Archives For tax evasion

ty_warner_beanie_collector_1If you grew up in the 90s, you might feel like there really is nothing pure left in this world.

Ty Warner, the creator of the popular pellet-stuffed animals like Legs the Frog, Spot the Dog, and Chocolate the Moose, agreed to plead guilty to tax evasion charges. Continue Reading…

Fat Joe is headed to prison for tax evasion.  From 2007-08 the rapper, whose real name is Louis Cartagena, failed to pay income taxes on over $1 million of income.  Cartagena plead guilty to the charges in December.

Cartagena said in his defense that “it wasn’t entirely my fault.”  That’s not quite the lyrical ingenuity you expect from the man who made the phrase “lean back” famous.  Personally, I was hoping for something more along the lines of “doing the lock away.” Continue Reading…

The $1.2 trillion sequester, AKA the “austerity crisis,” or “fiscal cliff Part 2” takes effect at the end of this week (March 1). Without alternative legislation, $85 billion will be slashed from the rest of this year’s budget.  The across-the-board cuts would hit the Pentagon, social services programs, government agencies like the Department of Education, NASA, and National Institute of Health, and reduce payments to Medicare providers.

Most politicians agree that the sequester is, as House Speaker John Boehner put it, “bad policy,” but if you thought collective agreement on a top priority political issue would promote bi-partisan action and compromise, you must have missed the debt-ceiling debates and first round of fiscal cliff negotiations.


Sen. Lindsay Graham

New revenues are the biggest stalemate to compromise.  The American Taxpayer Relief Act (ATRA), which extended tax breaks for 98% of Americans while raising over $600 billion in new revenue wasn’t enough for Democrats or the White House, who wanted at least twice that.  The Republican agenda on additional tax revenue is more divided, with some lawmakers such as Senator Lindsey Graham (R-S.C.) and Arizona Gov. Jan Brewer recently coming out in support of some new revenues in exchange for serious spending cuts.  Graham said he opposes the sequester because it’s “a lousy way to cut $1.2 trillion,” and that he would agree to $600 billion in new revenue pending Democratic compromise on reforming entitlements and of course, cutting spending.  Meanwhile, on CBS’ Face the Nation on Sunday, Brewer said:

“We know we have to be pragmatic. We know there has to be some kind of compromise, but dang it, they need to get the job done. They don’t need to leave the public out there hanging.”

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Tax-related issues took center stage in 2012. Between the drawn-out fiscal cliff negotiations, Romney’s 47% comment, the persistence of the Occupy movement, updated rules from the IRS and the presidential election, there was no shortage of tax talk. The talk becomes reality for Americans tomorrow (Jan. 30, 2013), when the IRS officially begins the 2012 tax filing season. In this post, we outline the highlights, predictions, changes, opinions and other worthy information on the 2012 tax filing season.

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Bradley Birkenfeld, the former UBS banker credited with helping break open Uncle Sam’s investigation into secret untaxed Swiss accounts, is about to be $104 million richer.

The Internal Revenue Service has recommended that Birkenfeld receive that impressive amount after he has now served around two and a half years in federal prison for a fraud conspiracy conviction related to the case.


It’s the largest whistleblower amount ever awarded by the IRS.

Birkenfeld’s insider info helped the IRS collect more than $5 billion in unpaid taxes from foreign banks and nearly 15,000 individuals who used their services to avoid paying U.S. taxes, as well as was a motivator in the Swiss government decision to change its tax treaty with the United States and turn over the names of more than 4,900 U.S. taxpayers who held illegal offshore accounts.

In addition, since the UBS investigation began, more than 35,000 taxpayers have participated in amnesty, or as the IRS prefers to call them offshore voluntary disclosure programs.

Ask and you could receive: The IRS didn’t agree to give Birkenfeld the reward out of the goodness of its heart. Rather, Birkenfeld did what any other tax cheat reporting taxpayer would do; he filed a reward claim with the tax agency.

Under federal law, a whistleblower could be entitled to a reward of between 15 percent and 30 percent of the total previously unpaid tax that is collected. There is no limit on the dollar amount that can be paid out to tax cheat reporters.

Birkenfeld’s lawyers released a redacted IRS summary award report that praised the former banker for providing comprehensive information that was “exceptional in both its breadth and depth.”

Birkenfeld was not in Washington, D.C., for today’s announcement of his award. He’s still serving three years’ probation under home confinement. His attorneys are seeking a presidential pardon for Birkenfeld.

Ratting out tax cheats: If you have information about someone or some company that is ingoing tax responsibilities, follow Birkenfeld’s lead. Well, at least the part about reporting the tax misdeeds.

If you suspect or know of an individual or company that is not complying with the tax laws, you may report this activity by completing Form 3949-A. You may fill out the form online, print it and mail it to the Internal Revenue Service in Fresno, CA 93888. (No street address necessary. The Post Office knows where to find the Fresno IRS office.)

If you prefer, you may send a letter instead of the form to the Fresno address. In that case, the IRS would like you to include, where possible, the following information:

  • Name and address of the person you are reporting,
  • The taxpayer identification number (Social Security number for an individual or employer identification number for a business),
  • A brief description of the alleged violation, including how you became aware of or obtained the information,
  • The years involved,
  • The estimated dollar amount of any unreported income, and
  • Your name, address and daytime telephone number.

The IRS says you don’t have to reveal your identity. But if information on a tax cheat entitles you to a reward, giving your name and contact info is the only way the IRS will know where to send the money.

You also can file Form 211 to request a whistleblower award. The IRS has more information at its special whistleblower award claim Web page.

Also check out the IRS memo on what to expect when providing the agency with information about tax evasion.

That system has improved over the years, but it still takes a while and requires the actual collection of substantial unpaid taxes before the IRS Whistleblower Office says thanks to tax tattletales with cash.

Still, under the right circumstances, the tax cheat reporting and wait can be very rewarding. Just ask Bradley Birkenfeld.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.


In an eerie glimpse of what a cashless society enables, the government of Argentina has taken the drastic step of mandating banks to report every credit card purchase to the tax authorities, AFIP. Also introduced on Friday, another measure adds a 15 percent tax surcharge every time a purchase is made outside the country using a credit card issued by an Argentine bank.

This action targets those people that have been using credit cards as a way to purchase at the official rate rather than the black market rate, in effect creating a dual credit card exchange regime. Capital flight is high in Argentina due the depreciating peso and currency controls are becoming more and more aggressive.

The black market peso price has spiked as the government has tried to close off any and all avenues for people to legally convert out of pesos and into US dollars. A 15 percent tax surcharge will close some of the gap between the regulated official rate and the black market rate, currently at 4.63 pesos per dollar and 6.39 pesos per dollar respectively. In theory, this new surcharge is deductible against future taxes owed so it’s really an advance payment. But in practice, its real value as a deduction will have been eaten up through inflation and it’s meaningless for those that don’t earn enough income to owe taxes.

On Monday, this new rule was broadened to include debit cards and purchases at any online site outside the country, which targets Amazon and eBay purchases.

But the measures go much farther, according to Michael Warren of Associated Press, “giving the government powerful new tools to combat widespread tax evasion.”

Tax and customs agents now will be able to compare better what Argentines declare to the customs and tax agencies with what their credit card bills say. Before, the reporting requirements applied only to expensive charges of more than 3,000 pesos (about $645). Now, every single purchase by every co-signer must be reported. And if the totals show people are living large while claiming to be paupers, they could get into big trouble.

Even the socialist President Jose Mujica of Uruguay called the new measures “crudely protectionist” in a radio interview from Montevideo. Tourism and investment to the area has already been suffering.

This articles focus is on how the advent of the cashless society utopia has actually advanced the cause of financial repression.

These are brutal, important lessons in why a cashless society should not strip everyone of their transactional and financial privacy. For those people in Argentina that want to bypass currency controls and also shelter their money from government-induced inflation, this Buenos Aires exchange community claims to buy and sell bitcoin for Argentine pesos. And, the exchange sells bitcoin for Ukash vouchers, which are available in Argentina.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

The institution of FBARs (Report of Foreign Bank and Financial Accounts) on income tax returns originally left many confused on if and how offshore accounts should be reported. Now, there is plenty of information and resources to fully understand the FBAR and the need to report income if you are a U.S. citizen or resident or non-resident alien that has accounts in different countries. Although, there are still court cases where individuals are arguing non-willful evasion of the FBAR because they simply did not know the protocol to filing it. In recent news, the decision United States vs. Williams was reversed due to Mr. Williams willfully failing to file the FBARs.

Before the case was reversed in the Fourth Circuit Court of Appeals, many were hoping U.S. vs. Williams would ensure that individuals would only be liable if the IRS could prove they knew about the FBARs. the law states that willfulness can be proven by reckless conduct or repeated failures to comply with known regulations. Williams admitted to tax fraud in the case, however, was not considered willful when he failed to file FBARs. The district court claimed the IRS would have a difficult time proving willfulness for a taxpayer who did not pay his/her FBARs. In general, an individual may not be willful of the penalty simply due to lack of knowledge or misunderstanding of tax law.

The appeals court found a hole in Williams testimony. He pled guilty to tax evasion so the question is whether he knew about the FBAR violation. The appeals court found that Williams made a conscious effort to avoid learning about the FBAR, and therefore is considered to be willfully apathetic. The majority ruling found that you can be willful without a bad intent – simply willful ignorance.

