It’s been so long since I have blogged about FBAR cases I almost forgot they even existed.  This is probably the effect of age.  But decisions in two recent cases show that FBAR willful penalty cases are still alive and reflect that courts are not blindly accepting the Government’s “pushing the envelope” theories.  Both cases rejected the Government’s theory that a taxpayer who signs tax return with a Schedule B is automatically “willful.”  Both also give a glimpse at the IRS’s internal decision-making process on whether a willful FBAR penalty should be imposed.

The case that resulted in only one decision, Jones v United States, CV 19-04950 (CD CA May 11, 2020), involves an elderly taxpayer who filed a streamlined disclosure only to end up with penalties assessed against her of $751,685 for 2011 and of $770,255 for 2012 and against her late husband’s estate for 2011 in the amount of $1,890,074.

Margaret Jones was born in Canada in 1928 and her husband, Jeffrey, was born in New Zealand in 1919.  They met and married in Canada and moved to the U.S. in 1954, becoming U.S. citizens in 1969.  Both were high school graduates; neither ever attended college. Jeffrey had four New Zealand bank accounts; Margaret had one New Zealand and two Canadian accounts; they had two joint accounts in New Zealand and two in Canada.  Jeffrey died in 2012.

Although their CPA knew that Mr. and Mrs. Jones were both born overseas and lived in Canada before they moved to the U.S., he never asked them about whether they had any foreign accounts.  He was not familiar with FBAR reporting requirements and never asked any of his clients about foreign assets or advised about foreign banking activities.  He never reviewed Schedule B with the Joneses.  Their returns did not report foreign income and checked “No” to whether they had foreign accounts.

After Jeffrey died, Margaret for the first time learned of his four New Zealand accounts.  In consulting with attorneys about Jeffrey’s estate, she learned for the first time about the need to file FBARs and report foreign income. She filed a timely FBAR for 2012 and in 2014 filed amended returns for 2011 and 2012 reporting previously unreported foreign income.   In 2015, Margaret filed streamlined submissions and paid a miscellaneous penalty of $156,000 based on the highest total balance in her separate accounts and the joint accounts.  The estate tax return filed for her late husband listed his foreign New Zealand accounts.

The revenue agent assigned to review Margaret’s streamlined filing had only three days of training about FBARs, foreign entities, foreign issues and international issues.  The investigation began because the penalty did not include Jeffrey’s four separate accounts.  There were no clear guidelines on filing a streamlined disclosure for a deceased spouse.  Several agents advised the agent auditing Margaret’s streamlined filing  to offer an opportunity to amend her streamlined filing to include Jeffrey’s accounts.  Instead, the revenue agent proposed willful penalty on the ground that Margaret and Jeffrey were “willfully blind.”   The revenue agent’s penalty against Jeffrey’s estate was based on the balance in his accounts as of June 30, 2012.  For Margaret, the revenue agent used 50% of the balance in her separate accounts and the joint accounts and “spread them” between 2011 and 2012.  The total penalty against Margaret was $1,521,000, but half the balance in her account on that date was $1,485,000.

While the Court gave lip service to the cases that had embraced the “constructive knowledge” theory of willfulness, it held that it can be rebutted.  Because there was evidence that Mrs. Jones and her late husband did not know about the need to file FBARs  the Court held there were questions of material fact in dispute:  “Ultimately, willfulness is a finding of fact and the fact that Mrs. Jones signed her return under penalty of perjury is prima facie evidence that she had constructive knowledge of the FBAR requirements.  Such evidence creates a genuine dispute of material fact as to whether she engaged in a willful violation.”

The Court then addressed Mrs. Jones’ argument that the penalty amount was arbitrary and capricious and thus should be set aside.  The Court stated that the penalty amount is reviewed for abuse of discretion under an arbitrary and capricious standard under the Administrative Procedure Act.  Here, the penalty was based on inappropriate data (i.e., the balance on June 30, 2012, to assess penalties for 2011 and 2012) that should not have been used and was therefore “arbitrary and capricious.”  If willfulness is found at trial, the Court stated it would remand the matter to the IRS for a recalculation of the penalty.

The second case is United States v. Schwarzbaum, Case No. 18-cv-81147 (SD FL March 20, 2020, and May 18, 2020).  The first decision in that case dealt with whether the Mr. Schwarzbaum was willful; the second decision dealt with the amount of the penalty and whether it violated the excessive fines clause of the Eighth Amendment.

