web analytics
May 7, 2015 / 18 Iyar, 5775
At a Glance

Posts Tagged ‘IRS’

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.

Courts Open Window on the IRS’s Political Litmus Tests

Friday, May 30th, 2014

Interest in the Internal Revenue Service’s outrageous practice of subjecting politically conservative groups to discriminatory treatment has died down a bit since the revelations about this scandal first hit the news a year ago. But a court decision that was handed down earlier this week about a similar instance of potential government misconduct may shed more light on the way the Tea Party and other right-wing organizations were given the business by Lois Lerner and the rest of what appears to be a highly politicized bureaucracy at the heart of our tax collection system.

On Tuesday, Federal Judge Ketanje Brown Jackson issued the first substantive ruling in any suit that challenged the IRS’s pose of political neutrality under the Obama administration. The case concerns Z Street, a Philadelphia area-based pro-Israel organization that filed for tax-exempt status in December 2009 because of its role in educating the public about Israel and the Middle East conflict. The group’s founder Lori Lowenthal Marcus wrote in the Jewish Press this week about what followed:

On July 19, 2010, when counsel for Z STREET spoke with the IRS agent to whom the organization’s application had been assigned, that agent said that a determination on Z STREET’s application may be further delayed because the IRS gave “special scrutiny” to organizations connected to Israel and especially to those whose views “contradict those of the administration’s.”

Z Street subsequently sued the government and rightly argued that its constitutional rights had been violated because of the “viewpoint discrimination” that the IRS agent had openly displayed. Now after years of delays, Judge Jackson has ruled that by asserting that Z Street had no right to sue, the government had tried to “transform a lawsuit that clearly challenges the constitutionality of the process … into a dispute over tax liability.” She similarly dismissed the government’s claims of sovereign immunity.

What has this got to do with the Tea Party and its complaints? Plenty.

As the Wall Street Journal editorial page noted yesterday:

This ruling will force the IRS to open its books on the procedures it used and decisions it made reviewing Z Street’s tax-exempt application, procedures it has tried to keep shrouded. As the case proceeds, Z Street’s attorneys can seek depositions from many who have been part of the larger attempt to sit on similar applications by other conservative groups.

In other words, this case may be the straw that breaks the camel’s back of the IRS’s politically prejudicial policies. If an IRS agent can reject or stall a pro-Israel group’s application on the grounds that “these cases are being sent to a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies,” then no group, no matter what its political orientation or cause is safe from being subjected to a political litmus test designed by any administration of either political party.

Z Street’s Marcus deserves praise for having the guts to persist in her challenge to the government for years even though the media had little interest in publicizing what appeared to be an outrageous example of how the IRS had become politicized under the Obama presidency. Last year Marcus learned she wasn’t alone when the news about the Tea Party broke. Now, as her legal process unfolds, Americans may get a better idea about how broken the system has become.

Using the IRS to punish political foes is blatantly illegal. If, as we suspect, the Z Street case reveals the sort of internal email traffic that will reveal how widespread this practice has become in the last five years, perhaps even a liberal mainstream press that still thinks the problems at the IRS are a “phony scandal” will start to pay attention.

IRS Political Discrimination Suit by Pro-Israel Group OKed by Court

Tuesday, May 27th, 2014

After nearly four years of litigation, a U.S. federal district court judge instructed the Internal Revenue Service to cease “struggl[ing mightly]” to thwart a lawsuit filed by the pro-Israel organization Z STREET. That lawsuit alleges the IRS violated Z STREET’s First Amendment Constitutional rights. The judge ordered the IRS to file a substantive answer to Z STREET’s Complaint within 30 days.

Z STREET* sought tax-exempt status as a non-profit organization engaged in educating the public about Israel and the Middle East conflict. The organization filed its application in December of 2009.

On July 19, 2010, when counsel for Z STREET spoke with the IRS agent to whom the organization’s application had been assigned, that agent said that a determination on Z STREET’s application may be further delayed because the IRS gave “special scrutiny” to organizations connected to Israel and especially to those whose views “contradict those of the administration’s.”

That statement by the IRS agent, according to the Z STREET board, constituted a clear violation of the Constitution. The government may not treat an organization or person differently because of that person or organization’s political viewpoint. Such action by a government entity constitutes what is known as “viewpoint discrimination.”

Z STREET filed a lawsuit against the IRS alleging that its Constitutional rights had been violated. That lawsuit, Z STREET v. Schulman, IRS Commissioner (now Koskinen) has finally obtained its first substantive ruling.

Several years after Z STREET challenged the IRS in court, several tea party and other conservative groups also claimed the IRS had discriminated against them on the basis of their political viewpoint. On May 10 of last year, the floodgates of criticism burst open when then Director of the IRS Exempt Organizations Division Lois Lerner admitted that the IRS had engaged in certain activity that disadvantaged conservative groups. Lerner referred to that activity at the time as “absolutely inappropriate.”

