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December 1, 2015 / 19 Kislev, 5776
At a Glance

Posts Tagged ‘IRS’

Israel Follows US Lead on Hunting Citizens’ Foreign Assets

Friday, June 26th, 2015

Israelis who have not filled out forms for declaring their assets to the Israel Tax Authority and have unreported overseas bank accounts are being targeted, Globes reports, in ways mirroring the methods of the IRS and U.S. Treasury.

In an agreement reached between Israel’s Finance Ministry and the United States more than a year ago, the Israel Tax Authority agreed to report the accounts of U.S. citizens in Israel to the IRS. In exchange, the IRS agreed it “may” report on income in the accounts of Israelis in the United States.

The U.S. Foreign Account Tax Compliance Act (FATCA) for “improving global tax enforcement” requires banks in dozens of foreign countries to collect and share private financial information about millions of Americans living and working outside the U.S.

Tens of thousands of Americans who came on aliyah fall into this category, and have since been warned by their banks they must fill out an annual IRS W-9 and “FBAR” (Foreign Bank Account Report.)

“The U.S. sent a delegation here, which examined our systems and information security and was very impressed,” said Israel Tax Authority head Moshe Asher in a speech this week to the Society of Trust and Estate Practitioners (STEP.)

Asher told participants at a business conference this week to expect more arrests of Israelis with unreported overseas assets.

According to the Tax Authority, there are Israelis who are holding an estimated NIS 50 billion in concealed capital in unreported accounts around the world. And after starting a war on illegal capital, Asher commented that the Tax Authority has already raised income tax revenue by NIS 3.5 billion over projected forecasts since the beginning of the year.

“Switzerland was once the world’s safe deposit box from which no information could be extracted,” Asher said.

But, “they have been forthcoming recently, even if in contravention of Swiss law… Inroads have been made in Swiss banking confidentiality – it’s like any other country now, subject to conventions and obligated to provide information.

“Secrecy is over: the world has become more transparent and much smaller… This is the time to come and make an arrangement for unreported capital, because the tax authorities will find it.”

IRS $50M Cyber Security Scandal Stretches to Russia

Thursday, May 28th, 2015

A major attack this year by cyber security criminals on the computer network at the U.S. Internal Revenue Service originated in Russia, sources confirmed to Fox News late Wednesday.

The Associated Press has also cited two anonymous sources who reported the IRS believes the hackers are part of a sophisticated criminal operation in Russia. Neither report connected the attack to the Russian government.

But both pointed out that this is not the first time that the IRS has been successfully breached by cyber thieves. Taxpayers whose accounts were accessed will be notified and provided with credit monitoring services, the IRS said.

The IRS inspector-general reported in 2012 hackers managed to manipulate the IRS system into sending 655 tax refunds to a single address in Lithuania. Another 343 tax refunds were sent to another address, this one in Shanghai. Following these attacks, system administrators tweaked the network safeguards to block other hackers.

This year’s attack began sometime in February, according to the report, and continued until mid-May. So far, the thieves have stolen at least $50 million in fraudulent tax refunds. That figure does not include the cost of tracking the breach, nor the expense involved in fixing it and preventing future attempts.

They used a software called “Get Transcript” to access the data. But in order to get into the records, the thieves first had to clear a security screen that required the use of taxpayer information such as a Social Security number, birth date, street address and tax filing number.

According to IRS Commissioner John Koskinen, the hackers used stolen Social Security numbers and other information to gain their access to taxpayers’ accounts. Then they used information from prior tax returns to file current fake returns seeking refunds.

“We’re confident these are not amateurs,” Koskinen told Fox News. “These actually are organized crime syndicates that not only we, but everybody in the financial industry are dealing with.” The IRS estimates that it paid out some %5.8 billion in 2013 to identity thieves, both foreign and domestic.

At least 104,000 taxpayer records dating back up to five years and perhaps more were stolen in the cyber heist, officials said.

The IRS notified the Department of Homeland Security following the breach, a federal law enforcement source said. The Senate Finance Committee has scheduled a June 2 hearing to question Koskinen and Treasury Inspector-General for Tax Administration J. Russell George on the issue.

“When the federal government fails to protect private and confidential taxpayer information, Congress must act,” Senate Finance Committee Chairman Orrin Hatch (R-UT) said Wednesday in setting the hearing.

IRS Pummeled by Court for Suggesting OK to Discriminate Against Pro-Israel Group

Thursday, May 7th, 2015

In a highly unusual public thrashing of a government lawyer for the Internal Revenue Service by the second highest U.S. court, the D.C. Circuit Court of Appeals, asked: “You don’t really mean that the IRS is free to discriminate against its citizens, do you?”

The judges asked this question several times in several different ways of the Department of Justice lawyer Teresa McLaughlin who had the misfortune of representing the IRS in a case filed against it by Z STREET*, a staunchly pro-Israel non-profit organization in a hearing on Monday morning, May 4.

Since August of 2010, the Z STREET case has been languishing in the U.S. court system. Z STREET sued the IRS because it learned from the IRS agent to whom its tax exempt application had been assigned, that its application would take some time to process because “the IRS had to give “special scrutiny to organizations connected to Israel,” and that the applications of such organizations “were sent to a special unit in Washington, D.C. to determine whether its activities contradicted the policies of this Administration,” according to its Complaint.

Z STREET sued the IRS for “viewpoint discrimination,” a violation of the U.S. Constitution. The claim is that the IRS did not provide Z STREET with a fair process, which is what it is now seeking, through this lawsuit.

Z STREET has made clear from the first document filed in this case and in every document filed over the past nearly five years of litigation that it was not seeking that the courts grant it a tax exemption (501(c)(3)), only that its application be afforded a Constitutionally fair process.

The IRS, in turn, has insisted in every one of its legal documents that Z STREET’s case should be dismissed because there is a statute, Sec. 7428 of the Internal Revenue Code, that allows it to bring a lawsuit seeking the tax exemption, which can be pursued 270 days after an application is filed if the IRS has not yet acted.

Last May the D.C. federal district court denied the IRS’s efforts to throw out Z STREET’s lawsuit, clearing the path for the critical phase of the lawsuit to begin: discovery, the portion of a lawsuit in which the parties have to truthfully answer questions under oath and must provide requested critical documents. At the 11th hour, the IRS filed a special kind of appeal, which the D.C. Circuit Appellate Court granted.

This Monday morning, the IRS’s lawyer had not gotten two sentences out of her mouth when Judges David Sentelle and David Tatel cut off the effort to once again mischaracterize the Z STREET claim and suggest that it should have pursued the Sec. 7428 option.

“That is an over broad characterization” of the claim, Judge Sentelle shot out, forcing the government lawyer to narrow the scope of the aperture, so that the goal of seeking a Constitutionally fair process was briefly acknowledged by McLaughlin. “Bingo!” Judge Sentelle exclaimed.

As the judges drew out McLaughlin’s grilling to more than twice the normally allotted time, the judges began to lose patience. Judge Tatel had to reassert the proper focus of the lawsuit: “Their [Z STREET’s] argument is this ‘Israel Special Process’ subjected them to a different standard, based on their viewpoint, subjecting them to a delay in the process. If they sue [later] for a [tax] refund that cannot remedy the delay.” In fact, he pointed out, “neither a refund nor a 7428 action could address that” discriminatory delay.

There was lots more pummeling of the government lawyer, as the Wall Street Journal pointed out repeatedly in its May 7 editorial, “The IRS Goes to Court” and subheadlined, “The Agency suggests it can discriminate for 270 days. Judges Gasp.”

V15 Campaign’s Defense is Wrong: Its Positions More Radical than PA

Sunday, February 8th, 2015

Opponents in Israel of the American tax-exempt organization-funded V15 campaign effort have laid several complaints against it: one, the foreign funding (including U.S. government funding) of an Israeli campaign violates Israeli election law, and two, an American tax-exempt entity funding a political campaign violates American law.

