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IRS Catches Big Fish

20 Jun

The nets of the IRS have, again, been cast out on the waters and this time, they caught some big fish when they hauled in the net. The Wall Street Journal broke the news in an article published on June 18th, just two days ago. You can read it at the WSJ.com website online here. I wholeheartedly agree with their comment that it is not coincidental that the U.S. Treasury made this announcement of their indictments now. The final date for your FBAR form to arrive in their offices just happens to be 10 days from now. That means you’d better get them done NOW as they have to arrive in the IRS offices by that date. This is for YOU, even if, as I am, you are a little fish. They’ll use you as bait for the big fish that they really want to catch.

It is also becoming clearer to me why I am being harassed by the IRS. It is all part of their witch hunt, looking for the big bucks to fill their empty coffers. The fishing analogy is one that I have been using since I started writing this blog when they came after me under the guise that my name was chosen by their computers for an audit to learn how they can improve their services. Yeah! Who do they think they are kidding? It’s a fishing expadition, and the WSJ article states, “Now the U.S. government is casting a wider net.”

As we have written, it started in Switzerland and is now spreading to Israel. Hey, this just happens to be where I live! Three Big Fish, according to the WSJ, three Israeli-Americans, set up corporations that held secret accounts at two Israeli banks based in Tel Aviv. These banks were not named, however, it is clear to me that one must be Bank Leumi. Apparently the indictment states that “”Bank A” describes itself as having more than 336 branches in 18 countries, with “loyal and discreet” bankers and a “premier position in the world of international private banking.” All you have to do is an internet search using these statements and it leads you to the website of Bank Leumi Luxembourg. The indictment said “Bank B” is a midsize institution with a “world-wide presence on four continents” that maintains “total discretion” on behalf of clients. I couldn’t find the name of “Bank B” so you’ll have to do the work yourself to find out or you can just wait.

The three accused Israeli-American accountants set up corporations in beautiful Belize that held secret accounts at the two Israeli bank’s Switzerland and Luxembourg branches on behalf of six clients. And we are talking about big money here. The indictment didn’t disclose the total amount hidden in the accounts but for only one client, known by the initials A.F., the defendants transferred $1.9 million to one of the Israeli banks. Multiply that by six and you’ll have some idea of the extent of this tax evasion.

No doubt the U.S. Treasury will bring these banks to justice. And the next step for the IRS will be to force these banks to make further revelations about the accounts of their customers who are U.S. persons. We will certainly hear more about these IRS catches in the near future and their success will also fuel their further fishing expeditions. I say, “All the more power to them.” But they can still be careful and not do harm to the innocent. They should have zero tolerance for collateral damage. Leave us small fry, honest citizens, who eek out a meager living working hard, but just happen to be expats, alone.

What say you?

Taxpayer Advocacy Service – A Powerless Agency

6 Sep

They who are paid to help taxpayers being dealt unfairly by the IRS have no power to do anything. It is just another waste of money by the government. Here is the text of my email to an organization called American Citizens Abroad who have been trying, in vain, to help me in my plight.

I have just called and spoken to Rosty Shiller who informed me, quite apologetically, that he/his office at the Tax Advocacy Service, can do nothing to help me. The IRS has been given the mandate by Congress to carry out an extensive and complete audit on anyone they so please. He did imply that this is being done to me because of their experience with people here in Israel having illegally claimed the Earned Income Exclusion on a false basis. But despite this, the IRS is not merely requiring me to prove my eligibility for this exclusion, but a complete A to Z audit. To prove to them my bone fide permanent residence in Israel would be quite easy, but they want more than this. And as Mr. Shiller says, they are acting within their legal rights. This is, in my opinion, morally wrong. Alas, nothing can be done to right the wrong. I have retained an account to represent me and will provide them with anything and everything they want. Once again, the little guy who is innocent, will get crushed under the wheels of “justice” and no one will even know or care about it — neither the IRS, not the Congress which has empowered them to do this. And when they find that nothing has been done wrong, other than, perhaps minor documentation errors, there will be no recourse. They will walk away unscathed.

Furthermore, he stated to me that I might contact my Congressman, but, alas, I, being an expat am subject to the laws passed by the US Congress, but have no representation there. Is this not TAXATION WITHOUT REPRESENTATION?