The ruling in the Z STREET case by Judge Ketanje Brown Jackson on Tuesday, May 27, is the first substantive ruling by a judge in any action brought challenging the political impartiality of the IRS under the current administration.

Judge Jackson summarily rejected the three grounds raised by the government in its effort to thwart Z STREET’s day in court. The first two she rejected because she refused to accept the IRS position that Z STREET was simply complaining about the fact that its application had not been granted.

Defendant struggles mightily to transform a lawsuit that clearly challenges the constitutionality of the process that the IRS allegedly employs when it determines the tax exempt status of certain organizations into a dispute over tax liability as a means of attempting to thwart this action’s advancement.

The judge rejected the third defense – one of sovereign immunity – raised by the IRS by pointing out that the government may not claim it is immune from claims that it is acting unconstitutionally. Indeed, that is the basis for the Bill of Rights.

The IRS must file a substantive response to Z STREET’s Complaint by June 26, 2014.

Since the time the lawsuit was filed, IRS documents were released by a U.S. congressman which essentially confirm Z STREET’s claims and suggest that the IRS agents filed documents with the court that were not truthful.

*The author of this article is the president of Z STREET.

Israel, U.S. Reach Agreement on IRS Regs for Dual Citizens

Thursday, May 15th, 2014

Americans living in Israel, watch out for this year’s June 30 tax deadline.

The Israel Tax Authority has formally reached an agreement with the U.S. regarding the Model 1 FATCA agreement with the IRS, according to attorney Dave Wolf, of the firm Hacohen and Wolf.

The full details of the FATCA Agreement are yet to be published upon the signing of the FATCA Agreement, but according to the Israel Tax Authority’s spokesman, the agreement contains certain restrictions on the use of information passed to the IRS and relief of reporting for certain institutions.

According to U.S. law, all U.S. citizens — regardless where they live — have an obligation to pay taxes on their worldwide income. In addition, in cases where the aggregate value of all foreign accounts exceeds $10,000 at any time during the calendar year, they also have to report this information on a special form commonly known as the FBAR.

Since July 1, 2013, the FBAR needs to be e-filed before June 30 of the following tax year.

Under FATCA, foreign financial institutions (banks, hedge funds, pension funds, insurance companies etc.) are required to report information to the U.S. tax authorities (the IRS) information about foreign accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

This means the Israeli financial institutions will have to report to the U.S. government all their clients who are U.S. citizens and/or green card holders, disclosing all these accounts.

This has huge implications for any American living in Israel or abroad who has never reported his foreign accounts or paid taxes on its income to the IRS, and also to some states if applicable (such as NY and NJ).

Individuals have four options with which to comply, according to Wolf, who can be reached at this link for more information.

‘The IRS Wants YOU’ and Israel Is Going to Help Them

Monday, March 10th, 2014

A mini “economic social” cabinet, headed by Prime Minister Binyamin Netanyahu, soon will approve an agreement to share information on accounts of U.S. citizens with the Internal Revenue Service, sources told the Globes business newspaper.

The newspaper said the proposal will allow the IRS full access on Americans’ accounts in Israeli banks and other financial institutions.

The U.S. government is preparing to sign agreements with other countries as well, but Israel is high on its “hit list,” partly because Swiss banks have accounts in three Israeli banks. Switzerland is no longer a safe place for foreigners to hide their money from the tax man, and so Israel has become a favorite home for money launderers and tax evaders.

The Israel Tax Authority is expecting increased revenues if the measure is approved. “The agreement will include an option under which, subject to certain conditions, information will be sent from the U.S. tax authorities to the Israeli tax authorities about the income of Israeli residents in the U.S.,” the document states.

However, while all information on American accounts in Israel will be sent to the IRS, Israel will receive data only in special cases.

The proposed agreement contained clauses aimed at protecting individuals from the IRS misusing personal information, but it is not clear if the IRS has learned its lessons from recent scandals, such as hunting down those nasty pro-Israel groups, as reported here.

Big Brother in Israel also is waiting on deck.

Attorney Yael Grossman, an expert in money laundering, told Globes, “The decision paves the way for further harm to the separation between the management of money by a bank and disclosure to Income Tax. Although at the moment, the measure helps the banks and saves them the need to work directly with the IRS, but experience shows that it will later expose all of the public’s banking activities to the Israel Tax Authority.

“This will be the final burial of banking confidentiality on one hand and a signal for the strengthening and prosperity of alternative institutions, which will rush to offer alternative instruments to the public.”

Americans living in Israel have an alternative to leaving their tax records and financial activities accessible by your closest friendly IRS clerk. They can simply void their American citizenship, a growing trend that was reported here in December.

Approximately 3,000 did so in 2013, three times the number in 2012. That means the IRS cannot snoop on them, but it also means they lose their right to vote in American elections, assuming it would be worth voting.

Printed from: http://www.jewishpress.com/news/the-irs-wants-you-and-israel-is-going-to-help-them/2014/03/10/

Scan this QR code to visit this page online: