Denver IRS Practitioner Meeting July 2014 – A Summary Review with Excellent References for FBAR and FinCEN Matters

24 Jul Denver IRS Practitioner Meeting July 2014 – A Summary Review with Excellent References for FBAR and FinCEN Matters

Meeting Summary as produced by IRS Senior Stakeholder Liaison Deborah Rodgers

Nancy Carver, IRS Local Area Counsel

Counsel continues to assist in training employees on partnership audits, and TEFRA. Counsel is also assisting in the investigations of promoters.

Virtual currency is on the radar for Internal Revenue Service.

Controlling ID Theft is a task that continues to use a lot of IRS resources.

Conservation easements are overvalued and continue to be a problem.

Counsel has a busy calendar in December.  Denver is fully staffed, despite many retirements nationwide.

Stephanie Valencia, Taxpayer Advocate

Taxpayer Advocate is working on the Marijuana Banking issue. They are trying to get legislation changed to allow banks to operate with the marijuana businesses without fear of reprisal from the federal government. That will require a change to Code Section 280E.

A stop gap measure that will keep marijuana businesses from being penalized for depositing cash will soon be available through Taxpayer Advocate’s involvement

Tammy Hobson, ACS

Atlanta, Kansas City and Denver ACS call sites were working Accounts Management call sites for 1 ½ years. All ACS call sites are back to normal operations.

ACS support inventory is over 10,000 cases, in which 8700 of those cases are overage. Denver along with Des Moines, Brookhaven and Philadelphia are charged with working the backlog of cases.

Internal Revenue Service will be combining SBSE and W&I ACS call sites early next year.

The Toll Free number for Identity Theft is 1-800-908-4490

The Identity Theft form is 14039

Michael Rogers, Governmental Liaison

Governmental Liaison is working Congressional inquiries on refund scams. They are implementing a memo of understanding with the Department of Corrections to stop prison fraud.

The top congressional cases received include, Tax Exempt status, Affordable Care Act (ACA), and ID Theft.

IMPORTANT changes for FBAR Filers: Effective July 1, 2013, filers must electronically file the FBAR through the BSA E-File System. If unable to E-file, filers may contact the FinCEN Regulatory Helpline at 800-949-2732 to request an exemption. There is no need to register or login to the system in order to file the Individual FBAR.  Go to http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html to file an individual FBAR. Institutions, businesses, and professional preparers batch-filing multiple FBARs must sign up for Bank Secrecy Act (BSA) E-Filing, at http://bsaefiling.fincen.treas.gov/Enroll_Now.html, and establish an account before being able to use the electronic filing service. Help in completing the FBAR is available Monday – Friday, 8 a.m. to 4:30 p.m. Eastern Time, at (866) 270-0733 (toll-free inside the U.S.) or (313) 234-6146 (not toll-free, for callers outside the U.S.). Questions regarding the FBAR can be sent to FBARquestions@irs.gov. Filers residing abroad may also contact U.S. embassies and consulates for assistance. For E-Filing system questions, call the FinCEN E-Filing Help Desk at (866) 346-9478, option 1 (M-F, 8-6 Eastern time) or email at BSAEFilingHelp@fincen.gov. A detailed technical review (PPT 1MB, 09/2013) of the new FBAR electronic filing requirements is available on the FinCEN website, including an explanation of the new FBAR FinCEN Form 114 (PDF 190KB).

FBAR is an information report required when:

• A US Person owns or has signature or other authority over foreign financial accounts

o   Worth over $10,000

o    In any calendar year.

Congress set up the penalties because some taxpayers use these accounts to evade US taxation. This report is also an important money laundering tool.  FBAR penalties promote voluntary compliance.

• FBAR Penalty Mitigation Guidelines

• LB&I FBAR Field Support – A list of technical specialists responsible for providing FBAR technical support for LB&I examiners.

• LB&I Division Counsel FBAR Coordinators  – LB&I examiners must submit FBAR case to Counsel for concurrence, if penalties exceed the maximum $10,000 non-willful penalty (in other words, only if willful penalties are recommended).

