The National Taxpayer Advocate’s Remarks On The Role Of Trust and Taxpayer Advocate Service In Fostering Tax Compliance (Part 1)

Nina Olson Final Words Part1

Volume 1, which I present to you today, includes an analysis of the 2019 Filing Season, an assessment of the impact of the recent government shutdown on the Taxpayer Advocate Service (TAS), 12 Areas of Focus, and a discussion of TAS advocacy initiatives, casework, and research studies.

Volume 2, IRS Responses and National Taxpayer Advocate’s Comments Regarding Most Serious Problems Identified in 2018 Annual Report to Congress, and Volume 3, Making the EITC Work for Taxpayers and the Government: Improving Administration and Protecting Taxpayer Rights, will be published next month.

Volume 2 will contain the IRS’s general responses to each of the administrative recommendations we identified in our 2018 Annual Report to Congress. Volume 3 will contain a comprehensive assessment of the Earned Income Tax Credit (EITC) and will make recommendations designed to increase the participation rate of eligible taxpayers and reduce overclaims by ineligible taxpayers.  During the spring, Professor Leslie Book of the Villanova School of Law, a leading EITC expert, served as a “professor in residence” with TAS, and Margot Crandall-Hollick, an EITC expert with the Congressional Research Service, worked with TAS on a detail.  Together with TAS’s EITC experts, including former Low Income Taxpayer Clinic attorneys and researchers, they conducted a broad review of existing EITC research and drafted a comprehensive set of recommendations to assist Congress and the IRS in improving the program.

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5 Ways To Leverage The Opportunity Zone Program – What You Will Be Happy To Learn About The OZ Program

Blake Christian On OZ Program

The Opportunity Zone (OZ) Program has been around for almost 18 months now but as a result of complexities and open issues on exactly how taxpayers would participate and benefit, the program is now getting national traction and investment dollars. The OZ Program is the most powerful investment and diversification and economic development tool I have seen in four decades of tax consulting.

The OZ Program borrows elements from other long-standing tax provisions –

-Internal Revenue Code Section(IRC) 1031(Like Kind Exchange) which allows taxpayers to defer taxes on properly structured real estate swaps,

-Roth 401K’s/IRAs which allow taxpayers to build-up tax-exempt income after holding the Roth Account for at least five years, and

-The Federal New Market Tax Credit Program

In summary, the OZ Program allows taxpayers to rol over all or a portion of capital gains (long or short-term) income into a Qualified Opportunity Fund (QOF). The invested funds can then be deployed into real estate or an active business located in one of the 8,700 qualifying census tracts throughout the U.S. and U.S. territories. Following these steps allows the taxpayer to defer the tax on their original capital gain until December 2026. Depending on when the taxpayer rolls their gain, they may also be eligible for a reduction in their reportable gain of 10% to 15%.

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IRS Wants To Hear From Large Corporate Taxpayers Interested In Applying For The Compliance Assurance Process

IRS Compliance

The Internal Revenue Service is asking publicly-traded corporate taxpayers interested in applying to the Compliance Assurance Process (CAP) in 2020 to provide a statement of interest.

Launched in 2005, CAP improves federal tax compliance by resolving issues prior to the filing of a tax return through open, cooperative and transparent interactions between the IRS and taxpayers. New applicants to CAP have not been accepted since 2015.

The statement of interest is a precursor to the formal application process that takes place in the fall of 2019. The IRS will use the information provided in the statements of interest by potential applicants to help determine the approach for expanding CAP in 2020.

For details on CAP eligibility, criteria and instructions, please refer to the statement of interest web page



What Is The Threshold For FBAR Filing?

Venar Ayar On FBARs

If you had a financial interest in or signature authority over foreign accounts exceeding $10,000, you need to file a Foreign Bank Account Report (FBAR). An unfiled FBAR can lead to a $10,000 penalty for non-willful violations and much higher penalties for willful violations.

Aggregate Account Balance

The $10,000 threshold is based on your aggregate account balance. That means if you own two foreign accounts and their combined balance exceeds $10,000, you need to file an FBAR even if neither account exceeds $10,000 on its own.

The FBAR filing requirement is also based on the highest account balance during the year. If your account balance exceeds $10,000 for even one day during the year, you need to file an FBAR.

FATCA Filing Requirements

The Foreign Account Tax Compliance Act (FATCA) imposes different requirements on taxpayers with foreign accounts. This may require to file a Form 8938, Statement of Specified Foreign Financial Assets.

The Form 8938 filing requirements for taxpayers living in the U.S. are as follows:

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Members Of The Armed Forces Are Entitled To Certain Tax Benefits

IRS LOGO on Military

Members of the military and their families often qualify for special tax benefits. For example, members of the armed forces don’t have to pay taxes on some types of income. In addition, special rules could lower the tax they owe or allow them more time to file and pay their federal taxes.

Here are some of these special tax benefits:

  • Combat pay exclusion. If someone serves in a combat zone, part or all of their combat pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
  • Deadline extensions. Some members of the military – such as those who serve overseas – can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
  • Earned income tax credit. Military members who get nontaxable combat pay may choose to include it in their taxable income. One reason they might do this is to increase the amount of their earned income tax credit. People who qualify for this credit could owe less tax or even get a larger refund.

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Are The Netherlands A Tax Haven?

Jimmy Cox On Taxes In The Netherlands

According to a majority of the members of the European Parliament, the Netherlands is, just like Malta, Cyprus, Ireland and Luxembourg, a fiscal paradise and it is demanding (without any underlying jurisdiction, incidentally) that the European Commission place these five countries on its list of tax havens.  This list is, of course, is more akin to a pillory than an honor roll.

