Some who call me shop around after we speak seeking a less expensive tax attorney. My billing rate is at the lower range of what equally experienced AV-rated tax attorneys charge. I know how much time at a minimum it takes to properly and professionally prepare the non-willful certification statement of facts supporting non-willfulness.

What is involved in preparing the non-willful certification?
The tax attorney must conduct a due diligence inquiry to determine the client’s state of mind as to knowledge and intent. The purpose of this inquiry is to determine if the client had known of the requirement to file FBARs and made a conscious decision not to file when he or she was otherwise able to file timely.

How does the tax attorney determine knowledge and intent?
The client will almost always claim he or she did not know about the FBAR filing requirement. How do you look into their mind to determine knowledge and intent? Well, there is no X-ray or MRI that reveals what was in their brain on the FBAR filing due date for each year. Consequently, knowledge and intent or lack of knowledge and intent must be established by what is called circumstantial evidence. Circumstantial evidence includes all of the surrounding facts and circumstances related to the creation, and operation of the foreign financial account. It also includes facts and circumstances that go to determining whether it is reasonable to conclude that the taxpayer would likely have known about the FBAR filing requirement and other facts that tend to either indicate knowledge and/or intent or the absence hereof.

Some of these factors are:

• Educational background, including advanced degrees and areas of study.
o Tax and finance courses included in curriculum.
o Generally, the more educated the more likely IRS will deem knowledge and intent present. But, focus of studies is important.
•Work history and experience – did positions held bring client into contact with tax and FBAR information?
• Level of sophistication of investments – more sophisticated investor is more likely to have heard of FBAR.
• Publication subscriptions – Wall Street and Economist reader more likely to have heard of FBAR than Miami Herald and Facebook reader.
• Unusual health, family and job stresses in life that may have distracted the client from inquiring or rendering client unable to timely file.
• Communications with bank – foreign banks keep records of emails and calls. Does the client have copies of all such communications?
o Relying solely on memory is extremely dangerous.
• Communications with return preparer
o Was organizer provided? Used?
o Face to face meetings?
o Emails? Does client have copies of all written communications?
o Must confirm answers directly with return preparer.
• Self-prepared returns:
o Which software program used?
o Which version of software as different versions may have different prompts regarding FBARS?
o Do returns contain Schedule B?
o Anyone assist? Must confirm facts.
• How the account came to be opened?
o Inherited?
o Outbound transfer of funds?
o Local banking needs for expatriate.
• Where the accounts were located?
o The IRS will look closely at streamlined filings including accounts at UBS or other financial institutions on its list of enablers.
o Similarly, if the taxpayer was involved with an identified enabler individual broker, attorney or banker, IRS may look askance at a taxpayer’s claim of non-willfulness.
• Source of funds must be determined and verified
 Legal activity?
 Untaxed funds?
• Obtain account opening documents
o Hold mail instruction?
o Nominee entity title holder?
• How account operated:
o Serial transfers back to U.S. in amounts under $10,000?
o Transfers to other foreign accounts in countries where client does not reside?
• How client learned of FBAR requirements?
o When? From what source?
• What client did to come into compliance after learning about FBAR reporting requirements?
o Name, address and telephone number of each professional contact.
o Advice provided.
o Date of communication.

The above facts take considerable time to marshal and incorporate into a coherent and cogent statement for non-willfulness.

What else must the tax attorney do in representing the potential streamlined client?

The tax attorney must first analyze these facts and determine that no tax (Title 26 U.S.C.), Bank Secrecy Act crime (Title 31 U.S.C.) or other crime (e.g. Title 18 U.S.C.) has been committed. The tax attorney must then determine if the facts and circumstances establish non-willfulness. Since the Streamlined Filing Compliance Procedures are internal IRS procedures contained in the Internal Revenue Manual but not in the Internal Revenue Code or Bank Secrecy Act, returns will be processed as streamlined returns at the discretion of IRS. Thus, the taxpayer’s affidavit must establish non-willfulness to the satisfaction of IRS for the taxpayer to be entitled to the streamlined penalty relief. Of course, ultimately, should IRS assess a willful FBAR penalty, it will have the burden of proving willfulness. The National Taxpayer Advocate may be able to assist if a taxpayer is unreasonably denied streamlined filing penalty relief.

The tax attorney must also determine that the client is either a person living in the U.S. or living outside of the U.S. This is not simply a matter of where the taxpayer happens to reside at the time of filing. The test for U.S. citizens or Green Card holders involves either meeting or failing to meet a non-residency test for any one of the three streamlined years (three most recent years for which the return due date has passed). For others, residency is determined under the substantial presence test for determining income tax residency. In this regard, taxpayers who are resident aliens under the SPT cannot user a tax treaty closer connection test to escape the 5% miscellaneous offshore penalty that applies to persons living in the U.S.

Finally, the tax attorney must review the streamlined returns to make sure there is nothing facially incorrect and that the facts stated in the returns are consistent with the statements in the non-willful certification statement.

The streamlined filing should be submitted by the tax attorney with a cover letter.

How much time does will the tax attorney spend in advising a potential streamlined client?
It should be apparent to even the naïve tax filer that this process cannot be completed in a few hours. I have found it impossible to complete in less than eleven hours. Some non-willful certifications take much longer. The many non-willful certification statements I have prepared ranged from a low of six pages to a high of over thirty-five pages

What are the potential consequences of a botched streamlined filing?
I have heard stories of clients paying as little as $1,000 for preparation of the streamlined non-willful certification statement. Frankly, someone charging such a fee cannot possibly do what must be done to insure that the filing won’t exacerbate the client’s tax problems by:

• At worst getting the client charged with a tax crime, FBAR crime or perjury for filing a false affidavit which is possible if:
o .The non-willful statement is found to be false.
o The non-willful affidavit cherry-picks the helpful facts but does not include facts that are not helpful or even that work against non-willfulness.
o The non-willful affidavit makes statements that are later contradicted by others such as the bankers or return preparers.
• At best, having the returns treated like regular tax filings not covered by the streamlined filing penalty relief which are later audited.