• IIC Cases: Counsel review of FBAR Penalties for IIC cases is required since there is no special agreement. See IRM 4.26.17.4.3, Closing Cases with FBAR Penalties.

• FinCEN Notice 2011-1 (PDF), revised 6/6/2011 granted an extension to June 30, 20012 on 2010 and prior years for an employee or officer with only signature authority on foreign accounts of certain foreign subsidiaries under 31 CFR § 1010.350(f)(2)(i)-(v).

• FinCEN issued Notice 2011-2 (PDF), 6/17/11 granted an extension to June 30, 20012 for officers and employees of investment advisors registered with the Securities and Exchange Commission having only signature or other authority in certain foreign financial accounts.

• Notice 2011-54 (6/16/2011) Further extends the filing date until November 1, 2011 for individuals with only signature authority whose filing requirements were properly deferred under Notice 2010-23 or Notice 2009-62. This extension only applies to reports for the 2009 or earlier calendar years. This Notice did NOT extend the reporting deadline for calendar year 2010.

• Notice 2010-23 Further extends the filing date to June 30, 2011 for U.S. persons having only signature authority over the foreign account for 2010 and prior calendar years. The Notice also waives the filing requirement for calendar year 2009 and earlier calendar years for persons who have a financial interest in a commingled fund (foreign hedge fund or private equity fund) that is not a mutual fund.  FBAR requirements still apply to foreign mutual funds. Notice 2009-62 is modified.

• Announcement 2010-16 Continues the suspension for the FBAR filing requirements due on June 30, 2010 for the 2009 and prior calendar years for persons who are not U.S. citizens, U.S. residents or domestic entities.  Announcement 2009-51 is supplemented and superseded.

• Revised FBAR Regulations (PDF 103 KB) – 31 CFR Part 1010 – Section 1010.350 (FR Doc. 2011-4048) Published 2/24/2011 and effective March 28, 2011 for reports (FBARs) required to be filed by June 30, 2011 relating to accounts maintained during calendar year 2010 and subsequent years. Filers who properly deferred filing under Notice 2011-54 and Notice 2010-23 apply these final regulations in determining their FBAR filing. The FBAR form and instructions (PDF) have been revised to reflect the amendments made by the final regulations.

• Notice 2011-31 provides guidance to taxpayers regarding how to answer questions related to foreign financial accounts (FFAs), found on 2010 federal income tax and information returns, e.g., Schedule B of Form 1040, and Schedule N of Form 1120, among others, etc. For tax returns filed after March 28, new Regs, Form and Instructions may be used. For returns filed prior to March 28, 2011 can reference old Regs or new Regs and instructions.

Kenneth Cooper, Examination

Exam continues a strong emphasis on identifying and stopping abusive tax schemes and abusive preparers through use of our Lead Development Center (LDC).

Exam conducts promoter/preparer investigations that may result in penalties and injunctions.

o   Leads for investigations are received from internal and external sources including tax professionals.

o   The Lead Development Center works closely with the Wage & Investment Division and the Return Preparers Office to identify questionable preparers.

o   Exam also conducts parallel investigations where Criminal Investigation and Examination conduct separate but contemporaneous investigations

Offshore Tax Evasion – OVDI

Stopping offshore tax cheating and bringing individuals, especially high net-worth individuals, back into the tax system has been a top priority of the Internal Revenue Service for several years.

IRS offshore voluntary disclosure programs are designed to encourage taxpayers with undisclosed offshore assets to become current with their tax liabilities. The programs have been part of a wider effort to stop offshore tax evasion, which includes enhanced enforcement, criminal prosecutions and implementation of third-party reporting via the Foreign Account Tax Compliance Act (FATCA).

The voluntary programs began in 2009. Overall, the three voluntary programs (2009, 2011 and 2012) have resulted in more than 45,000 voluntary disclosures from individuals who have paid about $6.5 billion in back taxes, interest and penalties.