Does the Netherlands merit being designated as a tax haven?  Most inhabitants of the Netherlands would not experience this as being the case; after all, the VAT on shopping, for crying out loud, has increased by 50% this year alone, and the highest bracket in income taxation (over EUR 68,508) remains at 51.75%:  a solid deduction indeed.  It is true that taxation on company profits has decreased from 20 to 19%, but this latter figure is still considerably higher than in Ireland (12.5%) or Bulgaria (10%), for example.  Furthermore, companies making profits higher than EUR 200,000 continue to pay 25% over this threshold.

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US Treasury Proposes That Foreign Income Subject To High Foreign Tax Be Excluded From Definition Of #GILTI

John Richardson On Foreign Income

In general – Good News For American Entrepreneurs Abroad …

On Friday June 14, 2019 US Treasury proposed in Notice 2019-12436 that any foreign income earned by Controlled Foreign Corporations be (subject to election) excluded from the definition of GILTI income. This will be particularly welcome to Americans living outside the United States, who are attempting to carry on business in their country of residence, through non-U.S. corporations.

For those who are concerned with understanding the hows and whys, I suggest you read Treasury’s Notice which includes a good history and description of the Subpart F rules, some Legislative History leading to the GILTI rules, and Treasury’s attempt to piece it all together. You will find it all here.

Treasury Notice 2019-12436

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Important Sales Tax Issues Your CFO May Be Missing

Monika Miles And CFOs on Sales And Use tax

In our multi-state tax consulting practice in Silicon Valley, we often see that sales tax is an afterthought in companies’ finance departments. Many companies have net operating losses (NOLs) for income tax purposes, and they often don’t consider the ramifications of sales tax.

Further, many of our clients sell intangible products – like software, SaaS platforms or digitally downloaded information – and those items don’t SEEM to be taxable. Plus, in California most of those items do qualify for sales tax exemptions; but that’s not the case in all states.

As such, with an already long “to do” list, CFOs and corporate controllers may not put sales tax concerns on the front burner. In another blog post, we explained why it’s not a good idea for a company’s corporate controller to take on the burden of sales tax. In some organizations, however, these responsibilities fall to the CFO. This post explains why this likely isn’t the best option, either.

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Certain Taxpayers Might Get A Letter From The IRS This Year – Here Is What They Should Know

IRS CP2000 Notice

Certain taxpayers might get a letter from the IRS this year. It’s called an IRS Notice CP 2000. It gives detailed information about issues the IRS identified. The IRS sends this notice when information from a third party doesn’t match the information the taxpayer reported on their tax return. The notice also provides steps taxpayers should take to resolve those issues.

Here is some information about these notices to help taxpayers understand why they got one and what to do when it arrives:

  • The IRS sends a notice to the taxpayer when a tax return’s information doesn’t match data reported to the IRS by banks and other third parties. Read More

Combating Bribery Of Public Foreign Officials In International Business Transactions

OECD On Bribery Of Foreign Public Officials

The OECD Anti-Bribery Convention establishes legally binding standards to criminalize bribery of foreign officials in international business transactions and provides for a host of related measures that make this effective. It is the first and only international anti-corruption instrument focused on the ‘supply side’ of the bribery transaction.

The OECD booklet contains the official text and commentaries of the 1997 Convention, the 2009 Recommendation of the Council for further Combating Bribery, the 2009 Recommendation on the Tax Deductibility of Bribes to Foreign Public Officials and other related instruments:

Download the 50 page OECD PDF

Destined to strengthen the Convention, a review of the 2009 Recommendation is being conducted by the Working Group on Bribery and is scheduled for completion in 2020.



Five Myths About The Opportunity Zone Program

Blake Christian Opportunity Zones

Due to the newness and uniqueness of the Opportunity Zone (OZ) Program and the voluminous OZ regulations, there is a fair amount of inaccurate information floating around in the business community.  Following is a non-exhaustive list of some of the more common misconceptions about this powerful federal tax program.  Note that June 28th is the deadline for setting up a Qualified Opportunity Fund (QOF) and investing cash or property from most calendar 2018 capital gains.  More details on the program can be found at:

  1. Only taxpayers with long-term capital gains can participate in the OZ Program.
  • False: Short-term capital gains and net §1231 (trade or business asset) gains, § 1250 building depreciation recapture, capital gain dividend distributions, and a portion of certain “straddle” transactions can also qualify for Opportunity Zone (OZ) reinvestment. Unlike Internal Revenue Code (IRC) §1031 transactions, the OZ program can be used for real estate, tangible personal assets, bitcoin, art, collector cars, business sales, intangibles and stocks.

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Internet Sales – The Wayfair Case

Monika Miles And Internet Sales Tax
South Dakota v. Wayfair, Inc.  – THE Case

On June 21, 2018, the U.S. Supreme Court ruled 5-4 in favor of overturning its 1992 decision in Quill, which set a standard requiring substantial physical presence before a state could enforce the sales tax collection responsibilities on a seller. In the current case, South Dakota v. Wayfair, Inc., writing for the Court’s majority, Justice Anthony Kennedy indicated “…the Court concludes that the physical presence rule of Quill is unsound and incorrect. The Court’s decision in Quill Corp v. North Dakota, 504 U.S. 298 (1992), and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967), should be, and now are, overruled.”

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