Mr. Schwarzbaum was born in Germany, had lived in a number of countries and spoke six languages.  His father had built a successful textile business and had invested in real estate.  He became a U.S. citizen in 2000, spent part of each year from 1993 to 2010 in Costa Rica, Switzerland and the U.S. and lived in Switzerland full time from 2010-2016.  Since 2016 he has lived in the U.S.

Mr. Schwarzbaum’s father supported him until he was 45, when his father signed over a Swiss account to him with $3 million.  He invested the funds conservatively like his father had.  His father died in 2009, leaving to him other offshore accounts.  Mr. Schwartzbaum let the bankers invest the money for him.  Between the years in issue, 2006 through 2009, Mr. Schwarzman had 11 Swiss bank accounts.

Mr. Schwartzbaum used accountants to prepare his U.S. tax returns.  In 2001, he told his CPA that he had received a substantial gift from his father in Europe.  The CPA told him that there was no U.S. tax reporting requirement for foreign gifts.  The CPA never told Mr. Schwarzman about the need to report income from foreign assets and he never asked the CPA about whether he had to do so.

By 2006, Mr. Schwartzbaum was using a different CPA.  He told her he had received money from family in Switzerland.  She told him that there was no need to report gifts to the IRS unless there was “a U.S. connection.”

At trial, Mr. Schwartzbaum testified that based on his experience in other countries, he believed that taxation is based on residency and not citizenship.  Between 2006 and 2009, he had an account in Costa Rica that he transferred money to from the U.S. He filed FBARs for 2006 through 2009 that reported the Costa Rican account because it had a “U.S. connection.”  In 2009 he transferred funds from the U.S. to his largest Swiss account.  He reported that account on his 2009 FBAR, but not any of his other Swiss accounts.  He also reported a $5.05 million gift from his father in 2007 because the funds were wired to the U.S.

In October 2009, Mr. Schwartzbaum received a letter from UBS; he consulted his Swiss lawyer, who told him not to do anything.  He did not consult any American lawyer or accountant.  Ultimately, he participated in the OVDI, but opted out. Initially, after interviewing Mr. Schwartzbaum, the agent to whom the case was assigned and his manager believed that only non-willful FBAR penalties should be assessed.  The Offshore Technical Advisor convinced them that there were sufficient indicia of willfulness and that FBAR willful penalties should be assessed.  The maximum potential penalties that could be asserted against Mr. Schwartzbaum was $35.4 million, but the IRS mitigated the amount to $13.729 million, the penalty for the year with the largest balance, and spread it out over 2006, 2007, 2008 and 2009.

Beginning its analysis, the district court stated that for purposes of a civil penalty, willfulness includes both knowing and reckless conduct and willful blindness but rejected the Government’s argument that a taxpayer has constructive knowledge of the FBAR filing requirements based on signing a tax return.

Turning to whether there was reckless conduct or willful blindness, the district court rejected the Government’s arguments that Mr. Schwartzbaum was willfully blind because he opened Swiss accounts with instructions to “hold” mail and did not respond to the UBS letter, since he was directed to sign the “hold instructions” by Swiss bankers and didn’t respond to the letter based on his Swiss attorney’s advice.

Mr. Schwarzbaum was not out of the woods yet.  Based on his FBAR filings for 2006-2009, the district court held that he was willfully blind for 2007, 2008 and 2009 but not for 2006.  While his English was limited in these years, he never asked anyone to translate the FBAR form or instructions for him.  These instructions were unequivocal that a U.S. person, which he was, was obligated to report all foreign financial accounts, regardless of whether there was a “U.S. connection.”  After reviewing the FBAR instructions for 2007, Mr. Schwarzbaum was or should have been aware “of a high probability of tax liability with respect to his unreported accounts” and took no steps to learn about what his filing and tax obligations were.  Thus, he met the willful blindness standard.

Mr. Schwarzbaum challenged the amounts assessed under the Administrative Procedure Act.  The IRS used the high account balance as shown on Mr. Schwarzbaum’s OVDI worksheet and not the balances as of June 30 of the year following the year for which the report was filed.  Thus, the penalties were not assessed according to law.  The court ordered supplemental briefing on the amount of the penalties and whether the Eighth Amendment prohibition against excessive fines applied.