OVDI certifications are being worked by SB/SE and LB&I. Exam is working the treaty cases and any cases from the private banking initiatives as examinations. These exams will address the impact of all offshore accounts and the full range of examination techniques will be utilized. Each case will be decided based on the facts of that case, including expansion to all periods of non-compliance, as appropriate. Penalties (for both Title 26 and 31) will be pursued, as appropriate.

2014 Changes to Offshore Programs

In June 2014, the IRS announced major changes in the 2012 offshore account compliance programs, providing new options to help taxpayers residing in the United States and overseas. The changes are anticipated to provide thousands of people a new avenue to come back into compliance with their tax obligations.

 With the expansion of the streamlined procedures for non-willful taxpayers, the IRS will also adjust the terms for taxpayers participating in the OVDP, whose conduct may reflect willful non-compliance. The changes modify the OVDP program to make it suited for taxpayers seeking relief from potential criminal prosecution.

IRS.gov has much more information on the changes to the current program; see News Release IR-2014-73, June 18, 2014; and Fact Sheets FS-2014-6 andFS-2014-7, June 2014:

• IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance

• Offshore Income and Filing Information for Taxpayers with Offshore Accounts

• IRS Offshore Voluntary Disclosure Efforts Produce $6.5 Billion; 45,000 Taxpayers Participate

Also see the main 2012 Offshore Voluntary Disclosure Program web page for frequently asked questions and answers available on IRS.gov.

National Research Programs

Exam continues studies through National Research Program. The goal of National Research Program (NRP) is to design and implement a successful strategy to collect data that will be used to measure payment, filing and reporting compliance and development improvements for workload identification.

The IRS will also use the NRP to analyze taxpayer compliance and to assess the effectiveness of compliance programs and treatments in use by the IRS.

Current IRS studies include Form 1040, Form 1120, Fuel Tax, and Employment Tax.

Results from the 2006 through 2009 studies have already been used to develop new tax gap measures and update selection criteria for individual returns.

Individual return program

Exam is approaching the end of a multi-year Form 1040 study, covering tax years 2006 – 2013.

Audits are ongoing and examinations of tax years to 2010 have been completed.    Audits of tax year 2011 returns will continue throughout 2014. The 1040 tax year 2012 study includes approximately 12,900 returns. Selected returns are scheduled to be sent to the field in summer 2014.

Under this study, a new classification program is being developed that will allow examiners to complete their work remotely, resulting in significant travel savings.

Corporate return program

SB/SE is also conducting a one-year NRP study involving 2,500 corporate returns with assets under $250,000. These returns have been classified and have been sent to the field. Audits are currently underway and will continue throughout 2014.

LB&I is conducting a 5-year corporate study involving 275 returns each year covering various asset codes.

Fuel & Employment Tax National Research programs

SB/SE Specialty and Employment Tax functions have similar programs for those types of returns. 

Ken Williams, Appeals

Denver has 13 Appeals Officers and 3 Settlement Officers. Each Officer has 30-40 cases in their inventory. There is a high level of overage cases.

Future resources look kind of bleak, due to more than half of the Appeals Officers are at or within a year of retirement.

Appeals is looking for new efficiency in working cases which will lead to less time spent on cases.   Both the government and the taxpayers may see an increased emphasis on response times and hard deadlines to provide information.

The Alternative Dispute Resolution programs, such as Fast Track Settlement, are grossly underutilized at this time. If Practitioners took advantage of this program, cases could be resolved in possibly 2 months vs one year.

Diane Sandoval, Collection

Collection will have limited hiring this year. There will be 74 Revenue Officers nationwide, with 5 for Denver.

Diane’s contact information is 720-956-4275.

Kirk Peifer, Criminal Investigation

Criminal Investigation’s top priority is refund fraud. Refund fraud encompasses a number of different types of fraud, including identity theft, prisoner schemes and the preparation of returns by unscrupulous return preparers.  These type of return preparers generally fall into two types of programs for CI. The programs are known as the return preparer program (RPP) and questionable refund program (QRP). CI spends over 25 % of their time investigating refund fraud.

