Gimme Some Truth Podcast with The Wolf Group





This week on Gimme Some Truth for Expats, our expat advisors Syl Michelin and Stan Farmer were joined by special guest Mishkin Santa, a partner of the DC-based international accounting firm The Wolf Group to discuss recent IRS court cases that would be of particular interest to U.S. expats.  For the past forty years, The Wolf Group has been at the forefront of representing and advising U.S. expats and U.S. and international organizations (including the U.S. State Department and the International Monetary Fund) on a myriad of U.S. tax issues, including a leading role in representing Americans going through Offshore Voluntary Disclosure (OVD). Streamlined Offshore Voluntary Disclosure (SOVD), and other streamlined compliance procedures that encourage expats with unreported, underreported and/or undisclosed foreign income or assets to come forward, come clean and get compliant with their tax reporting and payment obligations. On the podcast, Mr. Santa spent thirty minutes with us and provided a great deal of useful information and lessons for expats that can be gleaned from five important cases.







Rather than reiterate all of Mr. Santa’s insights, which can be gained simply by listening to the podcast or watching it on our YouTube channel, below is simply a short appendix of the cases discussed during the discussion:





Farhy v. Commissioner
In a recent Tax Court win for expat filers that own or have ownership stakes in foreign companies, the U.S. Tax Court ruled that the IRS lacks the authority to assess the $10,000 penalty for failing to file, or provide a complete and accurate filing, of Form 5471, which requires a very thorough and complete accounting (books, records, revenues, profits, etc.) on the taxpayer’s foreign company.  To enforce such penalties going forward, the IRS would need to get the Justice Department to institute a case against the taxpayer and sign off on the $10,000 penalty (which Mr. Santa described as “unlikely”). The IRS on its own accord can no longer assess these penalties on its own accord.





Bittner v. United States 
Along similar lines, the IRS has historically issued $10,000 penalties at a torrid pace against taxpayers that fail to file, or file complete FBAR disclosures (FINCEN Form 114) regarding foreign bank accounts. Often, the IRS would aggressively issue separate $10,000 penalties for each account that was not properly disclosed on the FBAR – in some cases issuing fines that exceeded the taxpayer’s total balance of reportable accounts! Bittner fought this practice all the way to the U.S. Supreme Court and ultimately prevailed in a 5-4 decision and a plurality opinion issued by the highest court in the land.  Another victory for expats against heavy-handed fines and penalties.





United States v. Schwarzbaum
If expats have ever questioned whether the IRS had reach beyond the border to seize assets in order to enforce payment of federal taxes due, this case erases much of the doubt as to the broad international reach of Uncle Sam.  When taxes go unpaid, the IRS has mechanisms to, with the cooperation of foreign governments, get payment from foreign financial accounts and property owned by the delinquent taxpayer. These international mechanisms are known as “repatriation orders” and the defendant in this case was unsuccessful in his challenges to resist such orders. There are, in fact, other mechanisms available to the IRS as well, including Interpol Red Cards, where foreign law enforcement officials may hold a tax fugitive while awaiting extradition orders to return the evading taxpayer to U.S. federal authorities. Moreover, the “FAST Act” gives the IRS the ability to have U.S. immigration seize the passport or VISA of any taxpayer who owes $50,000 or more in taxes and have the individual detained from leaving. 





United States v. Gyetvay
In this case, Mark Anthony Gyetvay, a CPA who lived in Naples, Florida and who at one time was the CFO of a large Russian natural gas company, opened up a couple of Swiss bank accounts and then had the ownership transferred to his Russian spouse. Mr. Gyetvay not only failed to disclose his control over these foreign accounts (with balances of around $93 million), he also failed to file taxes for two tax years (2013 and 2014)! Later, Mr. Gyetvay tried to take advantage of the IRS’s offshore streamlined compliance procedures to clean the proverbial slate with the IRS, but his filings were in fact incomplete and inaccurate. Mr. Gyetvay was convicted on multiple counts and faces potential sentencing in September of up to 5 years in prison for failing to file an FBAR, five years for making false statements to the IRS, one year for each failure to file a tax return. Mr. Santa sees this case as a cautionary tale to those who believe the IRS does not thoroughly scrutinize such streamlined filings and that these procedures can allow an easy path to skate freely into IRS amnesty – in reality, these filings should be done with the utmost honesty, transparency and competency with the professional help of the most experienced legal and tax professionals! As the IRS showed Mark Anthony Gyetvay, don’t try Putin one over on the IRS!





As you can see, it was a very informative and useful podcast, and we hope to bring Mr. Santa back to our channel for more practical and informative discussions in the future.

By: Stan Farmer

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.