But even V15’s defenses to those charges make it ripe for lethal criticism.

V15 and its funder, OneVoice, claim to empower the “majority of Israelis” to change Israeli leadership (that’s what their posters say: “We’re Changing the Leadership”) to reflect that majority’s views. In fact, the goals of OneVoice represent neither the majority of Israelis, nor even the stated political views of the Palestinian Authority.

Let’s start with the complaints already on record.

In this corner, we have V15, the community organizing-style political campaign effort which imported the skills and funding of American leftists to Israel. OneVoice has received, under the Obama administration, large grants from the U.S. State Department and various foreign political parties and efforts. Also, the fact that the son of Mahmoud Abbas – the acting leader of the Palestinian Authority, is on its Advisory Council, is difficult to ignore.

The most problematic issue already raised, because it is hardest to explain away, is how an American entity which is tax-exempt can be funding a political campaign at all, let alone one in Israel.


The politicization of American tax-exempt organizations was what triggered the Internal Revenue Service’s ugly Lois Lerner scandal. A significant number of politically conservative organizations which applied for tax exempt status were subject to extraordinary scrutiny and other alleged inappropriate behavior, because the claim was, because they were politically engaged, which is prohibited under the IRS regulations.

But the flat-footed targeting and punishment of organizations deemed “conservative” by the IRS was itself a politicization of the IRS process. It led to a huge outcry, congressional investigations, internal governmental investigations and lawsuits, most of which remain unresolved.

In fact, at least one pro-Israel organization which applied for tax-exempt status was given special scrutiny by the IRS which placed it in a Be on the Look Out (BOLO) category created by the IRS for “occupied territory advocacy.”

Just advocating for Israel with respect to the disputed territories triggered intensive IRS scrutiny, without the organization funding or participating in either an American or an Israeli political campaign. That’s hard to square with OneVoice having tax-exempt status, given its focus on “occupied territory advocacy.” The difference between the two entities is that OneVoice unabashedly seeks to turn over the disputed territory to the Arabs.

Young Likud party activists posted on their Facebook page instructions for filing complaints with the IRS against V15, in an effort to encourage the Service to undertake an investigation of the entity, and members of Congress are seeking an investigation by the State Department.

In addition, a complaint was filed with Israeli police against V15 and the Labor-Livni and Meretz parties, alleging violations of Israeli election law which bars campaign funding from sources outside of Israel.


The response by V15 to the criticisms lodged against it have been inconsistent. It was able to diffuse the State Dept. funding issue by claiming the grants ran out at the end of November, 2014. V15 was not launched until January, 2015, so, they claim, there were no State Department funds in its coffers by then.

The entity’s response to the IRS violations have been less categorical. Although it rigorously denied it is involved in the prohibited “campaigning for or against any political candidate,” statements by its alleged leadership, and the plain letter of their own posters reveal otherwise.

Israel Bank Pays US $400 Million for Ripping Off IRS

Tuesday, December 23rd, 2014

Israel’s Bank Leumi has confessed to helping more than 1,500 U.S. customers evade taxes and will pay the American government $400 million.

The IRS will receive $270 million, and $130 million will go to New York’s Department of Financial Services. Bank Leumi maintains offices in New York, Illinois, Florida and California.

The names of the bank’s American customers involved in the case will be handed over to American investigators.

The Justice Dept. charged the bank with conspiracy but agreed not to prosecute for two years. Bank Leumi officials in the United States met with American clients in parks, hotels and other locations outside the bank to help them hide their assets in undeclared accounts in Israel, Switzerland and Luxembourg.

The bank also provided mail services so account information would not be sent directly  to the clients, who kept their foreign accounts secret from U.S. officials who took out loans on the secret accounts.

Even worse, after the Justice Dept.’s probe of Swiss banks for helping U.S. clients evade taxes, Bank Leumi opened accounts for clients who left the Swiss banks, such as UBS, to help them to continue avoid detection.