Shopping for a tax attorney is not akin to shopping for an automobile. Autos of the same make, model and with similar options are comparable. Each tax attorney is unique in his or her knowledge, experience and ethical behavior, Clients should be suspicious when a much lower fee is suggested by a particular attorney. The old adage should warn: “If it sounds too good to be true, it is.” Bargain-basement streamlined filings may turn out to be very expensive filings if any of the above bad things happen because bad advice is received from an inexperienced “inexpensive.” tax attorney. Streamlined filings are consequential matters that should be approached with great caution and care.

© 2016 by Robert S. Steinberg, Esquire
AV rated (preeminent) by Martindale Hubbell

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For some time now, I’ve been receiving frequent calls from U.S. citizens or Green Card holders living outside of the U.S. and U.S. citizens, Green Card holders and residents living in the U.S. who have been out of compliance with U.S Tax Law vis a vis their foreign income producing activities and foreign financial assets.

I explain to them that to qualify for the Streamlined Filing Compliance Procedures, which provide a relatively simpler and less painful path back to compliance, they must certify under penalties of perjury that their failure to properly report income, file FBARs and foreign reporting forms was the result of non-willful. Further, that non-willful means that their conduct was not willful. And, that the courts have defined willfulness as the intentional violation of a known legal duty.

Thus, they either must have been ignorant of their duty to file FBARs and other foreign reporting forms and report foreign interest and other income; or, having knowledge, must have been negligent or careless in failing to file or report, but not willful. (For a discussion of willfulness see blog post of September 1, 2014 “Will-O-The Wisp Willfulness in the Streamlined Process.”

Beginning in  2015 and more urgently in 2016 Foreign Financial Institutions (FFEs) seeking to comply with FATCA’s due diligence requirements have begun inquiring of depositors whether they are U.S. citizens or residents and requesting completed Forms W-9 from deposits who are U.S. citizens or residents. Moreover, the FFEs are telling U.S. depositors to inquire about their U.S. tax reporting obligations.

Thus, U.S. expatriates and citizens and residents living in the U.S. who have been contacted by an FFE are learning of the U.S. income tax and foreign financial account reporting requirements and may no longer be able to state, under penalties of perjury, that their conduct at least with respect to 2015 and 2016 filings was non-willful.

To qualify for the Streamlined Filing Compliance Procedures the taxpayers conduct must have been non-willful for the entire period of noncompliance. Thus, absent other exigent facts and circumstances, if a taxpayer knew of the offshore reporting requirements for 2015 or 2016 filings and consciously or voluntarily did not or do not file or report, he or she will not be eligible to file amended or delinquent returns (persons living outside of the U.S) using the Streamlined Procedures.

Some examples:
1. A U.S. expatriate living in and paying taxes in a European country with unfiled U.S. returns is contacted by his or her foreign bank in November of 2015 requesting a Form W-9 and informing him of U.S. income tax filing and FBAR reporting requirements. The taxpayer who was previously ignorant of the offshore reporting requirements completes and returns the form to the bank but decides to ignore the newly acquired knowledge and does nothing about coming into compliance. In November of 2016 the taxpayer seeks professional assistance about how to come into compliance and plans to file delinquent returns for 2013, 2014 and 2015 and FBARs for 2010 through 2015 in early 2017.

2. Same facts as in example I above, except that the taxpayer upon being contacted by the bank immediately seeks professional help, files for an extension for 2015 in April 2016 but does not complete the delinquent returns for 2013, 2014 and 2015 or file FBARs for 2010 through 2015 until November of 2016. The delay is caused by the difficulty in obtaining all of the necessary information to file complete and accurate returns and in retaining a qualified return preparer and experienced tax attorney to assist with the Streamlined Filing Non-willful Certification.

3. Same facts as in example 1 above, except that the bank does not contact the taxpayer until June of 2016.

Conclusions: Caveat: these are overly simplified fact patterns that focus solely on when the taxpayer obtained knowledge of the offshore reporting requirements.  The examples and conclusions are based on my discussion of November 15, 2016 with an OVDP Revenue Agent in Austin following my call to “The OVDP Hotline.” I had posed the question stated in Example 1.  The agent emphasized that the timing of obtaining knowledge would be critical but that all facts and circumstances would be considered.  The answers provided are informal opinions of the agent and are not necessarily binding on the IRS.  Certainly, making willful versus non-willful determinations requires close and careful examination of all relevant facts and circumstances. See IRS FAQs for Streamlined Filing Compliance Procedures and Forms 14653 and 14654. For Tax Wars Blog discussions about what must be included in the Non-willful Certification see blog posts of January 28, 2016, “Non-willful Affidavits under the Streamlined Filing Compliance Procedures;” March 9, 2015, “Don’t Lie, Don’t Exaggerate and Don’t Cherry Pick Your Facts,” and others.

• Example 1: Absent extenuating facts and circumstances, the IRS would likely view the taxpayer’s conduct as willful. On April 15, 2016 the taxpayer knew he or she was required to file an income tax return for the year 2015 and on June 30, 2016, knew he or she was obligated to file and FBAR, but consciously did not file. Thus, the taxpayer is ineligible for making a Streamlined Filing because his or her conduct would be deemed willful with respect to 2015 even though conduct was non-willful prior to the 2015 filing deadlines

• Example 2: Absent other damaging facts the IRS would likely view the taxpayer’s conduct as non-willful for all relevant years. If damaging facts are present, they must be stated in the non-willful certification statement and explained, if there is a cogent explanation.