In its second order, dated May 18, 2020, the district court fixed the total penalties for 2007, 2008 and 2009 at $12,907,952.  The court rejected Mr. Schwarzbaum’s arguments that a) no penalty should apply since the IRS did not follow the law in determining the penalty amount; b) that the case should be remanded to the IRS for further proceedings, with the IRS being time-barred from assessing penalties since that argument was not properly raised; c) that the penalties were invalid, since the court had already determined that Mr. Schwarzbaum was liable for willful penalties and had ordered supplemental briefing as to the amount, which the Government did; and d) that the FBAR penalty should be capped at $100,000 per tax year, since this was contrary to the statutory language.

The district court also rejected the Government’s argument that it should sustain the full amount of the proposed penalties, $13,729,591, since that amount was below the statutory maximum for 2007, 2008 and 2009.  The court rejected this argument, finding it was not “harmless error.”  Based on the balance in each account the district court determined that the penalties were $4,498,486 for 2007, $4,212,871 for 2008 and $4,196,595 for 2009.  In its analysis, the district court relied on charts prepared by the Government that listed the balance in each account as of June 30 of the year following the year for which the report was required and determined a penalty amount based on 50% of the balance in each account and, in some instances where the account balance was unknown or below $100,000 fixed the penalty at $100,000.

Which takes us to the last and perhaps the most important part of the opinion: the court’s evaluation of the Excessive Fines argument.  The court held that FBAR penalties do not violate the Eight Amendment Excessive Fines provision because they did not serve primarily punitive, retributive or deterrent purposes but were primarily remedial.  The court termed the FBAR penalty a “tax penalty” and noted that tax penalties have traditionally considered remedial.  The court also said that treating FBAR penalties as outside the purview of the Eight Amendment was consistent with the purpose of the FBAR, which “is to identify persons who may be using foreign financial accounts to circumvent United States laws and to identify and trace funds used for illicit purposes to identify unreported income maintained or generated abroad.”  Further, 31 USC sec. 5321 is entitled “Civil penalties.”  The court concluded that FBAR civil penalties are not subject to the Eighth Amendment.  I found the court’s analysis of the applicability of the Eighth Amendment unsatisfactory.  FBAR penalties are not “tax penalties” and the purpose of the BSA was in part aimed at detecting and deterring criminal conduct. My guess is this issue is heading to an appellate court.  While there may not be definitive law yet, most court’s that have dealt with the issue have agreed the Excessive Fines clause would apply to an FBAR penalty.[1]

Some take aways: first, while the Government continues to push the claim that a person who signs a tax return is automatically deemed to know of the FBAR reporting requirements, some district courts are pushing back; second, the IRS’s default position is when in doubt, assess the FBAR willful penalty; third, the Government will go through each account to determine not only non-willful penalties but also willful penalties.  Thus, if a taxpayer had several accounts, the willful penalty may be based on 50% of the balance in accounts with over $100,000 and $100,000 if the account had a balance of $100,000 or less.

Of overriding importance is that maybe— and just maybe—these decisions will cause IRS and DOJ Tax to recognize that they are dealing with penalties and penalties have a purpose.  When they are applied in a manner which undercuts the credibility of the tax administrator by pushing the envelope at every corner, they not only lose their effectiveness but also undermine the fairness of tax enforcement.

Contact Robert S. Horwitz at horwitz@taxlitigator.com or 310.281.3200   Mr. Horwitz is a principal at Hochman Salkin Toscher Perez P.C., former Chair of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending criminal tax investigations and prosecutions. Additional information is available at http://www.taxlitigator.com.

[1] See Steven Toscher and Michel R. Stein, “FBAR The Eighth Amendment Limits on FBAR Penalties-Common Sense Limitations Becomes a Legal RealityJournal of Tax Practice & Procedure, June-July 2018, 39.

We are pleased to invite you to the NYU 12th Annual Tax Controversy Forum Webinar to be held June 18 and 19.  This year all registrations are complimentary.  As set forth below, Co-Chairs Bryan Skarlatos and Armando Gomez have assembled an all star group of Government speakers and it will be a great opportunity to learn what is next in tax enforcement  in the COVID-19 environment.

STEVEN TOSCHER will have the honor this year to interview IRS Chief Counsel Michael Desmond. 

You do not want to miss this program.

