Abajian Law Tax Attorneys Vic Abajian and Aksel Bagheri attended the annual Tax Controversy Institute on October 25, 2016 at the Beverly Hills Hotel. The institute is the premier meeting where top tax practitioners and high ranking IRS employees from Los Angeles and Washington DC meet to discuss top tax issues pending before the IRS.
The luncheon’s Keynote Speaker was Caroline Ciraolo who spoke about the government’s efforts in discovering the names of US Persons with offshore accounts. She explained that John Doe summonses, treaty requests, and “required records” summonses are still vital tools in combating non-compliance. There was also discussion about “Bank of Nova Scotia” summonses where the Government can get a federal court to compel a domestic branch to produce records of a foreign branch.
Recently in February of 2016, the Justice Department filed an action in federal court to compel a UBS’s branch in Miami to produce bank records of a Singapore account for a US Taxpayer who lives in China using a “Bank of Nova Scotia” summons. Abajian Law thinks the IRS is very interested in pursuing cases in Singapore and US persons with accounts relevant account should seek consultation.
Ms. Ciraolo reminded the audience that the Offshore Voluntary Disclosure Program is not permanent although there was no discussion or indication when the programs would end.
Ms. Ciraolo also mentioned a recent case where a former trucker from Kansas City named Clifford C. Copp recently pled guilty to tax evasion. When the IRS began collecting past due trust fund recovery penalties for employment taxes and his company failed to pay, prosecutors alleged that Mr. Copp lied and made false to the IRS. It is vitally important to be truthful on collection disclosure forms; they are all signed under the penalties of perjury. Mr. Copp was sentenced 33 months in federal prison and was ordered to pay restitution of $939,408.
Mary Beth Murphy, Commissioner of IRS Small Business/Self Employed Division gave some insight about the IRS and their future plans for collection. She stated that the IRS has 22,000 employees and 50% will become eligible for retirement in the near future. As a result, the IRS will be looking to private debt collectors to collect back taxes. Cases that go to private debt collectors will mainly be cases where CDP rights are expired, as well as cases where taxpayers have not worked with the government for a solution such as an installment agreement or offer in compromise. The private debt collectors have already finalized contract, the IRS will get residuals of their collections and income streams. Private debt collectors will not be able to lien and levy. The IRS spoke about the challenge of having taxpayers respond to private debt collectors, the prospect of fraudsters acting as debt collectors, and how the taxpayers will be able to distinguish a legitimate debt collector from a fraudster.
Ms. Murphy also spoke about how congress has given the IRS authority to revoke passports of clients that have $50,000 or more in liability owed to the IRS, and are not on an installment agreement or have not commenced an offer in compromise. Passports can be reinstated once the taxpayer comes into compliance and has paid the tax, has compromised the tax, or has negotiated an installment agreement. The IRS will work with the Department of State in revoking passports; the details are still being ironed out.
Both measures have met a lot of criticism from tax practitioners and taxpayers. This measure has been criticized as being authoritative and hard to implement fairly. There is also concern about the aggressiveness of private tax collectors and the methods they will use to try to collect tax.
There was also extensive discussion by panelists about community property rules and their impact on income tax and estate tax reporting, as well as their impact on collection. Panelists discussed issues regarding transmutation of property from separate property to community property, inherited property, when income can be split on separate returns, and IRC Section 66(c). The collection discussion focused on the intricacies of innocent spouse relief, the protection of separate assets, and post-nuptials, fraudulent conveyances, and the relevance of community property laws in offer in compromise cases.
Lastly, there was discussion by other panelists about the unanticipated consequences of late filing, amended return filings, quiet voluntary disclosures and when they constitute Qualified Amended Returns and penalty abatement considerations including best practices for penalty mitigation.