Mr. J Bryan Williams will now be facing hundreds of thousands of dollars in penalties because of his failure to file FBARs for his offshore accounts. This would have been a lot easier if he simply took the time to learn how to report his offshore accounts.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.


If Lauryn Hill had become famous for her rendition of “Killing Me Softly” now, you could make the argument that she was singing about the IRS.

Lauryn Hill pleaded guilty in a New Jersey courtroom on Friday to evading federal taxes on $1.8 million earned between 2005 and 2007, the Associated Press reports. The singer faces a maximum one-year sentence for each of the three counts.

Hill declined to speak after the hearing, but her attorney, Nathan Hochman, indicated that she plans on paying back the taxes owed. U.S. Magistrate Michael Shipp agreed to delay the sentencing from early October to late November in order to give Hill time to make payment.

The income on which Hill did not pay taxes — $818,000 collected in 2005, $222,000 in 2006 and $761,000 in 2007 — was earned by four corporations that she owns.

Charges were brought against Hill earlier this month, after which the singer took to Tumblr to address her side of the situation but focused on her time outside of the spotlight: “During this period of crisis, much was said about me both slanted and inaccurate, by those who had become dependent on my creative force, yet unwilling to fully acknowledge the importance of my contribution, nor compensate me equitably for it.”

Hill added in the post that she felt her “potential to work” was in danger and thus said, “I did whatever needed to be done in order to insulate my family from the climate of hostility, false entitlement, manipulation, racial prejudice, sexism and ageism that I was surrounded by.

“There were no exotic trips,” she continued, “no fleet of cars, just an all out war for safety, integrity, wholeness and health, without mistreatment, denial, and/or exploitation.”

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

When we hear the words, “tax haven,” we generally think of offshore locations such as the Cayman Islands or Isle of Man. However, we often overlook tax havens when they are right in front of our eyes. Not only is Delaware the first state, but it is also the first offshore haven right on America’s shores.

1209 North Orange Street seems innocuous in its name, however it is the legal address of 285,000 businesses. Among them are American Airlines, Walmart, Coca-Cola, Ford, General Electric, etc. These are global companies with substantial employee bases and ubiquitous recognition. 1209 North Orange is merely a dropbox location for these businesses. Beyond these giant corporations are small start-up businesses, mom and pop shops, scoundrels, and swindlers and they all showed up to minimize taxes, dance around regulations, and perhaps cover their tracks.

A classic tax avoidance operation is through a “shell company” whereby the process of buying and selling is mitigated through an “alleged” company to disguise the actual company’s profits. It takes less than an hour to incorporate a company in Delaware and the government is so eager about business coming in, the office of its secretary of state stays open until midnight Monday-Thursday.

“Shells are the No. 1 vehicle for laundering illicit money and criminal proceeds,” said Lanny A. Breuer, assistant attorney general for the criminal division of the Justice Department. “It’s an enormous criminal justice problem. It’s ridiculously easy for a criminal to set up a shell corporation and use the banking system, and we have to stop it.”

However, most of the businesses in Delaware are legitimate incorporations that use legal means to reduce their tax bills. Since 1792 when Delaware was ratified as the first state, many companies were lured to open business here because of its friendly corporate and tax laws.

To put in perspective how much Delaware has become a tax haven – nearly half of all public corporations in the U.S. are incorporated in Delaware. 133,297 businesses were set up in this state last year and there are currently more corporations than people living in the state (945,326 to 897,934)! Delaware has received roughly $860 million in taxes from these corporations, which accounts for a quarter of the state’s budget.

Delaware is also utilized as a tax bill reducer. The state allows companies to shift their revenue and royalties to their “holding company” where they are not taxed. This loophole has enabled corporations to reduce their tax payments by an estimated $9.5 billion. Obviously, tax officials are seeing through these evasion schemes, however there is little that can be done because most of the practices are completely legal.

What differs Delaware from the typical offshore havens like the Caymans, Isle of Man, and Jersey is its lack of transparency and secrecy. Most offshore havens require full disclosure of the company’s business, assets, debts, etc. before opening any type of account. In Delaware, you can essentially operate a business abroad and have just a mailing address in the state and receive all the tax benefits as if you lived there.

Delaware may be basking in tax income, however states like Pennsylvania are receiving the brunt end of the opportunity. Pennsylvania is claiming they are being robbed of their tax dollars. A major company involved in natural gas and drilling is said to have more than 400 subsidiaries all registered in Delaware, even though they do business in Pennsylvania. According to the Pennsylvania Budget and Policy Center, in 2004 the Delaware loophole cost Pennsylvania nearly $400 million in lost revenue in 2011.

Delaware officials are adamant about keeping the situation the same. It is hard to work around a legitimate tax haven, however if more cases of illegal practices arise, there may be more leverage to alter the state’s tax structure. For now, 1209 North Orange Street will remain America’s biggest tax haven.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.