This year’s NYU Tax Controversy Forum will feature updates on what the IRS is doing to enhance compliance through communication and enforcement. Panels will highlight the new IRS focus on intra-agency collaboration, new initiatives with respect to penalties and fraud referrals, and IRS’ handling of tax collection challenges. Tune in for free from your computer, at home or the office, to hear Tax Compliance and Procedure Updates from senior IRS personnel.

  • Erin M. Collins, Esq., National Taxpayer Advocate, Internal Revenue Service
  • Michael J. Desmond, Esq., Chief Counsel, Internal Revenue Service
  • Don Fort, CPA, Chief, Criminal Investigation Division, Internal Revenue Service
  • Darren Guillot, Deputy Commissioner, Small Business/Self Employed Division, Internal Revenue Service
  • Eric Hylton, Commissioner, Small Business/Self-Employed Division, Internal Revenue Service
  • Andrew Keyso, Jr., Esq., Chief, Independent Office of Appeals, Internal Revenue Service
  • Sunita Lough, Esq., Deputy Commissioner for Services and Enforcement, Internal Revenue Service
  • Paul J. Mamo, Director, Collection, Internal Revenue Service
  • Douglas W. O’Donnell, CPA, Commissioner, Large Business & International Division, Internal Revenue Service
  • Tamera Ripperda, CPA , Commissioner, Tax Exempt and Government Entities Division, Internal Revenue Service
  • Damon Rowe, Executive Director, Fraud Enforcement Office, Small Business and Self-Employed Division, Internal Revenue Service

Click Here for more information.

SAVE THE DATE FOR NEXT YEAR’S FORUM!

Next year, the 13th Annual Tax Controversy Forum will take place live and in person on June 24-25, 2021 at the Crowne Plaza Times Square Manhattan, and will feature the same powerful and thought-provoking content that is so critical to those who attend the Forum each year.

 

We are pleased to announce that our principal Michel Stein will be speaking at the upcoming Beverly Hills Bar Association webinar on PPP Loans: Completing Loan Forgiveness Applications, Handling the Latest Q&As and other Recent Guidance, Thursday, June 4, 2020, 3:00 pm-4:30 pm.

Coronavirus Aid, Relief and Economic Security Act (CARES Act) brought us the Paycheck Protection Program (PPP).  PPP loans are additions to the Small Business Administration’s Loan Programs. In a short period, the SBA has issued two sets of “interim final rules”, a periodically expanding list of Frequently Asked Questions and, on May 15th, a two page PPP Loan Forgiveness Application, worksheet and  and 8 pages of instructions.

Mike and a panel of lawyers will present a case study using the PPP Loan Forgiveness Application as a framework and will analyze and offer pragmatic guidance on:

  • What strategies are available to maximize the amount of loan forgiveness;
  • How to accurately complete the Loan Forgiveness Application, worksheet and tables;
  • What is the hierarchy of authorities and does it matter;
  • How partners and self-employed are treated;
  • What alternatives are available for borrowers to determine payroll costs;
  • How the two haircuts in the loan forgiveness amount work;
  • Are the expenses funded with a PPP loan deductible for Federal and state income tax purposes;
  • How to handle rehires, furloughed employees, hazard bonuses and salary paid in arrears;
  • Should the borrower use a separate bank account or separate GL account;
  • What should the borrower do with amounts not spent on eligible expenses; and
  • What are the documentation and record keeping strategies recommended for the borrower.

The  panel will also  discuss  whether the lender has the last say on the requirements of the Loan Forgiveness Application and the risks to the borrower of having made erroneous representations and certifications, submitted incorrect answers to questions on the original Loan Application and the Loan Forgiveness Application and  signed bank loan documents without review and professional advice.

For full programming details Click Here.

Longtime IRS attorney Carolyn Schenck has been selected to advise the agency’s new fraud enforcement program.

In her new role as national fraud counsel, Schenck will advise the program on the design and development of its anti-fraud efforts as it supports activities across the IRS to detect and deter tax fraud, the agency said in a May 26 release.

Schenck’s appointment is the latest in a string of staff shuffles that reflect a renewed emphasis by the IRS on preventing tax fraud. Those efforts began with Eric Hylton’s promotion from deputy chief of the Criminal Investigation division to commissioner of the Small Business/Self-Employed Division in September 2019, followed by the February selection of Brendan O’Dell to temporarily serve as promoter investigations coordinator and the appointment of Damon Rowe to head up the new Fraud Enforcement Office in March.

