Does a Nonresident Alien Spouse that Has Elected to be Treated as a US Person Need to File an FBAR?

Posted on June 29, 2015 by Russ

With the FBAR deadline upon us, an interesting question arose: Does a spouse covered by the §1.6013-6 regulation allowing a nonresident alien individual to be treated as a resident need to file an FBAR? Logic says no; the FBAR comes out of the Bank Secrecy Act, not the Tax Code. And the IRS agrees with logic: “If the wife is non us person for FBAR therefore she does not have a filing requirement.” (That quote comes from a question I submitted to the FBAR group at the IRS.)

But beware, if the taxpayers have a Form 8938 filing requirement the wife’s accounts will need to be reported on that form. That’s a tax form, so the accounts would need to be included.

Posted in FINCEN, International | Tagged | 1 Comment

A Peabody, Massachusetts Tax Preparer Gives an Unwitting Endorsement for EFTPS

Posted on June 28, 2015 by Russ

Barry Ginsberg operated a payroll tax service in Peabody, Massachusetts (near Boston). He endorsed escrow accounts for his clients; they would send him the money for the payroll taxes and he, in turn, would pay them. Since I’m writing about this, you’ve already figured out where the money didn’t go: to the IRS and the Massachusetts Department of Revenue. Mr. Ginsberg, who was indicted back in 2013, pleaded guilty to multiple tax fraud charges on Friday.

Mr. Ginsberg operated a traditional payroll service. It’s fairly easy to check on your payroll company if you use such a service: Enroll in EFTPS. Using EFTPS you can verify that your payroll company is making the payroll deposits they say they are. That’s a good idea–trust but verify. The DOJ Press release notes:

To cover up his scheme, Ginsberg falsified his clients’ tax returns, which he was hired to prepare, indicating that the clients’ payroll taxes had been paid in full, when they had not. When asked by clients about their mysterious IRS debts, Ginsberg gave them a litany of false excuses, including blaming the IRS and his own staff.

None of those excuses work hold up with EFTPS. Today, payroll tax deposits with the IRS are all made electronically. Is it possible for one to get messed up? Yes, but it’s very unlikely. Indeed, most payroll companies just make sure the deposits are made from your payroll bank account.

Mr. Ginsberg will likely be spending years at ClubFed. Unfortunately, the business owners who trusted him may be spending years getting out of debt with the IRS and Massachusetts.

Posted in Payroll Taxes, Tax Fraud | 1 Comment

You Can Pay Employees in Cash, But…

Posted on June 28, 2015 by Russ

…you’d better withhold payroll taxes. One Milwaukee restaurant owner is alleged to have forgotten that minor detail. He also allegedly didn’t include all of his cash receipts on his tax returns.

Paul Bouraxis operates three Milwaukee-area restaurants. Judging from his tax returns, the restaurants weren’t doing that well. The Department of Justice believes that a better way of judging is the $3.7 million in cash and silver in banks in the United States and Greece. ($1.7 million in gold, silver, and cash was seized.) Mr. Bouraxis, his wife, son, and son-in-law are all alleged to have skimmed cash from the business, filed phony tax returns (both personal and payroll taxes). A part-owner of one of the restaurants, Gus Koutromanos, also allegedly participated in the scheme.

The DOJ found that the accountant for the businesses participated in the scheme, too. Scott Sherman of Sheboygan will plead guilty to one count of filing a false tax return; he’ll likely testify (if need be) against the Bouraxis family if the case goes to trial.

The family is all facing extended stays at ClubFed if found guilty.

Posted in Tax Evasion, Wisconsin | Comments Off on You Can Pay Employees in Cash, But…

BEA-10 Due on June 30th

Posted on June 24, 2015 by Russ

Just a reminder this morning that the BEA-10 mandatory survey of foreign investment by Americans is due on June 30th. If you own 10% or more of a foreign entity, you will need to file this form. New filers must mail the forms in.

There are significant penalties if you don’t file this, so it’s definitely something to take care of (if it applies to you).

Posted in BEA, International | Comments Off on BEA-10 Due on June 30th

FBAR Due in One Week

Posted on June 23, 2015 by Russ

The Report of Foreign Bank and Financial Accounts (Form 114, the FBAR) is due on June 30th. The form must be electronically filed with FINCEN. Your tax professional may be able to do it through his software (we can) or you can do it yourself using the BSA EFile system. There is now an online form you can use (besides Adobe reader) that may work better (it certainly can’t work worse).

Because of the Hom decision of last year, we now must again report foreign online gambling accounts. That’s basically all online gambling sites except the legal sites in Delaware, Nevada, and New Jersey. I maintain a list of online gambling sites and their mailing addresses here.

There are ridiculous penalties if you willfully fail to file an FBAR (half the balance in the account or $100,000 (per account), whichever is greater). Thus, as I said last year, just file the FBAR…timely.

Posted in Gambling, International | Tagged | 1 Comment

Arbitrage Is Legal, But You Better Pay the Taxes

Posted on June 21, 2015 by Russ

Let’s say you are 100% certain that the price of a certain article will increase from $0.20 to $0.62 in a few weeks. Can you purchase a stock of that at $0.20 each and then sell them later at $0.62? If there are no laws against it, certainly. Of course, the $0.42 profit is taxable. That last line allegedly was forgotten by a Tennessee legislator.

Joseph (Joe) Armstrong is a member of the Tennessee legislature. He wanted to increase the state’s tobacco tax from $0.20 to $0.60 (per pack of cigarettes). Was he interested in the health of the residents of the Volunteer State? Perhaps. According to the indictment handed down last week, he was really interested in the health of his bank balance.