Between a Hammer and an Anvil

25 Aug

Here I am trying to overcome the massive bureaucracy called the IRS and their, in my opinion, unfair demand for a soup to nuts audit complete with certified translations of every document and I get a call from a financial institution in the USA where my retirement funds are housed. They said that the Israeli government just passed a law saying that other than some specific conditions, they will have to cease all connection with me. I have only been a customer of theirs for a bit over 30 years and this doesn’t matter one twit. The specific conditions are a long shopping list, most of which include big businesses and corporations, but not little people like me. They said someone in their office would get in touch with me with more details and I also requested that they attach something in this regard to an email to me. That was about a week ago, but so far, NOTHING. From the other side of the pond, the IRS is putting the squeeze on the banks all over the world, including my neck of the woods. The banks and all financial institutions of all sorts must report all assets of anyone who is American to the IRS. This includes citizens like myself and also others whose connection to the USA is pretty loose, including children of citizens even if these kids are not citizens. The list goes on and on and must include a huge number of people here who wouldn’t ever think of going to the “goldena medina.” This will probably prove to be a monumental task of the banks who have never asked for any information other than a persons name, address, date of birth, and identification number (equivalent of social security number). So the banks responded with a demand for all of these Americans to cease and desist all investments by the banks financial services excluding checking and savings accounts. Of note is that here the banks provide all the brokerage services that are provided by stock brokers in the US. Soooooooo here I am — I can’t invest my hard earned savings in the USA and I can’t invest it here. I am between the veritable rock and to hard place — between the hammer and the anvil. What in the world am I to do?

Letter to Congresswoman Carolyn Maloney sent August 1, 2011

18 Aug

SourceURL:file:///Users/danielkovnat/Documents/My%20Files%20%26%20Folders/2008%20TAX%20AUDIT/Letter%20to%20Congresswoman%20C.doc p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: Times; }div.Section1 { page: Section1; }

Letter to Congresswoman Carolyn Maloney sent August 1, 2011

I live in Israel. Marylouise Serrato of the ACA suggested I contact you as I believe I am being unjustly treated by the IRS.

My wife and I, in our latter years, I being 70 and Nancy 67, have been selected “at random” by the IRS for a compliance research examination for the tax year 2008. I was sent a seven page Form 4564 listing all the documents required for the audit. I must also fill out Forms 9209, 9211 and 9213 providing appropriate certified translations of each document.

We maintain dual citizenship and have been full Israeli citizens since 1992. We file and pay income taxes to the US every year. We also pay Israeli income taxes every year and have owned our house on Moshav Evan Menachem for the last 13 years. It is quite clear that we are eligible for the Earned Income Exclusion and that, even if we claim our gross earned incomes from my medical work ($28,743) and my wife’s farming work ($50,691), without reduction for expenses, we do not exceed the maximum allowable Earned Income Exclusion for the tax year 2008.

They want proof of our Israeli residency, which is in Hebrew. The want all the documentation regarding all expenses claimed on the Schedule C of our self employment endeavors, which, obviously also is in Hebrew and, according to the tax compliance officer, requires “Certified Translation.” All these translations entail a huge amount of work, time and expense to complete. Needless to say, our earned income, even if you don’t reduce it by business expenses, does not exceed the maximum earned income exclusion for 2008. We have always paid the self employment tax (social security) based on this earned income.

I feel that this total audit is unfair because the IRS has no representative in Israel. We deal with the office in Puerto Rico. They have no one who can read and understand Hebrew. If they want to review all this documentation they should provide a means of their understanding it such as an IRS officer in the Embassy here. I really have been depressed and distraught over this whole affair. I believe that it caused my acute appendicitis, which occurred three days after receiving the notification of this audit. I have even thought of taking my own life.

I turned to the Tax Advocate Service for assistance and they requested that the IRS carry out a limited/focused audit instead of the all-inclusive compliance research exam. The request was denied by the IRS. After that, the Advocate said they could not help me any more and closed my file.

Can you help me in any way or refer me to anyone who might be able to influence the IRS to at least carry out a focused audit? Can you draw this to the attention of someone in the IRS who might be able to help?

Thank you for anything that you try to do.

Author’s addendum: This inquiry was not answered as of this date