On April 15, 2019, the Internal Revenue Service (“IRS”) announced that it had just completed a two-week educational campaign focusing on employment tax issues. According to the IRS’s release, it dispatched Criminal Investigation (“CI”) agents to nearly 100 businesses that were showing signs of potential serious noncompliance. During these visits, business owners were informed about ways to catch up with back payroll taxes. During these meetings, the CI agents discussed how to stay current and the potential for civil and criminal penalties. The IRS also announced that, over those two weeks, it had taken several dozen legal actions against potential employment tax violators, including indicting twelve individuals and executing four search warrants. The IRS said that federal courts imposed criminal sentences in six cases in which defendants were convicted of crimes involving payroll tax violations. Continue reading “The IRS Announces Conclusion of Two-Week Campaign Focused on Employment Tax Compliance”
State and federal authorities are ramping up civil and criminal enforcement efforts against merchants who use electronic sales suppression (“ESS”) software, also known as zappers and phantom-ware (collectively “zappers”). These devices are usually software patches that retailers apply to their Point of Sale (“POS”) software. POS software is designed to record every transaction, and its internal records usually cannot be altered by the retailer (or its employees). When zappers are installed (usually by a USB flash drive), some percentage of the business’ transactions are never recorded, thereby permanently altering corporate books and records from the outset. Given that zappers are usually only operational when a flash drive is plugged into the POS software, it is next to impossible for outside auditors to detect their use. Obviously, in a cash-intensive business, the use of a zapper makes recreating a paper trail impossible.
In the last few years, state governments have placed a greater emphasis on identifying merchants that use zappers. Their concern is real. Continue reading “Don’t Get Zapped: Enforcement against Businesses That Use Sales Suppression Software Is on the Upswing”
Few Americans consider the United States to be a money laundering haven, but it is. Earlier this year, the European Parliament wrote:
“The USA is seen as an emerging leading tax and secrecy haven for rich foreigners, when in parallel it has reprimanded other countries for helping rich Americans hide their money offshore. It is difficult to estimate how much revenue the United States loses from tax avoidance and evasion, but some have suggested that the annual cost of offshore tax abuses may be around US $100 billion per year.”1
To combat U.S. money laundering by foreign citizens, the Internal Revenue Service (“IRS”) and the U.S. Department of Treasury Financial Crimes Enforcement Network (“FinCEN”) implemented new and strengthened existing reporting requirements for foreign individuals who have financial interests in the United States. Although these regulations are applied broadly, there has been very little discussion about their implementation in the United States. Presumably, there has been even less discussion abroad.
This article focuses on two new, wide-ranging regulatory requirements: 1) the requirement that foreign-owned entities, treated as “disregarded entities” for U.S. federal income tax purposes, file an IRS Form 5472, Information Return of a 25 Percent Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business; and 2) the requirement that all entities report beneficial ownership when opening a bank account. Failure to comply with these requirements may subject foreign nationals and U.S. individuals who do business with them to civil and criminal sanctions. Continue reading “New Treasury Regulations Impose Conflicting Requirements on Foreign Persons with U.S. Interests”