• Example 3: As in example 3, absent other damaging facts the IRS would likely view the taxpayer’s conduct as non-willful for all relevant years.
In addition, as noted in prior blog posts Caroline Ciraolo, Principal Deputy Assistant Attorney General in the Tax Division of the Department of Justice, has stated her skepticism whether any taxpayer could claim to be non-willful at this late date, after all of the publicity about offshore non-compliance. While I have disagreed with her statement in prior blog posts, it is certainly becoming more difficult, although not impossible in every case, to disagree with that conclusion.

It is imperative for those desirous of employing the Streamlined Filing Compliance Procedures to come into compliance to make sure to be fully compliant regarding offshore activities and assets in their 2016 income tax return and FBAR.  That means filing a timely and accurate Form 1040 with all required foreign reporting forms as well as a timely and accurate FBAR.  Those taxpayers having knowledge of the filing and reporting obligations who do not file timely compliant 2016 returns will have a difficult time establishing non-willfulness and, depending on the specific facts and circumstances, may need to enter the OVDP or file amended returns outside of the formal IRS OVDP or Streamlined procedures with statements claiming non-willfulness and/or claiming mitigating factors that justify  abatement or reduction of the willful or non-willful FBAR penalty.   Properly filed amended returns, in an appropriate case, may be viewed by IRS as a traditional Voluntary Disclosure under the IRS’s long-standing informal Voluntary Disclosure Policy.  (See IRM Voluntary Disclosure Practice).  If deemed a Voluntary Disclosure, the taxpayer would not likely be charged with a tax crime.

It is also imperative that those seeking to come into compliance under either the Streamlined Filing Compliance Procedures or the Offshore Voluntary Disclosure Program do so at the earliest possible time. Following his inauguration, President Trump will nominate a new Secretary of the Treasury and IRS Commissioner. Both will be confirmed unless the Senate Democrats filibuster to delay the nominations from taking effect. In that case, the Republican majority may change the 60 vote requirement to a simple majority. Thus, there likely will be a new Treasury team running the show sometime in 2017. The new sheriff in town may decide that the two amnesty programs have run their course and that leniency is no longer desirable tax policy. Thus, either one or both programs may be eliminated. The IRS has repeatedly stated that there is no guarantee that these special programs will continue in their present form or at all.

The need to take action about coming into compliance is made more compelling by the growing likelihood of discovery. See blog post of November 3, 2016 “18 USC 3287 – The Statue without Limitations – Impact on OVDP Decisions.”
For a discussion of the OVDP compared with the Streamlined Filing Compliance Procedures, see blog post of May 19, 2016, “Comparison Chart – OVDP vs. Streamlined Filing Compliance Procedures.”

© 2016 by Robert S. Steinberg, Esquire

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Title 18 of the United States Code Section 3287 – Wartime Suspension of Limitations Act (WSLA), provides as follows:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)), the running of any statute of limitations applicable to any offense (1) involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not (emphasis added), or (2) committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or (3) committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress. (Emphasis added).

Definitions of terms in section 103  [1] of title 41 shall apply to similar terms used in this section. For purposes of applying such definitions in this section, the term “war” includes a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution (50 U.S.C. 1544(b)).

Some individuals who have unreported foreign financial accounts may be thinking to continue to hide and out-wait the Department of Justice and IRS to the statute of limitations for crimes under Title 26 (tax), Title 31 (Bank Secrecy Act) and Title 18 (General federal criminal statute).

Apart from the increasingly heightened risk of discovery and other events that toll the various statutes of limitations (continuing conspiracy or concealment of conspiracy, out of the country, fleeing felon – see below.) 18 USC 3287 is perhaps the scariest tolling provision. While the statute does not apply to Title 26 crimes, such as tax evasion under IRC Section 7201, it does apply to Klein conspiracy crimes under 18 USC 371.

The SOL on conspiracy, six years, is extended when it is a continuing conspiracy or when a conspirator commits acts to conceal the crime. But, 18 USC 3287 eliminates the need for the government to prove these extending elements. The SOL under the WSLA is suspended until 5 years after the “termination of hostilities” as proclaimed by the President with notice to Congress or by a concurrent resolution of Congress.

To trigger the SOL suspension the U.S. does not require a formal declaration of war although that would trigger the section’s application. It is triggered when Congress enacts a specific authorization for the use of the Armed Forces as described in section 5(b) of the War Powers Resolution (50 USC 1544 (b).

Presently there are two active authorizations for the use of the Armed Services that have not been revoked by Presidential proclamation with notice to Congress or by a concurrent resolution of Congress. These are:
• Congress authorizing on September 18, 2001,the use of military force against those tied to the attacks of September 11, 2001, and,
• Congress authorizing on October 11, 2002 the president’s use of military force relating to the weapons of mass destruction threat posed by Iraq.

The Fifth Circuit Court of Appeals in United States v. Pfluger, 685 F. 3d 481 (June 21, 2012) has held that the “termination of hostilities” test in the WSLA is a formal test that requires the specific action stated in the statute, that is a proclamation of the President with notice to Congress or a concurrent resolution of Congress. Termination of hostilities cannot be established as a result of termination of the conditions justifying the original authorization for the use of military force.

The U.S. Supreme Court unanimously held in Kellogg, Brown & Root Services Inc. v. U.S. ex rel Carter (576 U.S. __, 12-1497, slip op. at 11 (May 26, 2015). that the WSLA does not suspend the applicable statute of limitations (SOL) in civil litigation, in Kellogg Brown & Root a civil false claims act case. Kellogg Brown & Root, however, also confirms that the criminal statute of limitations in criminal fraud cases is indefinitely suspended as long as Congressional authorizations for military force in Afghanistan and Iraq continue in force.
Moreover, civil tax assessments may be made at any time by IRS if fraud is proved.

What is the implication of the WSLA? Rosa Brooks in her book “How Everything Became War and the Military Became Everything”, states that a global war on terror, “was a war that could by its nature have no boundaries; no geographic limits, no limits on who could be targeted, captured or killed and no end.”

