Page 6 - Robert Fink Interview

34 BUSINESS ENTITIES
November/December 2015
offshore voluntary disclosure program been successful? What about the FACTA rules for identifying U.S. investors hold- ing accounts in foreign financial institu- tions or significant owners in non-foreign financial entities? Is this just adding unnecessary costs and expenses to tax compliance? Will it have a deleterious effect on foreigners otherwise wanted to invest in the financial markets, real estate, or other businesses in the U.S.?
AThe offshore voluntary disclosure program coupled with the FATCA ruleshasmadetaxevasionthroughthe holding of foreign bank accounts much moredifficult.Iwouldsaythatthese programs and rules have been suc- cessful and worth the government costs, especially when you consider that most of the reporting costs of FATCA are borne by the foreign financial insti- tutions. However, offshore tax evasion is still pervasive among individuals with dual citizenship. I don’t think these new provisions will have a deleterious effect on foreign investments in the United States. Foreigners place their money here mainly for reasons of safety, espe- cially in the real estate markets.
QDo many taxpayers improperly seek to resolve difficult if not dan- gerous tax audits through non-attor- neys? When should a taxpayer
1 691 F.3d 903 (CA-7, 2012). See, e.g., In re. M.H., 648 F.3d 1067, 108 AFTR 2d 2011-5880 (CA-9, 2011); Shapiro v. U.S., 335 U.S. 1 (1948); Marchetti v. U.S., 390 U.S. 39, 21 AFTR 2d 1772 (1968).
2 See 31 U.S.C. section 5311.
3 See note 1, supra.
4 543 U.S. 220 (2005).
5 See Rita v. U.S., 551 U.S. 338 (2007).
receiving a notice of audit in a prob- lem case, e.g., one where the taxpayer believes his returns may be false, erro- neous, or not complete, first consult with a lawyer and what should that lawyer’s level of experience be?
AYes, many taxpayers use accoun- tants for dangerous or what we call “eggshell” audits. Indeed, the accoun- tants often do not even know of the problem areas; and when they do know of the problems, many accountants still will handle the audit out of a sense of loyalty to their client, even though they do not know what needs to be done or how to do it. If a client has a “danger- ous” audit, it is best he sees a lawyer, with expertise in tax evasion, at the ear- liest possible moment, that is, before there is any contact with an IRS agent.
QHow can lawyers and accountants get in trouble with the IRS and Department of Justice when advising clients in tax matters?
AThat calls for an easy answer—don’t become a co-conspirator with your client. His or her problems remain his or hers.Youcanadvise,butdon’tbreakthe law in trying to extricate your client. Alwaysremember,ifsomeonehastogo to jail, make sure it is the client.
QCan reliance by a taxpayer on the erroneous advice of a lawyer or tax accountant avoid prosecution where the error is material and substantial in nature? In other words, does receiving erroneous advice protect the client from prosecution and conviction?
AYes, so long as the client has given the lawyer or accountant a full and accurate account of the facts. But remember my answer to the last ques- tion; the tax professional cannot give knowingly faulty advice in order to extricate his client from a tax charge.
QWhat is your experience with state tax prosecutions for tax evasion? Do the states leave that area for the federal government?
ASome states do, but my home state, New York, as well as sever- al other states such as California and
Massachusetts have active tax enforcement programs. New York is especially active in enforcing sales tax, which is its main money maker and which does not have a federal equivalent for enforcement purpos- es. Also, the issue of residency is vig- orously enforced in New York, since New York has higher tax rates than its neighboring states or retirement states such as Florida.
QAre there ideas that you have that would enhance our self-assessment system of taxation in terms of fostering greater compliance?
AThe self-assessment system is weak when it comes to compliance. The greatest compliance occurs when Uncle Sam takes its cut at the time of the transaction. We see the best compli- ance at the worker level, where each week tax is withheld on wages. The greater the withholding, the greater the compliance. You would have greater compliance if there were withholding on capital gains on the sale of stocks or homes. Other countries have that, but I believe we are a long way from that happeninghere.
QItseemseveryelectioncycle politicians want to simplify the Internal Revenue Code or close down the Internal Revenue Service. As to the former item, some suggest that a flat tax of 10% applied to all individ- uals, without deductions or special tax incentives would be fairer and sim- pler. Do you have comments to make on these ideas or is it simply political “sound bites” made to garner votes?
AWe hear these suggestions constant- ly, but I have not seen any momen- tum in Congress to enact them. Our graduated tax system is fairer for the country. The rich, who can afford the burden, pay at a higher tax rate than the poor. A VAT tax or a flat income tax with- out deductions would certainly be sim- pler, but would it be fairer? It would place a heavier burden on those taxpayers who could least afford it. While those propos- ing these alternative tax systems do so to garner votes, I don’t think the popu- lation will advocate for it once they are educated. I
INTERVIEW