TIGTA published a report on prisoner schemes and the legislative fixes needed to allow IRS to disclose certain prisoner/taxpayer information to the Bureau of Prisons. This legislation is needed to address these schemes. 6103 significantly hampers IRS’ ability to address these types of schemes and certain legislation that was in place to allow IRS to share taxpayer information has lapsed.

CI is investigating some ITIN returns. These returns yield 4.2 billion dollars in refunds each year. The refunds are driven by refundable credits that ITIN holders are eligible for, since the legislation that was passed does not require an SSN to be eligible for the refundable credits. These cases are difficult to investigate, given that ITIN holders are generally in the country illegally and not easy to find. If we do find fraud, it is difficult to investigate and prosecute the individuals responsible for the fraud because of the difficulty locating individuals and using them as witnesses given their illegal status.

In 2010, a law was passed allowing criminal restitution ordered to the IRS by federal judges to be assessed as tax on the proper individuals/entities tax account. As a result, the process for assessing and collecting tax from individuals prosecuted criminally for tax crimes has been streamlined. The civil side of the IRS does not have the ability to reduce the criminal restitution ordered by the federal judge. A motion would have to be filed in federal court to reduce the criminal restitution and the federal judge would have to grant the motion. Only the Department of Justice could file this type of motion and it has not been done, to date. There would have to be a significant error with the calculation for this to occur and this is highly unlikely to occur. If you are dealing with a revenue officer (RO) or revenue agent (RA) after the conclusion a criminal case against your client, be mindful that the full amount of criminal restitution has to be paid. The IRS does not have the ability or authority to reduce this amount. If you are handling this issue for your clients ensure the United States Attorney’s Office, Financial Litigation Unit is kept apprised of all payments made by your client. The criminal restitution paid will be applied against their tax bill; they will not be charged twice. The IRS may come up with amounts higher than the criminal restitution ordered, given interest, penalties and other factors.

Criminal Investigation is also investigating a number of International tax cases, which stems from individuals attempting to move money offshore to evade U.S taxes.

Deborah Rodgers, Stakeholder Liaison

How to apply for tax-exempt status webcast-July 24, 2014 attachment

The Internal Revenue Service announced that guidance will soon be issued outlining a new voluntary program designed to encourage education and filing season readiness for paid tax return preparers. The program will be in place to help taxpayers during the 2015 filing season.

Revenue Procedure 2014-42 provides guidance regarding a new, voluntary Annual Filing Season Program designed to encourage tax return preparers who are not attorneys, certified public accountants (CPAs), or enrolled agents (EAs) to complete continuing education courses for the purpose of increasing their knowledge of the law relevant to federal tax returns.  In addition, this revenue procedure modifies and supersedes Revenue Procedure 81-38, 1981-2 C.B. 592, regarding limited practice before the IRS by individuals who are not attorneys, CPAs, or EAs.

The IRS National Public Liaison Office is preparing for the Tax Forums and the Nationwide Tax Forums Online (NTFO). Stakeholder Liaison Field is being asked to reach out to our stakeholders (CPAs) who may be interested in volunteering their time to test and or review the new 2014 NTFO Courses.  NPL is looking for a diverse cadre of volunteers from across the country. Volunteers will need to complete an NPL Volunteer form no later than August 29, 2014.  If you are interested reply to me and I will send you the form.  Volunteers will be prioritized in the order received.

If you have questions, you may contact Maria G. Jaramillo, IRS National Public Liaison, Management and Program Analyst at (213) 500-3594 or maria.g.jarmillo@irs.gov.   If you wish to participate, fax the form to Maria by August 29^th, 2014.  We specifically need CPAs in order to meet NASBA (the National Association of State Boards of Accountancy) requirements for IRS Taxation Courses.  NASBA is our CPE Sponsor at The Nationwide Tax Forums and Nationwide Tax Forums online. We strictly follow their Statement on Standards.