Since almost all offshore tax fraud involves an implicit agreement between two or more persons (U.S. taxpayer and at least one enabler) and overt acts in furtherance of the agreement, the SOL on tax fraud will remain open and waiting will not make the problem go away. The tax fraud also vitiates the tax SOL on assessment of the tax and civil fraud penalty by IRS.

On the other hand the FBAR civil penalty SOL is not suspended by the WSLA and waiting can eliminate that penalty if the foreign financial accounts have been closed and funds repatriated to the U.S. or moved into non-reportable assets. Although in the latter case the criminal conspiracy SOL would be suspended by virtue of additional acts committed in furtherance of the tax fraud scheme. Such individual may think to wait and then enter the OVDP after the FBAR SOL has expired. He or she would then opt-out of the OVDP penalty regime while preserving the criminal amnesty feature of the OVDP. While FBAR penalties would be time barred if 6 years had elapsed since the last required FBAR filing, Title 26 penalties could still be assessed if fraud is proved. Presumably, such individual will have closed all foreign financial accounts and repatriated the funds to U.S. accounts to turn-off the FBAR filing requirement.

This plan may seem plausible but waiting is a very dangerous tactic because:
• The likelihood of discovery is growing exponentially.
• There is no guarantee that the OVDP will continue in its present form.

Why is likelihood of being found out growing?

OECD CRS (Common Reporting Standard) – 100 countries are on board with about 60 to begin reporting in 2017.
Heightened pressure on tax haven countries by G20 nations to adopt the CRS.
• Swiss Bank Settlement Program – DOJ obtaining information from which to make treaty requests for specific taxpayer information.
• .IRS data base from OVDP and Streamlined filings (Over 100,000 combined participants)
Investigations extending beyond Switzerland – Caribbean, Asia, Middle East
FATCA (Foreign Account Tax Compliance Act) – Information Sharing Agreements have been signed and banks are asking for W-9s as part of their due diligence obligations.
Panama Papers – DOJ opened investigation
John Doe summonses continue to be obtained which seek information from foreign banks about the identity of U.S. account holders.
Summons or subpoena issued to taxpayer – Courts have uniformly held there is no Fifth Amendment defense to act of production of documents concerning accounts under Required Records doctrine.
Under examination disqualifier – Receipt of an audit letter ends eligibility for both programs until audit is closed.
o When is audit considered closed? Per my conversations with OVDP Hotline personnel:
 Receipt of Form 987 in agreed case officially closes audit after which a Code 300 series entry will appear on the taxpayer’s account transcript.
 Signing Form 4549 is not official end of audit
 But if the taxpayers fears his or her name is about to be disclosed, the individual can fax names to CI with copy of the signed 4549 and CI might accept that person into the OVDP. But, there is no guarantee of acceptance.


Any one of a number of Statutes of Limitation (SOL) tolling provisions will suspend the running of the SOL and enable IRS to assess additional tax or the DOJ’s to bring criminal charges. For example:

o As to Civil tax and penalty assessments:

   IRC 6501 (c) (8) – extends SOL on return to 3 years after the date that all required foreign reporting forms (not FBARs) are filed (limited to foreign items if failure to file due to reasonable cause). This is civil SOL.
• Reasonable Cause – “taking that degree of care that a reasonably prudent person would exercise.” CCA 200748006 (Chief Counsel Advisory). What it means? Absence of negligence.
• Likelihood of establishing reasonable cause decreased over time as more years go by.
Unfiled returns – No SOL Sec. 6501 (c).

o As to tax crime SOLs:

   Normal criminal SOL is 6 years / Title 31 crimes 5 years.
• Outside U.S – Sec. 6531.
• Fleeing felon – 18 USC 3290
• During U.S. Gov’t request for evidence located in foreign country – 18 USC 3292
• Even worse – 18 USC 3287 – discussed above

Possible Loss of Passport – IRC Sec. 7345. Seriously delinquent tax debt over $50K can lead to denial, revocation or limitation of a passport. If Sec. of State is notified by IRS, must not issue new passport and can revoke a passport previously issued.
o Could be big problem for expats who do not necessarily receive all tax notices mailed to out of date addresses.

Cost rising – 47 more banks, brokers, individual advisors being added to IRS enablers list that increased OVDP misc. offshore penalty to 50% – Now 144 enables on list
o Less warning to taxpayer that individual enabler will soon be added to list. Banks usually attract headlines when investigation begins before DOJ makes public.
o Taxpayers connected to these individuals will pay the higher OVDP penalty.
o 4 WEEK GRACE PERIOD – These latest additions begin to trigger the 50% penalty for any taxpayer who has not come forward by November 15, 2016.
o Individuals – either under investigation or cooperating.
 Anyone who assisted with offshore arrangement.
 Mangers of offshore account
 Lawyers who set up nominee entity
 Bankers who assisted in hiding account
 No Mossack Fonseca lawyer names yet (Panama Papers law firm).

For all of these reasons waiting is generally not a safe plan as continued secrecy is a poor tax planning strategy. Someone always knows and someone is always willing to testify to save his or her own skin.

© 2016 by Robert S. Steinberg, Esquire
All rights reserved


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Below is a copy of a press release regarding my being awarded the above honor. In my over forty years of tax practice I have endeavored to maintain my personal commitment to professionalism and have attempted to represent with compassion and respect clients who have found solutions to tax problems brought to me.

“America’s Most Honored” is a recognition program created by American Registry. American Registry is expert in business recognition evaluation. Like all professionals included in American Registry’s comprehensive database, these honorees have received multiple honors by recognized trade or professional groups, and/or acclaimed recognitions by peers, clients and/or the press.

Robert S. Steinberg has received their prestigious Top 1% Award for America’s Most Honored Professionals 2016. This award is not limited to lawyers like Robert S. Steinberg, but all professionals including CEO’s, doctors and others included the top echelon of recognition.