According to the IRS, Schenck will collaborate closely with Rowe and O’Dell on their anti-fraud efforts.

Frank Agostino of Agostino & Associates PC said the IRS’s new enforcement group will serve an essential function in promoting voluntary compliance. There’s a perception among tax cheats that the IRS can’t or won’t find them, and this means the tax system needs this sort of coordination on fraud, he said. “I want to see the good in everyone, but there is tax fraud in the world,” he said.

Schenck is serving as assistant division counsel (international) in SB/SE, where for the past decade she has advised the IRS’s Offshore Compliance Initiative. Throughout her career at the IRS, which began in 2006, Schenck has litigated cases before the Tax Court, advised IRS agents on fraud cases, and assisted the Justice Department with criminal tax prosecutions.

Good Call

IRS Commissioner Charles Rettig described Schenck as “extremely well-regarded” by the tax community, and practitioners who spoke with Tax Notes agreed.

Agostino praised the selection of Schenck to fill the role, saying she is an exceptional lawyer who is well versed in the law of tax fraud. “She’s knowledgeable about where the line and the law is, and what taxpayers went over the line knowing where the line was,” he said.

Steven Toscher of Hochman Salkin Toscher Perez PC said Schenck’s appointment suggests a “continued and sustained commitment by the IRS to detect and deter tax fraud,” and that the appointment of Schenck, along with Rowe and O’Dell, will yield more efficient tax enforcement and fraud detection across all the IRS’s operating divisions.

A Time Such as This

IRS Chief Counsel Michael Desmond said in the release that bringing Schenck into her new role is especially timely, given the opportunities for tax fraud amid the coronavirus pandemic.

“Someone with her talent and experience should send a strong signal that those who seek to take advantage of the situation will face dire consequences,” Desmond said.

Toscher echoed that sentiment, observing that Schenck appears to have a “broad mandate” that will involve not only advising Rowe and boosting fraud referrals by the operating divisions of the IRS to CI, but also the training of IRS agents and developing the “appropriate use of civil fraud penalties.”

Toscher also suggested that by specifying that Schenck will work closely with O’Dell, the IRS is signaling that its focus on promoters and enablers of tax fraud schemes is a major part of its antifraud strategy.

We are pleased to announce that three of our principals Steven Toscher, Michel Stein and Jonathan Kalinski will be speaking at the upcoming Strafford webinar on Taxation of Cannabis: Overcoming Tax Challenges in Marijuana Business Operations, Key Planning Techniques, Thursday, June 18, 2020, 1:00 pm-2:30 pm EST, 10:00 am-11:30 am PST.

This CLE/CPE webinar will provide tax counsel and advisers guidance on tax and related issues for businesses engaged in the cannabis industry. The panel will discuss critical federal and select state tax rules impacting cannabis businesses, recent tax court decisions, Section 280E, forfeiture, and banking.

The sale and distribution of cannabis for recreational or medical use have become a powerful economic engine generating billions in annual revenue with 33 states and the District of Columbia having some form of legalization of the substance. Despite state relaxation of marijuana prohibition laws, without careful planning, the taxation of regulated cannabis businesses can result in hefty tax assessments and penalties.

Cannabis businesses are accounting for and reporting the results of their operations with gross receipts, cost of goods sold (COGS), and other deductions just like other for-profit businesses. However, as long as marijuana remains a Schedule 1 controlled substance under federal law, these businesses must navigate the pitfalls of complex federal and state tax rules.

Under Section 61, all gross income must be reported from whatever source it is derived. However, under Section 280E, cannabis businesses cannot deduct rent, wages, and other expenses unless it is for COGS, resulting in a substantially higher tax rate than other companies on their income. This dilemma has been the subject of recent tax court cases and appeals.

Listen as our panel discusses federal and select tax rules impacting the cannabis industry, recent tax court cases, Section 280E, forfeiture, banking, and other related issues.

For full programming details Click Here.

Most federal criminal cases end in a written plea agreement, and tax cases are no exception. In plea negotiations, prosecutors wield enormous power and can effectively dictate the terms to most defendants. The plea agreements are largely district-specific, boilerplate documents that even individual prosecutors can’t modify outside of the factual basis, minor adjustments to appellate waivers, and options for sentencing recommendations.

