Offshore Voluntary Disclosure Revoked By The IRS

According to reports, the IRS revoked the Voluntary Disclosure Program for many U.S. taxpayers. This includes many U.S. taxpayers who hold accounts in Bank Leumi in Israel.

The IRS was not satisfied with merely investigating Switzerland; it has now expanded its net to include several more countries, including Israel, India, Hong Kong, and Singapore. Many taxpayers will recall that the IRS initiated a large-scale investigation led to the disclosure of UBS bank accounts. Individuals who had not disclosed their foreign accounts suddenly found themselves under the microscope of the Internal Revenue Service.

UBS was extensively fined and provided information regarding many offshore accounts that had been previously undisclosed. Wegelin Bank, the oldest bank in Switzerland, pled guilty to felony conspiracy to commit tax evasion, becoming the first Swiss bank to do so.

For U.S. taxpayers with undisclosed accounts, the IRS initiated a program in 2009 and 2011, the Offshore Voluntary Disclosure Program. This program allowed taxpayers to file amended returns and to pay penalties and interest without the threat of facing civil or criminal penalties. The program found success, with the government collecting over $4.4 billion in delinquent tax payments. Over 30,000 U.S. taxpayers participated in the collection. This particular program has ended, paving the way for a new program in 2012, to be explained in a subsequent blog post.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Beware, US Investors Trying to Evade Taxes

In an article in today’s Wall Street Journal, the Internal Revenue Service is brandishing a “very big stick.” It’s called the Foreign Account Tax Compliancy Act. According to the article, panelists during a Dow Jones webinar agreed that the unfolding law, which will uncover U.S. investors who evade taxes by putting their money in foreign funds and institutions, deserves that forceful designation.

It is the opinion, though, of Laurie Hatten-Boyd, a principal at KPMG, that this new law has information gathering purposes, not a revenue-making machine.

As proposed, the law would require any U.S. entities paying dividends, interest or proceeds from the sale of securities to withhold a 30% punitive tax if the foreign recipients of this payments refuse to agree to disclose information about their U.S. investors or account holders to the U.S. government.

The law is complex, though, and will take as much as five years to implement fully. A comment period on the proposed rules ended on April 30, but lawyers, compliance officers and consultants are still waiting to hear the final word on the changes.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Tony Romo Scores Big with Tax Law

According to a recent article in Forbes by Kelly Phillips Erb, current tax law may make Tony Romo, controversial quarterback of the Dallas Cowboys, the highest paid NFL player.

Romo signed a 6-year $108 million dollar contract extension, much to the chagrin of the Twitter world. Regardless of whether or not the sports world approves, Romo is at least winning the salary game, as his contract extension makes him the highest paid NFL player after taxes.

Based purely on salary, Romo would be the fifth highest paid player in the NFL, but his location gives him an edge when taxes are involved. Texas, the state in which he resides, is “kinder” in regards to its tax rates, which leaves Romo with a higher take home salary than even Baltimore Ravens quarterback Joe Flacco. The Ravens quarterback, despite being the highest-paid player in NFL history, lives in Maryland. The state, with its “millionaire’s tax,” will potentially subject Flacco to a 5.75% tax on his earnings in the state and possibly a 2.75% local tax.

In the article, Erb asks why all athletes don’t move to states like Florida and Texas. She notes that there are a few who have adopted that strategy, Tiger Woods included. Unfortunately for NFL athletes, such flexibility is not part of their job description.

Erb notes that residency is only a portion of the whole tax picture. She goes on to explain that while individuals may have a residence in a tax free or tax light state, they still may be subject to taxes by the states in which they do business.

Taxes, as we have learned time and again, can sometimes influence the most unexpected of cultural choices.

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Facebook Founder with $1 Billion Tax Bill

mark zuckerburg facebook founderFacebook Founder with $1 Billion Tax Bill

The stock market debut of Facebook left Mark Zuckerberg, the company’s founder and CEO, with a very large fortune, and a very large tax bill.

According to an article in CNNMoney, the tax bill is the result of a decision Zuckerberg made in May to increase his stake in the company. Zuckerberg, on the day the company went public, decided to exercise a stock option and purchased 60 million shares of Facebook at 6 cents each.

The IRS views the shares as ordinary income, regardless of whether or not the shares are ever sold. The article notes that the rationale for classifying it is income is that options such as those are a form of compensation, not unlike regular wages.

The billion dollar tax bill that Zuckerberg is facing is unusual, according to tax experts that CNNMoney consulted with in the process of writing the article. According to Silicon Valley tax attorney, Toby Johnston, it is usually capital gains, and not ordinary income, that result in a tax bill that large.

Segal, Cohen & Landis
9100 Wilshire Blvd., Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999