American Registry issues awards for “Most Honored Professional” for individuals in the top ten, top five and top one percent. The Top 1% Award is an achievement considered by American Registry to be one of the most dignified of any individual recognition. Nationally, very few lawyers are awarded the Top 1% designation.
More information on this award is available at

Robert S. Steinberg is also AV rated by Martindale Hubbell. An AV rating is the highest peer reviewed rating for legal ability and ethical standards awarded by Martindale Hubbell, the world’s most trusted attorney peer-reviewed rating service and legal directory.

The American Registry and Martindale Hubbell are private organizations not affiliated with The Florida Bar and their awards are not an indication of any special status or expertise sanctioned by the Florida Bar.

Robert S. Steinberg limits his practice to taxation. For more information visit his legal website

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The Department of Justice Tax Division on August 17 released a transcript of comments made by Principal Deputy Assistant Attorney General, Caroline D. Ciraolo, who had spoken at the Panama Bankers Association Anti-Money-Laundering Panama City, Panama.
Some take-aways from a large portion of her comments reproduced below:
• The DOJ and IRS will continue to devote formidable resources at offshore non-compliance.
• The DOJ will continue to seek court orders compelling compliance with IRS administrative summonses as it has done in the past.
• The DOJ will continue to file petitions in appropriate cases seeking court authorization to issue John Doe Summonses..
• The DOJ will continue to employ all other available and appropriate methods to obtain information regarding potential tax violations. These methods will include use of information and names the DOJ is obtaining under the Swiss Bank Settlement Program as well as information obtained pursuant to various deferred prosecution agreement entered into with a number of banks.

The text of Deputy Assistant Attorney General Ciraolo’s comments follows:

Among our highest priorities is offshore tax enforcement. When taxpayers fail to produce records related to their offshore assets and activities during a civil tax audit, the IRS can refer the matter to the Justice Department for assistance. The Justice Department’s attorneys will file petitions with federal courts seeking to enforce the IRS requests for these records. In many cases, we are seeking records that exist within the United States, but the Tax Division also can seek to compel U.S. branches of foreign banks to produce records that they control located in foreign jurisdictions, despite claims that such production would violate foreign law.

Recently, in UBS v. Hsiaw, the Tax Division filed suit to compel UBS AG (UBS) to produce account records held by a UBS branch in Singapore, after UBS refused to produce those records in response to an IRS administrative summons. The records related to a Singapore account held by a U.S. taxpayer, believed to be residing in China. UBS initially refused to produce the account records, arguing that doing so would be a violation of Singapore bank secrecy laws. After the suit was filed, UBS produced the records requested. In today’s climate, the Justice Department’s use of such tools expands the IRS’s ability to obtain information in the U.S. government’s continuing efforts to hold U.S. taxpayers accountable for reporting and paying their fair share of taxes.
The Tax Division will also file petitions with federal courts seeking authorization to issue what we call “John Doe summonses” to obtain information based on a reasonable belief that a class of individuals whose identities are unknown are engaged in conduct violating the U.S. internal revenue laws. In December 2014, a federal court in New York signed an order authorizing the IRS to issue John Doe summonses requiring Federal Express Corporation aka FedEx Express, FedEx Ground Package System Inc. aka FedEx Ground, DHL Express, United Parcel Service Inc., Western Union Financial Services Inc., the Federal Reserve Bank of New York, Clearing House Payments Company LLC and HSBC Bank USA, National Association, to produce information about U.S. taxpayers who might be evading or have evaded federal taxes by using the services of Sovereign Management & Legal Ltd (Sovereign). Sovereign is a multi-jurisdictional offshore services provider that we alleged offered clients, among other things, the formation and administration of anonymous corporations and foundations. The IRS believed Sovereign’s related services included the maintenance and operation of offshore structures, mail forwarding, the availability of virtual offices, re-invoicing and the provision of professional managers who appoint themselves directors of the client’s entity while the client maintains ultimate control over the assets. Sovereign used Federal Express, UPS and DHL to correspond with U.S. clients and Western Union to transmit funds to and from clients in the United States. In addition, wire services operated by the Federal Reserve Bank and Clearing House and the U.S. correspondent bank accounts that HSBC USA held for Sovereign’s banks in Panama and Hong Kong, were believed to have records of financial transactions between Sovereign and its clients in the United States. With these records, the IRS sought to identify and gather information about Sovereign’s U.S. clients who may be avoiding or evading taxes.

Similarly, in September 2015, a federal court in Miami granted the Justice Department’s petition for an order authorizing the issuance of a John Doe summons to Bank of America and Citibank seeking information about U.S. taxpayers who may hold offshore accounts at Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL). Belize Corporate Services (BCS) is incorporated and based in Belize and offers corporate services including the purchase of “shelf” Belizean international business companies. The Justice Department established a reasonable belief that the customers in the John Doe class failed to report income, evaded income taxes, or otherwise violated U.S. internal revenue laws. The records were sought to identify U.S. taxpayers who hold or held interests in financial accounts at BBIL and BBL, as well as other financial institutions that used the same correspondent accounts.
The Justice Department will continue to enforce IRS administrative summonses, seek the issuance of John Doe summonses and employ all other available and appropriate methods to obtain information regarding potential tax violations and to assist its partners within the IRS with enforcement of the U.S. tax laws. To this end, we appreciate the prompt response and cooperation of financial institutions, both within and outside the United States, in producing the records and information requested.

