the Swiss banks entering the SBSP will cooperate with DOJ.
  • Clearly, information obtained by DOJ through the SBSP will expose many U.S. offshore depositors to immediate threat of criminal prosecution and disqualify them from entering the IRS OVDP.

What should U.S. persons with unreported offshore accounts do?

Do what is rational and sensible: retain experienced tax counsel and consider entering the OVDP as soon as possible.

 What should persons with unreported offshore accounts not do?

    •  Move Swiss bank funds to another tax haven jurisdiction like Singapore.  Caveat:  IRS is pursuing so-called “leavers,” and moving the funds is an overt act that helps DOJ establish willfulness and the crime of tax evasion.
    • Assume you will not be found out because your account is in the name of a relative.  IRS will discover the beneficial account owner from facts that show who interacted with the bank, received distributions, etc. and assert that person is the real owner.
    • Do nothing – employ the Ostrich tactic of sticking your head in the sand and hoping the scary problem will go away on its own accord. Once IRS or DOJ has your name, you will be disqualified from entering the OVDP.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved


Posted in 2012 OVDP, FBARS, NEW OVDP, OFFSHORE BANK ACCOUNTS, TAX, VOLUNTARY DISCLOSURE | Tagged , , , , , | Leave a comment


The Wall Street Journal reported today (“Credit Swiss Nears Tax-Cheat Deal,” by John Letzing, Francesco Guerrera and David Enrich) ) that Credit Swiss, Switzerland’s second largest bank, is said to be in serious negotiations with the Department of Justice to resolve allegations that it assisted American citizens in evading U.S. income taxes and reporting responsibilities.  WSJ reported that although in early stages the settlement is expected to exceed the $780 million fine paid by UBS which entered into a deferred prosecution agreement with the DOJ that also resulted in names of U.S. depositors being submitted to the DOJ.  A deal with Credit Swiss is expected to be concluded by mid-year.

Credit Swiss is one of 14 large Swiss banks under criminal investigation by DOJ.  Over fifty percent of Switzerland’s smaller government-backed banks not actively under investigation have indicated they will participate in the Swiss Bank Settlement Program under which they will cooperate with the DOJ to avoid possible criminal sanctions but pay fines on a sliding scale depending on the degree of culpability.

The 14 larger banks under investigation are ineligible for the special bank settlement program.

IRS and DOJ have repeatedly indicated they intend no let-up on the aggressive pursuit of offshore tax scofflaws.  Those betting on not getting caught or obtaining a better deal later on, are unrealistic.

Meanwhile, the IRS current version of its Offshore Voluntary Disclosure Program is still open as one avenue for those seeking to come in from the cold and make amends for prior tax transgressions without facing jail time.   Other means by which to come into compliance are also available and which route is safest or most appropriate for a particular taxpayer involves a complex analysis of fact, law and administrative rules that requires the assistance of a tax attorney experienced in these matters.

Taxpayers should not try to self-navigate the complexities of these decisions through internet searches or from gossip or anecdotal stories from friends.  A candid and complete exchange with an attorney under protection of the attorney-client relationship is the safest and wisest way to determine how to proceed with a voluntary disclosure.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved

Posted in 2012 OVDP, NEW OVDP, OFFSHORE BANK ACCOUNTS, TAX, VOLUNTARY DISCLOSURE | Tagged , , , , , , | Leave a comment


Part T of the Federal Sentencing Guidelines Manual deals with “Offenses Involving Taxation.” The Introductory Commentary states:

The criminal tax laws are designed to protect the public interest in preserving the integrity of the nation’s tax system.  Criminal tax prosecutions serve to punish the violator and promote respect for the tax laws.  Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines.  Recognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators.

It is difficult to understand how Ty Warner’s sentence of probation comports with the above purpose.  While, as the court stated, Mr. Warner is indeed a “very unique individual,” his gentle treatment before the court gives the impression that the wealthy will be treated differently; that they can flout the law and get off with a monetary penalty that, for them, is not extremely painful and amounts to a very public slap on the wrist.   Mr. Warner must serve 500 hours of community service, must pay a civil penalty of $53 million, $5 million in back taxes and a fine of $100,000.  But, is his punishment commensurate with the severity of the crime?

Mr. Warner, age 69, plead guilty to only one count of tax evasion although he was charged with more.  The maximum sentence for the crime he plead to is 5 years.  The prosecutor sought a sentence of at least one year and one day.  Under the Sentencing Guidelines jail time is increases with the tax loss to the government.  A Forbes article by Janet Novak, “No Jail Time for Beanie Babies Billionaire Tax Evader Ty Warner (Forbes 1/14/14) suggests that the guideline sentence should have been 46 to 57 months of incarceration.  Much of the factual information outlined below about Warner’s sentence and the court’s reasoning is taken from Ms. Novak’s article. The comments are mine.