The Justice Department alleges that he entered into a conspiracy to profit from the increase in the cost of a tobacco stamp. Buy low, sell high is great, but as a legislator you’re not supposed to profit off of it. (Though Mr. Armstrong wanted a tripling of the price, the tax increase ended up being $0.42 per pack to a tax of $0.62.) Mr. Armstrong got a loan, bought lots of tax stamps at the old rate, and then sold them at the high rate. He used a nominee business (through his accountant) to hide the profits. His accountant got 15% of the profits.

(The accountant made a plea deal in July 2014 that was unsealed earlier this year. Charles Stivers, a CPA, was Mr. Armstrong’s accountant. As a reminder to the IRS, a license doesn’t make a person immune to deficiencies in ethics.)

The Justice Department alleges that Mr. Armstrong wanted to both have his after-tax income equal his pre-tax income from the scheme (always a good, albeit, illegal option) and he wanted to hide this from his wife. He is also being charged with lying to the IRS about his activities.

Mr. Armstrong pleaded not guilty to all charges on Friday. If found guilty, Mr. Armstrong will likely be residing at ClubFed.

Posted in Tax Evasion, Tennessee | 1 Comment

Form 8300 and Poker

Posted on June 17, 2015 by Russ

I’ve posted before on staking, but someone asked me the following question:

I’m a professional [poker player] and am going to be staked for the High Roller One Drop Tournament [a $111,111 buy-in tournament]. I’m going to be handed the cash to enter the tournament. What do I need to do?

Besides the normal staking issues (see these articles), there’s another issue: cash reporting. If you’re a business and you receive a payment of $10,000 or more in cash or like funds (this would include casino chips but would not include a cashier’s check), you have a reporting requirement: You must file Form 8300 with the IRS.

A professional poker player is operating a business and is required to comply with the laws impacting businesses. This includes cash reporting requirements. You have 15 days from the date of the cash transaction to report it. This is done by either mailing Form 8300 to the IRS or by filing it electronically through the BSA efile website. Note that if you use the BSA efile system you will have to register (required for Form 8300 efiling).

Like most penalties related to the Bank Secrecy Act, the penalties are on the ridiculous side. While the Failure to File penalty is just $100, the Intentional Failure to File penalty is the greater of $25,000 or the amount of the cash transaction (to a maximum of $100,000).

The IRS does take questions regarding Form 8300. You can call the IRS at 866-270-0733 or email questions to 8300questions@irs.gov

Posted in Gambling, IRS | 1 Comment

June 15th Tax Deadlines

Posted on June 15, 2015 by Russ

There are two deadlines today. First, individuals outside the United States must make file their tax returns (or an extension) today. Second, today is the due date for second quarter estimated payments (both for individuals and corporations). These are both postmark deadlines, so as long as your estimated payment is posted today (and I strongly recommend certified mail, return receipt requested so you have proof), it’s considered timely.

Posted in Uncategorized | Comments Off on June 15th Tax Deadlines

Neymar Wins Championship but Faces Tax Evasion Investigation

Posted on June 7, 2015 by Russ

On Saturday Barcelona beat Juventus 3-1 in Berlin, Germany to win the Champions League Final in soccer (or football as it’s known everywhere but here). Neymar, from Brazil, is one of Barcelona’s star players.

Neymar might have enjoyed the game (and results) but the news out of Brazil might put a tarnish on everything: Neymar is under investigation for tax evasion. First reported by the Brazilian Epoca magazine, the alleged evasion took place form 2011-2014 and involves the money for the transfer of Neymar from Brazil to Barcelona. What was once €17.1 million became €57 million, with some of this supposedly ending up with Neymar.

Posted in Tax Evasion | Tagged | 1 Comment

Another Las Vegas Preparer Gets In Trouble Over the Foreign Earned Income Exclusion

Posted on June 7, 2015 by Russ

The Foreign Earned Income Exclusion is pretty simple to understand. An individual who is either a bona fide resident of a foreign country or is outside of the United States for 330 days out of a 365-day period can exclude about $99,000 of earned income from income tax. Seems fairly straightforward, right?

There is a codicil to the Exclusion. “This period can be waived when the Secretary of the Treasury determines, after consultation with the Secretary of State, that individuals were required to leave a foreign country due to war, civil unrest or other conditions that preclude the normal conduct of business, among other things.” A list of such countries is published each year. I prepare a lot of tax returns with the Exclusion. I have yet to prepare any with the Exclusion based on the waiver.

Sheila Bunting of North Las Vegas looked at that waiver list as a way to make her clients happy. She apparently repeatedly used the waiver clause of the Exclusion to get her clients a lower tax bill. Unfortunately, her clients weren’t in those countries. The IRS wasn’t amused, and Ms. Bunting found herself facing a lawsuit from the Department of Justice. She consented to a permanent injunction last week.

The DOJ press release notes, “The injunction requires Bunting to provide a list of customers that identifies by name, social security number, address, e-mail address, telephone number and tax periods, all persons for whom she has prepared federal tax returns or claims for refund since Jan. 1, 2012, that reference foreign earned income.” If you used butning’s 5 Star Tax LLC and have the Foreign Earned Income Exclusion (Form 2555) on your tax return, you can expect to receive a “Dear Soon to be Audited Taxpayer” letter from the IRS.

This is the second Las Vegas preparer who recently has been in hot water over the Exclusion. Earlier this year Harvey Cage was sued by the Department of Justice for the same thing. I’d say it was something in the water but Las Vegas is in a desert.

Posted in Las Vegas, Tax Evasion | 1 Comment