As noted, the Tax Division also investigates and prosecutes U.S. taxpayers who use foreign accounts or entities in an attempt to evade tax, as well as bankers, account managers, professional service providers and other facilitators, including foreign entities, assisting or conspiring with U.S. persons in evading their tax obligations. Since 2008, the U.S. Department of Justice has charged criminally more than 160 accountholders and over 50 facilitators, many of whom reside outside the United States.
For example, on Aug. 1, Masud Sarshar, a California businessman who owns Apparel Limited Inc., a company that makes and sells clothing, was charged with conspiring to defraud the United States and corruptly endeavoring to impair and impede the due administration of the internal revenue laws. Mr. Sarshar maintained several undeclared bank accounts at Bank Leumi and two other Israeli banks, both in his name and in the names of entities that he created. For decades, with the assistance of at least two bank employees, Mr. Sarshar diverted tens of millions of dollars in untaxed gross business income to these accounts in an effort to conceal income and obstruct the IRS. The bankers frequently visited Mr. Sarshar in Los Angeles and, at his request, delivered account information in person, rather than send account statements by mail. For example, one banker loaded account statements on a USB drive, which she concealed in a necklace worn during her trips to the United States. At the suggestion of the bankers, Mr. Sarshar also used “back-to-back” loans to access his funds offshore without actually withdrawing the funds or creating a paper trail that would reveal the existence of the secret foreign accounts. The bankers also directed Mr. Sarshar to obtain Israeli and Iranian passports in an effort to avoid being flagged as a U.S. citizen by the compliance departments at both banks and later facilitated the transfer of Mr. Sarshar’s remaining funds to yet another Israeli bank.

Mr. Sarshar has agreed to plead guilty and pay more than $8.3 million in restitution to the IRS. If the court accepts the plea agreement, Mr. Sarshar will be sentenced to 24 months in prison. In addition, Mr. Sarshar stipulated to a civil penalty in the amount of 50 percent of the high balance of his undeclared accounts to resolve his civil liability for not disclosing the existence of his Israeli bank accounts.

As reflected in the Sarshar prosecution, U.S. accountholders who use foreign accounts to conceal assets and income and to evade their U.S. tax obligations rely on the assistance of third parties – foreign financial institutions, bankers, accountants and lawyers, just to name a few. Many of these third parties are unwitting participants. Others, like the bankers who assisted Mr. Sarshar, play an active role in the criminal conduct.
For example, on June 22, Michele Bergantino, a citizen of Italy and resident of Switzerland, pleaded guilty to conspiring to defraud the United States by assisting U.S. taxpayers to conceal foreign accounts and evade U.S. taxes during his employment as a banker working for Credit Suisse. Mr. Bergantino admitted that from 2002 to 2009, while working as a relationship manager for Credit Suisse in Switzerland, he participated in a wide-ranging conspiracy to aid and assist U.S. taxpayers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. He oversaw a portfolio of accounts, largely owned by U.S. taxpayers residing on the West Coast of the United States, which grew to approximately $700 million of assets under management.

Mr. Bergantino assisted clients in hiding their Swiss accounts by assuring them that Swiss bank secrecy laws would prevent Credit Suisse from disclosing their undeclared accounts to U.S. law enforcement; discussing business with clients only when they traveled to Zurich; structuring withdrawals from undeclared accounts by sending multiple checks in amounts below $10,000 to clients in the United States; facilitating the withdrawal of large sums of cash by U.S. customers from their Credit Suisse accounts at Credit Suisse offices in the Bahamas, Switzerland and particularly the Credit Suisse branch at the Zurich airport, and at a financial institution in the United Kingdom; holding clients’ mail from delivery to the United States; issuing withdrawal checks from Credit Suisse’s correspondent bank in the United States; and taking actions to remove evidence of a U.S. client’s control over an account because the U.S. client intended to file a false and fraudulent income tax return. Moreover, Mr. Bergantino understood that some of his U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

Mr. Bergantino also admitted traveling to the United States to meet with clients, taking careful steps to conceal the purpose of his visits from U.S. law enforcement. He used private couriers to send clients’ account statements to the U.S. hotels where he stayed, so that he would not be caught traveling with clients’ statements in his possession, and obtained “travel” account statements for each client he intended to visit which were devoid of Credit Suisse’s logo and account or customer identification information, and used business cards that Credit Suisse provided that contained only his name and office number. On entering the United States, Mr. Bergantino provided misleading information regarding the nature and purpose of his visit to U.S. Customs and Border Protection authorities.

Mr. Bergantino had been a fugitive since 2011, unable to travel outside of Switzerland without risking arrest. He is the third fugitive to come to the United States and plead guilty to charges in this case. Two of Mr. Bergantino’s co-defendants, Andreas Bachmann and Josef Dörig, pleaded guilty to the superseding indictment in 2014 and were sentenced on March 27, 2015.
These cases demonstrate that tax evasion knows no geographic bounds and that the Justice Department will pursue these cases wherever the money travels. Not only will those individuals involved be held responsible, but also the entities that support and facilitate their conduct. The Justice Department remains committed to holding foreign financial institutions, corporate service providers, legal and financial professional firms, insurance companies and other entities accountable for their role in assisting U.S. taxpayers in concealing accounts and evading U.S. tax obligations.
In May 2014, Credit Suisse pleaded guilty to conspiring to aid and assist U.S. taxpayers in filing false returns and was sentenced in November 2014 to pay $2.6 billion in fines and restitution.

In December 2014, Bank Leumi, an international bank based in Israel, entered into a deferred prosecution agreement after the bank admitted to conspiring from at least 2000 until early 2011 to aid and assist U.S. taxpayers to prepare and present false tax returns by hiding income and assets in offshore bank accounts in Israel and other locations around the world. Bank Leumi admitted to helping U.S. clients conceal assets by, among other things, using assumed names or number accounts, providing hold mail service, sending private bankers to the United States to meet secretly with clients at hotels, parks and coffee shops to discuss the clients’ foreign account activity and assisting U.S. clients in using nominee corporations created in the British Virgin Islands, Panama, Belize and other foreign jurisdictions to hide their foreign accounts by concealing the U.S. client as the true beneficial owner. Under the terms of the deferred prosecution agreement, Bank Leumi paid the United States a total of $270 million (in U.S. currency) and continues to cooperate with respect to civil and criminal tax investigations.