Courts recognize the unequal bargaining power in deciding whether a prosecutor has breached a plea agreement. As with any one-sided contract, ambiguities are construed against the drafter (i.e., the government). Beyond charging decisions — which charges and how many counts, both of which affect the statutory maximum sentence and the recommended guideline sentencing range — the primary negotiated benefit in a plea agreement is the government’s promise regarding its sentencing position. Such promises can range from agreeing to recommend a particular sentence, to an agreement that the government can recommend any sentence it wants up to the statutory maximum. Although judges make their own sentencing decisions, the government’s recommendation carries substantial weight in most cases.

Given the importance of the government’s sentencing recommendation, whenever a prosecutor strays from the agreed-to recommendation in the plea agreement, there’s a good chance it will be considered a breach of the plea agreement. Upon a breach, there are two almost inevitable outcomes: a do-over on sentencing and an internal Department of Justice ethics investigation of the prosecutor. Most breaches aren’t fixable unless they are a “slip of the tongue or typographical error.” The 9th U.S. Circuit Court of Appeals appropriately has held that the district court can’t fix the problem by claiming it would disregard the breach. Once the “breach” bell has been rung, the sentencing must proceed before a different judge. This isn’t a comment on the judge’s abilities to disregard the government’s improper argument, but more likely a comment that any sentence imposed by the judge tainted by the government’s breach would carry the appearance of unfairness.

On May 12, the 9th Circuit reversed the sentence imposed by an Idaho district judge and remanded to a new judge for either resentencing or to consider the defendant’s request to withdraw from the guilty plea to a 26 U.S.C. Section 7206(2) charge (aiding and abetting the filing of a false tax return). United States v. David Brannum, 19-30126 (unpublished). Although the plea agreement set the tax loss at just over $100,000, the prosecutor argued in a sentencing brief that the actual loss was $3.3 million and the sentence should reflect the seriousness of criminal conduct associated with the higher number. The government tried to justify this apparent breach of the plea agreement by claiming it wasn’t asking that the guideline sentencing range be based on the $3.3 million figure, but instead the general sentencing factors contained in 18 U.S.C. Section 3553(a) (which actually includes the guidelines as a factor) should take into account the higher figure. The district court found that this argument was not a breach, but likely recognized the 9th Circuit could disagree and tried to appeal-proof the sentencing by stating on the record that it was disregarding the government’s argument and was sentencing the defendant based on the $100,000 loss amount. The sentence was below the guideline range, but well above the straight-probationary sentence recommended in the presentence report drafted by U.S. Probation. The district court’s attempt to save the sentencing on appeal was in vain, as the damage had been done and could not be cured by claiming to ignore the government’s injection of a loss amount 33 times higher than agreed to in the plea agreement. The 9th Circuit found it was a breach, sent it back for resentencing, and now the case will be another judge’s concern.

The case isn’t over for the prosecutor, who (fortunately for his or her sake) wasn’t named in the appellate decision. A judicial finding that a breach occurred means the prosecutor almost certainly will be investigated by the DOJ’s Office of Professional Responsibility. Although the district court found there was no breach, t 9th Circuit’s description of the prosecutor’s course of conduct in the short opinion suggests that the breach was, at a minimum, reckless. Instead of instantly apologizing for taking an inconsistent (and very aggressive) position in the sentencing papers, the prosecutor tried to justify the position in the sentencing hearing by asserting that using a $3.3 million tax loss figure for Section 3553(a) arguments, and $100,000 tax loss for guideline calculations, was consistent with the plea agreement. Although the district court found no breach, the 9th Circuit summarily found that both the sentencing position and arguments during the sentencing hearing constituted breaches of the plea agreement. The 9th Circuit noted that the sentencing position brief alone was sufficient to establish the breach, but the prosecutor’s doubling down on the breach in the sentencing hearing couldn’t have helped the government’s argument on appeal.

Much of the plea-negotiation dance, including convincing the client that he or she will be treated fairly at sentencing, is based on trusting that the prosecutors will stick to the letter and spirit of the plea agreement. This incident presumably will have repercussions for both the prosecutor and the Idaho U.S. Attorney’s Office, at least when dealing with the defense bar and perhaps the Court.