New agreements between Israel and the United States have required all bank account information of U.S. citizens in Israel to be exposed to the IRS.

One Chance to Hold the IRS Accountable?

Friday, June 27th, 2014

Though the IRS and its commissioner have been on the hot seat in recent congressional hearings, there is little doubt that the agency and the Obama administration believe they can ride out the storm by stonewalling Republicans asking questions about the scandal and the missing emails that are now at the center of the controversy. But an otherwise obscure legal challenge to the tax-collecting bureaucracy may hold the key to bringing some measure of accountability to the nation’s tax collectors.

As we’ve noted numerous times here, there are still a lot of unanswered questions about how and why the IRS singled out conservative groups for scrutiny when they applied for tax-exempt status. But concern about this blatantly illegal political bias has been only compounded by the revelation that the emails of the woman at the center of the affair—department chief Lois Lerner—were lost in a mysterious computer crash.

It now turns out that not only was the damaged computer hard drive recycled but that the agency also erased its own email servers. As has been pointed out repeatedly by IRS critics, taxpayers and corporations are required by law to preserve all of their communications for seven years in case they might be audited. But the IRS, a government body with nearly unlimited powers to wreck the lives of individuals that come under its scrutiny, doesn’t live by the same laws that they rigorously enforce against ordinary citizens.

But despite the suspicious nature of the missing emails and the fact that the agency cancelled the contract of the IT service provider at the same time that it lost vital information at the heart of this scandal, there seems little that critics can do about it other than to hound IRS Commissioner John Koskinen in hearings. Though his story is merely a sophisticated version of the old “dog ate my homework” excuse, Koskinen hasn’t lost his cool or cracked under the pressure. That’s due to what appears to be a thick hide and his confidence that congressional Democrats will always cover for the administration no matter how outrageous its behavior.

Since Lerner has pled the Fifth Amendment in her attempt to avoid answering questions and Attorney General Eric Holder will never launch a genuine investigation of this affair or appoint a special prosecutor, it doesn’t seem like the angry Republicans can do much but to huff and puff at Koskinen or any other hapless IRS official that attempts to tell the same lame story he’s been trying to sell Congress.

But, as I noted last month, there appears to be one hope, albeit a slim one, for some measure of accountability about the IRS’s unconstitutional behavior: a lawsuit by a small pro-Israel group* that was told by agency employees that its application for non-profit status was being scrutinized because of its opposition to the Obama administration’s foreign policy.

After years of stonewalling the case, the IRS was dealt a staggering legal setback last month when a federal judge ordered that the agency must answer the lawsuit. That response is due today. But the events of the last few weeks in which we have learned of the disappearance of Lerner’s emails makes it all the more interesting since as the defendant in the case, the IRS had the obligation to preserve all records relating to the alleged discrimination against Z Street.

Since Lerner was the official supervising those who were dealing with Z Street during this period, that makes the missing evidence even more crucial. Moreover, as the plaintiffs pursue their case they will have the ability to compel IRS officials to testify as to their practices and produce all records. If they don’t, that will only strengthen Z Street’s case.

Report: Bank Leumi to Pay NIS 1 Billion in Fines to US for Suspected Money Laundering

Sunday, June 8th, 2014

According to a report that appeared in the Israeli Channel 2 news site Mako, Bank Leumi will be required to pay NIS 1 billion in fines to the US for suspected money laundering at its American branches.

The claim is that the US branches may have made transactions on American client’s accounts in the US branches, but not all taxes were paid as required by law.

The bank’s directors held a special meeting yesterday to agree to a compromise agreement with the US government, and pay the fine.

Banks not just in Israel but around the world are also under investigation by the US government for suspected money laundering, in violation of new US laws.

Credit Suisse was recently fined $2.5 Billion USD.

The Mako report states that Mizrachi-Tefachot and Poalim may also have to pay fines.

Printed from: http://www.jewishpress.com/news/breaking-news/report-bank-leumi-to-pay-nis-1billion-in-fines-to-us-for-suspected-money-laundering/2014/06/08/

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