In February 2016, the Justice Department entered into a deferred prosecution agreement with Bank Julius Baer, which admitted to conspiring with and knowingly assisting U.S. accountholders to hide billions of dollars in offshore accounts and evade U.S. taxes. Julius Baer admitted that it identified certain U.S. taxpayers only by code name or number and opened accounts for U.S. taxpayer-clients in the name of non-U.S. corporations, foundations, trusts, or other legal entities or non-U.S. relatives. As part of the deferred prosecution agreement, Julius Baer agreed to pay $547 million (in U.S. currency), including restitution for tax loss arising from the undeclared U.S. related accounts, disgorgement of gross fees paid with respect to these accounts, and a fine for its illegal conduct. In addition to the deferred prosecution agreement, two Julius Baer bankers, both of whom had been fugitives since 2011, pleaded guilty to conspiracy to defraud the IRS, to evade federal income taxes and to file false federal income tax returns.

In addition to our ongoing criminal tax investigations, in August 2013, the Justice Department announced the Swiss Bank Program, which provided a path for Swiss banks to resolve potential criminal liabilities in the United States. Banks already under criminal investigation related to their Swiss-banking activities, identified as Category 1 banks and all individuals were expressly excluded from the program. Under the program, Swiss banks about which we had little or no information came forward and self-identified as having helped U.S. taxpayers to hide foreign accounts and evade their U.S. tax obligations. In exchange for a non-prosecution agreement, these institutions, identified as Category 2 banks, made a complete disclosure of their cross-border activities, provided detailed information on accounts in which U.S. taxpayers have a direct or indirect interest, are cooperating in treaty requests for account information, are providing detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed and must cooperate in any related criminal and civil proceedings for the life of those proceedings. The banks were also required to pay appropriate penalties.

From March 30, 2015, through Jan. 27, 2016, the Justice Department executed 78 agreements with 80 Category 2 banks and imposed more than $1.3 billion in penalties. The Justice Department also signed a non-prosecution agreement with Finacor, a Swiss asset management firm, reflecting the Justice Department’s willingness to reach fair and appropriate resolutions with entities that come forward in a timely manner, disclose all relevant information regarding their illegal activities and cooperate fully and completely, including naming the individuals engaged in criminal conduct.

The banks participating in the program have revealed the names of thousands of U.S. accountholders, a substantial number of whom have voluntarily disclosed their accounts to the IRS and are providing information for treaty requests to obtain the names and account records of those individuals who have refused to waive Swiss bank secrecy. The program has driven thousands of taxpayers into the IRS voluntary disclosure programs. In October 2015, the IRS reported more than 54,000 voluntary offshore disclosures and the collection of more than $8 billion in taxes, penalties and interest. These figures have substantially increased since the program was announced in August 2013, due in part to the pressure applied by the Swiss banks on their accountholders to come into compliance. In addition, the number of Reports of Foreign Bank and Financial Accounts filed by U.S. taxpayers increased from just over 332,000 for calendar year 2007 to more than 1.1 million for calendar year 2015.

Tax Division attorneys and IRS agents are reviewing the tremendous volume of information received from banks participating in the Swiss Bank Program and those cooperating pursuant to the terms of other resolutions, as well as information received in response to our treaty requests and from whistleblowers, to pursue ongoing and new criminal tax investigations and to support civil enforcement efforts.

I’ve included these lengthy comments by Ms. Ciraolo because they emphasize that offshore non-compliance issues will not go away. Moreover, anyone thinking that they will wait out the Statute of Limitations on criminal and FBAR charges should become familiar with 18 USC 3287, the perhaps indefinite SOL extender so long as the War on Terrorism remains unconcluded. I intend to blog on this issue in the near future.

Although it is late in the game, there is still time for many taxpayers, whose names may not have been acquired by IRS or the DOJ, to come into compliance through an OVDP submission and thereby avoid criminal charges and the maximum possible FBAR penalties. For some who fall on the lower rungs of the tax-culpability ladder it may still be possible to employ the Streamlined Filing Compliance Procedures. A tax attorney experience in these matters should be consulted about which path a particular taxpayer should use to safely come into compliance.

Robert S. Steinberg, Esquire

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The IRS occasionally posts updates to its Frequently Asked Questions for the Streamlined Filing Compliance Procedures, both for taxpayers residing in and outside of the United States. The last update of the FAQs was made by IRS on July 18, 2016.The post highlights two question and answers that are notable for taxpayers seeking Streamlined penalty relief.

QUESTION 9 – I realized that I made a mistake in my submission to the Streamlined Filing Compliance Procedures. How do I correct my mistake?

ANSWER: If you made a mistake in your submission to the Streamlined Filing Compliance Procedures and your returns previously submitted are not under examination, you may correct the error by providing amended returns and/or an amended Form 14653. On the top of the certification form, write “amended” in red ink, and on the top of the first page of each corrected amended tax return write “Amended Streamlined Foreign Offshore” in red ink. Explain all facts and circumstances concerning the error in the original Streamlined submission. See SFO FAQ 6 for relevant information to provide.
Mail the amended submission to:

3651 S. IH 35
MS 6063 AUSC
Attn.: Streamlined Procedures
Austin, TX 78741

Example 1 (amended tax returns and amended Form 14653):
The taxpayer made an SFO submission on February 1, 2016, and she just realized she failed to address a foreign financial asset in the narrative statement of facts on Form 14653. Additionally, she failed to include income from that foreign financial asset on her Forms 1040 for the tax periods in her Streamlined submission, tax years 2012, 2013, and 2014. She must provide amended income tax returns for tax years 2012, 2013, and 2014, an amended Streamlined Certification on Form 14653, and payment for increases in tax and interest. The amended Form 14653 must include all facts and circumstances concerning the error in the original Streamlined submission. Additionally, if the taxpayer made a mistake in filing her FBARs with FinCEN, she must efile amended FBARs with FinCEN.