EVAN J. DAVIS – For more information please contact Evan Davis – davis@taxlitigator.com or 310.281.3288. Mr. Davis is a principal at Hochman Salkin Toscher Perez PC.  He spent 11 years as an AUSA in the Office of the U.S. Attorney (C.D. Cal), spending three years in the Tax Division of the where he handed civil and criminal tax cases and 11 years in the Major Frauds Section of the Criminal Division where he handled white-collar, tax, and other fraud cases through jury trial and appeal.  As an AUSA, he served as the Bankruptcy Fraud coordinator, Financial Institution Fraud coordinator, and Securities Fraud coordinator.  Among other awards as a prosecutor, the U.S. Attorney General awarded him the Distinguished Service Award for his work on the $16 Billion RMBS settlement with Bank of America.  Before becoming an AUSA, Mr. Davis was a civil trial attorney in the Department of Justice’s Tax Division in Washington, D.C. for nearly 8 years, the last three of which he was recognized with Outstanding Attorney awards. 

Mr. Davis represents individuals and closely held entities in criminal tax (including foreign-account and cryptocurrency) investigations and prosecutions, civil tax controversy and litigation, sensitive issue or complex civil tax examinations and administrative tax appeals, and federal and state white-collar criminal investigations including campaign finance, FARA, money laundering, and health care fraud. 

Applicants who clearly lied in their applications for the Paycheck Protection Program’s (PPP) tax-free forgivable loans will make better targets for criminal investigation than those who don’t fit lawmakers’ ideas of the program’s intended beneficiaries.

“I’m sure there are some blatantly false [statements on PPP loan applications], and I think that is where it’s going to go. I don’t think they’re going to get in the business of going in and second-guessing the uncertainty,” Steven Toscher of Hochman Salkin Toscher Perez PC said.

To read more Click Here.

 

We are pleased to announce that Dennis Perez, Michel Stein, Robert Horwitz and Sandra Brown will be speaking at the CalCPA Webinar at 9 am on May 19th entitled “What Professionals Need to Know About PPP Loans and Employee Retention.”

The PPP loan has and continues to be one of the most critical fiscal stimulus tools to combat the Covid 19 induced recession. Join our experienced team of tax litigators for guidance on obtaining and keeping this valuable source of capital for business survival and avoiding the potential pitfalls of an SBA audit and investigation.

For full programming details Click Here.

 

 

We are pleased to announce that three of our principals Steven Toscher, Michel Stein and Cory Stigile will be speaking at the upcoming Strafford webinar on IRS Audits: Responding to IDRs, Independent Office of Appeals, Extending the Statute, and Current IRS Initiatives, Tuesday, May 26, 2020, 1:00 pm-2:50 pm EST, 10:00 am-11:50 am PST.

All tax practitioners need to be up-to-date on the latest IRS tax initiatives and current IRS audit procedures. Before the audit takes place, advisers need to understand the different types of examinations, the current IRS audit process, and when returns are no longer subject to audit. The type of audit: correspondence, office, field or compliance affects the effort and ease of resolving the issue(s) raised.

Since most audits take place just before the statute runs, deciding whether to grant the IRS an extension of time is often a critical initial consideration. Throughout the process, there is a fine line between cooperating with the IRS and its voluminous information document requests (IDRs) and providing information that could be damaging.

For full programming details Click Here.

We are pleased to announce that three of our principals Steven Toscher, Michel Stein and Sandra Brown will be speaking at the upcoming CPAacademy webinar on Developments in Cryptocurrency – Reporting and Enforcement, Wednesday, June 3, 2020, 3:00 pm PDT; 2:00 PST.

The Internal Revenue Service (IRS) launched a “soft letter” campaign advising taxpayers believed to have engaged in cryptocurrency transactions of their obligations to report those transactions and the ability to file amended tax returns to correct prior reporting and compliance issues.

The program will provide tax advisers and compliance professionals with a practical look at IRS guidance to calculating and reporting income and gain on cryptocurrency (e.g., Bitcoin) transactions.  We will also discuss the IRS’ position on cryptocurrency as property rather than cash, analyze IRS monitoring to increase compliance and define proper reporting and tax treatment for hard forks, “mining” and exchanging cryptocurrency.  Further, we will address recently released IRS Revenue Ruling 2019-24 and the updated FAQs regarding the taxation of cryptocurrency, with a particular focus on the recent IRS enforcement initiatives to identify and tax virtual currency activity and how this soft letter campaign fits into the IRS voluntary disclosure practice.

For full programming details Click Here.

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