The Court based its sentence on the following:

  • Mr. Warner is a very unique individual. Comment: Is being unique license to break the law?
  • The good works Warner has done citing his payment of a $20,000 medical bill for a stranger and gift of $20 million charitable donation. Comment:  Just about every white-collar crime defendant cites charitable acts as reason to reduce the sentence.
  •  “Society will be better served by allowing him to continue his good works.” Comment: He could continue his good works after serving some time as punishment for his bad deeds.
  • Warner has already paid a price of public humiliation. Comment: But, he’s still a billionaire and deserves more than embarrassment.  He could afford to pay his share of taxes; but, greed compelled him to attempt to shirk his tax obligations.
  • Warner had tried unsuccessfully to enter the IRS 2009 Offshore Voluntary Disclosure Program but was rejected because the IRS already had his name from those initially disclosed by UBS after it had entered into a deferred prosecution agreement with the DOJ.  More than 39,000 taxpayers have been granted amnesty under the three variations of the program.
  • Warner had accepted responsibility for his mistakes.  Comment: What else could he do having been caught red-handed?

The prosecutor had argued “(without prison time), tax evasion becomes little more than a bad investment.”

There were aggravating factors in this case that did not apparently influence the judge, namely:

  • It is not clear that Warner did not know his name had been submitted when he applied for the 2009 OVDP. Comment: but he certainly knew his name would likely be submitted.  He submitted his name to the program after another UBS client had pleaded guilty and a UBS banker had been indicted.
  •  The other UBS client Jeffrey Chernick, a toy manufacturer, had hidden $8 million offshore and was sentenced to three months in jail.  Comment: I guess he did not hide enough to get off with no jail time.
  • Warner between 1998 and 2008 maintained unreported Swiss bank accounts.
  • Initially the accounts were opened at UBS AG.
  • He had travelled to Zürich in 1996 to open the account.
  • He’d instructed the bank to hold correspondence that no mail could be traced to him.
  • It was no clear whether the initial deposit to the Swiss account was not from funds on which no U.S. tax had been paid which, if true, would substantially increase the tax loss to the U.S. Treasury.
  • After UBS agreed to report information to the IRS in 2001, it advised its clients to move funds out of the bank to Zuercher Kantonalbank (ZKB) in order to retain the secrecy of the account.
  • In 2002 Warner again travelled to Zürich and transferred $93.6 million from UBS to ZKB.  Comment: Thus, he took overt steps to perpetuate the crime.
  • His new account at ZKB was managed by Hansreudi Schumacher, the Swiss banker later indicted.
  • The new account, however, was not opened in Warner’s name but in the name of a nominee entity, the Molani Foundation, a Liechtenstein entity, used to further conceal Warner’s identity.  Comment: This is a biggie for showing wilfulness.
  • Between 1999 and 2007, Warner’s unreported income from the accounts was about $24.5 million. Comment: Wow!
  • Obviously, Warner did not file FBARS for the years in question.
  • Warner had filed amended tax returns in December 2007 for the years 2002 through 2005 but did not report the existence of or income from the ZKB account in those amended returns. Comment:  Thus, for those years he’d filed false original and amended returns.

The facts above appear to show a pattern of behavior aimed at concealing Warner’s hidden offshore accounts until it was clear that, further efforts were futile, and disclosure was imminent.  Then, and only then, did Warner attempt to enter the OVDP.

That Warner was extraordinarily charitable is not unusual for the rich who break the law.  Human nature is such that most people are neither angels nor devils, but represent a collage of good and bad character traits; and, all are prone to making mistakes.  A self-assessment tax system, under which few are audited, requires a belief in the fairness of the regime by taxpayers.  If the perception arises that the wealthy will be treated with kid gloves because of their wealth, how will the little guys who pay a bunch of tax react? Will the small businessman be inclined to report fairly his income?

What is the take away from Ty Warner’s sentence for those still out in the cold?  Ty Warner was given the benefit of the doubt because, among other factors, he tried to enter the program.  Thus, even if rejected from the program, coming forward may be helpful at a later sentencing.  My advice for those still pondering whether to come in from the cold is to stop wavering and take action to enter the OVDP now.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved

Posted in 2011 OVDI, 2012 OVDP, FBARS, NEW OVDP, OFFSHORE BANK ACCOUNTS, TAX, TAX CRIMES, VOLUNTARY DISCLOSURE | Tagged , , , , , , | Leave a comment