Example 2 (amended Form 14653 only):
The taxpayer made an SFO submission on February 1, 2016, and she just realized she failed to address a foreign financial asset in the narrative statement of facts on Form 14653. She fully reported all income from the foreign financial asset on her income tax returns in her original Streamlined submission. She must provide an amended Streamlined Certification on Form 14653 including all facts and circumstances concerning the error in the original Streamlined submission. Additionally, if the taxpayer made a mistake in filing her FBARs with FinCEN, she must efile amended FBARs with FinCEN.
Note: This question and answer also appear as FAQ 15 in FAQs for Persons Residing in the U.S.

QUESTION 10 – I am eligible for a Social Security Number (SSN) but do not have one at this time. May I make a submission to the Streamlined Filing Compliance Procedures without an SSN? If I make a submission without an SSN, what are the consequences?

ANSWER: If you are eligible for an SSN but do not have one, you may not use the Streamlined Filing Compliance Procedures. The terms of the Streamlined Filing Compliance Procedures require a valid Taxpayer Identification Number (TIN). For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid SSN. If you make a submission to the Streamlined Filing Compliance Procedures without a valid SSN, then the IRS may process your returns after assigning an IRSN. See IRM and But taxpayers that make submissions to the Streamlined Filing Compliance Procedures without valid SSNs are not eligible for the favorable penalty provisions of the Streamlined Filing Compliance Procedures. The IRS will process such returns subject to penalties applicable outside of the Streamlined Filing Compliance Procedures.
Note: This answer also appears as Question 16 in FAQs for Persons Residing in the U.S.

1. Obviously, it is far better to be careful the first time around and not omit income on the Streamlined amended returns, foreign accounts in the Form 14653 or important facts in the Non-willful Certification. But, if inadvertently an error is discovered following one’s Streamlined filling, all is not lost and FAQ 9 provides a procedure for corrections.

2. Regarding the inability to use Streamlined procedures absent a Social Security Number, the IRS position seems unnecessarily harsh for expats who may for many reasons not have obtained an SSN. IRS should be able to come up with a procedure for affected expats to submit Streamlined fillings for example with a temporary taxpayer ID number. The problem with the IRS posture is that it is difficult and time-consuming for an expatriate to obtain a Social Security Number. Not all countries have embassies or consulates that can assist and the process can take many months. In the meanwhile, an audit letter from IRS will make the expatriate ineligible for Streamlined penalty relief. This seems unfair, especially since expatriates frequently fall on the lower rungs of the tax-culpability ladder. Of course, if not negligent, they can obtain penalty relief under the reasonable cause exception rules; but, most would prefer the comfort and greater certainty in qualifying as non-willful, a more lenient standard than “reasonable cause, that the Streamlined Filing Compliance Procedures offer.

Robert S. Steinberg, Esquire

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A Wall Street Journal article of July 27, 2016, “How Inaccurate Memories Can Be Good for You,” by Sue Shelenbarger, discusses a number of studies that found benefits to people from even inaccurate memories. More important that accuracy is that fact that recalled events from the past help define ourselves and create plans for the future.

But, these benefits do not change the well-established fact that our belief in the reliability of our ability to recall events accurately is highly overrated. The studies show, writes the author, that “memories are not just a storehouse for facts, but a creative blend of fact and fiction.” The author cites numerous examples of how we distort memories. These unconscious distortions can slip into the narrative that clients will tell attorneys assisting with streamlined filings. Here are some examples.

• The client may fictionalize a past event or just imagine something that never actually happened.
• The client may confuse when the recalled event occurred.
• The client may accentuate the helpful details and ignore or diminish in importance other details.
• The client may change the memory to conform to what is helpful.
• The client may change the memory based on information gleaned from recent sources like the internet.

In fact, we alter a memory a bit every time we recall the happening from our memory banks. The attorney must be attuned to the fact that memory is inherently unreliable. In relating their stories about offshore accounts clients may infer positive facts and ignore inconvenient facts. These distortions may be unconscious tricks of memory or intentional misstatements. The internet, including this blog, contains much information about what facts will likely establish non-willfulness and what acts will likely be viewed by IRS as indicative of willful conduct. People facing a tax noncompliance problem may unconsciously weave these published facts into their own story.

Thus, absolute, unclarified statements of fact based solely on memory may turn out to be false statements. The non-willful certification is signed under penalties of perjury. Material misstatements could lead to a perjury charge. Thus, statements based solely on memory should be preceded by a clarification or disclaimer phrase, “to the best of my recollection and belief.”

Still, the attorney should carefully interview the client to try to prod and probe his or her memory, to challenge inconsistencies, to seek the truth about how the offshore account came to be opened and how it was operated, from where funds came and to what other accounts funds were transferred; and, to establish the real beneficial owners of the accounts.

To the maximum extent possible statements of fact should be based on documentary evidence such as the account opening documents, withdrawal and deposit slips, bank statements, correspondence and emails. The foreign financial institution will likely have these documents and may also have recordings of telephone discussions. Do not assume that the truth will not be uncovered.

Relying on memory alone in making statements in the streamlined non-willful certification is dangerous.  As previously stated, the attorney should add a clarification or disclaimer statement for any facts included in the non-willful certification that are based solely on the client’s memory.

The first rule for any attorney assisting clients out of compliance is “Do no harm.” Do not make things worse than they are already by filing an inaccurate non-willful certification. The non-willful certification is an affidavit that should be given the respect any document signed under penalties of perjury deserves. Caution should be the watchword. Make sure that the non-willful certification is truthful, detailed and completely transparent, stating both good and bad facts.

Robert S. Steinberg, Esquire

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