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The Warren “Ultra-Millionaire Tax Act of 2021”

The Warren "Ultra-Millionaire Tax Act of 2021"

The Contextual Background – Elizabeth Warren – January 28, 2021

Excerpts from a recent CNBC interview (see the following link for context) …

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Businessman Indicted For Not Reporting Foreign Bank Accounts And Filing False Documents With The IRS

Businessman Indicted For Not Reporting Foreign Bank Accounts And Filing False Documents With The IRS

A federal grand jury in Alexandria, Virginia, returned an indictment on March 3, 2021, charging a Virginia man with failing to file Reports of Foreign Bank and Financial Accounts (FBARs) and filing false documents with the IRS.

According to the indictment, Azizur Rahman of Herndon, had a financial interest in and signature authority over more than 20 foreign financial accounts, including accounts held in Switzerland, the United Kingdom, the Republic of Singapore, and Bangladesh. From 2010 through 2016, Rahman allegedly did not disclose his interest in all of his financial accounts on annual FBARs, as required by law. Rahman also allegedly filed false individual tax returns for the tax years 2010 through 2016 that did not report to the IRS all of his foreign bank accounts and income.

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Cyprus: The EU’s Newcomer For Introducing Transfer Pricing Legislation

Transfer Pricing In Cyprus

It is probable that, while you are reading this article, Cyprus is already the latest European country to introduce transfer pricing legislation in its income tax law with effect from the 1st of January 2021.

This introduction will mark a new era of how Cypriot corporations shall calculate their tax base: transfer pricing, in essence, is a mechanism that divides the overall business profit of a group amongst the various companies.

To date, Cyprus has had no detailed transfer pricing legislation included in its income tax law. The tax law was first introduced in 1941 by the British Colonial Governor in Cyprus (Sir William Denis Battershill) and made no reference to any transfer pricing provisions. It was not up until 2002, when the legislation was amended and a specific “arm’s length” provision was incorporated therein, despite there being no guidance on how to apply it. Further on, in 2017, a detailed transfer pricing circular (based on the OECD transfer pricing guidelines) was issued by the tax authorities governing (only) certain financing transactions.

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Feel Like You Are Not Responsible For A Debt Owed By Your Spouse Or Ex-Spouse?

ERIN COLLINS - NATIONAL TAXPAYER ADVOCATE

Taxpayer Advocate Service Tax Tip

Saying “I do” doesn’t necessarily mean you’re responsible for your spouse’s or ex-spouse’s debts.

If your spouse has a debt (this debt could be for any number of things – child support, spousal support, a federal debt (e.g., student loans), or a federal tax debt) and you file your taxes using the Married-Filing-Joint tax filing status, the IRS can apply your refund to one of these debts, which is known as an “offset”. Or they can take a collection action against you for the tax debt you and your spouse owe, such as filing of the Notice of Federal Tax Lien or issuing a levy. However, if you’re not legally responsible for the past-due amount, you may still be entitled to receive your share of the refund or request relief from joint and several liability, depending on the facts of the situation.

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IRS Statement About CP59 Notices

IRS Statement About CP59 Notices

Earlier in February 2021, the IRS issued notices to approximately 260,000 taxpayers stating they haven’t filed their 2019 federal tax return. These notices, referred to as CP59 notices, are issued yearly to identified taxpayers who have failed to file a tax return that was due the prior calendar year (Tax Year 2019). Due to pandemic related shutdowns, the IRS has not completed processing all 2019 returns at this time. Therefore, the CP59 notices should not have been sent because some portion of the recipients may actually have filed a return that is still being processed. People who filed their 2019 return but nevertheless received the CP59 notice, can disregard the letter and do not need to take any action. There is no need to call or respond to the CP59 notice because the IRS continues to process 2019 tax returns as quickly as possible. The IRS regrets any confusion caused by this mailing.

The IRS encourages those who have yet to file their 2019 return to promptly do so.

IRS

German Tax Authorities Reported To Be Imposing Tax On US Military Pay

German Tax Authorities Reported To Be Imposing Tax On US Military Pay

Prologue

This post draws heavily from the reporting of John VanDiver who has written a number of articles in Stripes. His most recent article is here:

“You don’t want to be chased and harassed by a government office. It is scary,” said Melissa Howell, the spouse of a U.S. soldier who is being targeted by a tax office in Germany’s Landstuhl area. “I don’t know how they expect people to come up with that money.”

Howell, a German who lives with her American husband and children, said she ran into trouble in June when she went to file her taxes at the local finance office.

She said she was interrogated about her husband and told to fill out a questionnaire that probed information about his employment.

She then received a letter ordering her to hand over her husband’s W-2 and other tax forms.

“I did it because I didn’t know. I found out that

was a mistake,” she said.

After that, she got a phone call from the tax office, saying that their case was getting handed over to a case manager who handles “American-German couples.”

 

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IRS Announces Tax Relief To Texans Due To Severe Winter Weather

IRS Announces Tax Relief To Texans Due to Severe Winter Weather

One of the most devastating major winter storms in the history of the State of Texas has finally passed.  Recognizing the significant emotional and financial toll the storm has taken on Texans, the IRS recently released an announcement indicating that residents and businesses in all 254 Texas counties may qualify for tax relief.  See TX-2021-02 (Feb. 22, 2021).  This Insight summarizes some of the more noteworthy relief provisions.

Postponement of Certain Tax Deadlines

Both the Internal Revenue Code and the governing regulations provide authority for the IRS to provide relief to those affected by a federally declared disaster.  Exercising this authority, the IRS has declared that certain taxpayers “that reside or have a business in all 254 Texas counties qualify for tax relief.”  These taxpayers include:

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Red Flags That Trigger IRS Audits

Avoiding An IRS Audit

Avoiding IRS Audits

Just 0.45 percent of taxpayers were audited in fiscal year 2019. Still, with taxes becoming more complicated every year, there is an even greater possibility of confusion turning into a tax mistake and an IRS audit. Avoiding “red flags” like the ones listed below could help.

Red Flags That Trigger IRS Audits

  • Claiming Business Losses Year After Year
    When you operate a business and file Schedule C, the IRS assumes you operate that business to make a profit. Claiming losses year after year without any profit raises a red flag with the IRS.
  • Failing to Report Form 1099 Income
    Resist the temptation to underreport your income if you are self-employed or have a second job. The IRS receives the same 1099 forms that you do, and even if you didn’t receive a Form 1099 when you think you should have, you can’t be sure the IRS didn’t either. If the IRS finds a mismatch, you are sure to hear about it.
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Wait, When Did This Virtual Currency Question Appear On My 1040 Tax Form?

Wait, When Did This Virtual Currency Question Appear On My 1040 Tax Form?

The IRS Form 1040 now includes a checkbox which taxpayers must address regarding virtual currency. The form asks taxpayers if “at any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”  The key question at hand is who is required to answer “Yes” and who may answer “No?” National Taxpayer Advocate Erin M. Collins addresses these and many other questions taxpayers have when it comes to virtual currency and their taxes.

Given the explosion in virtual currency, the IRS has increased its focus on virtual currency tax compliance. In 2019, the IRS sent letters to over 10,000 American taxpayers who may have failed to report their virtual currency transactions and pay the associated income taxes. The National Taxpayer Advocate says, “taxpayers should proceed with care in order to experience the benefits of virtual currency while avoiding its pitfalls.”

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IRS Issues Alert On Improper Corporate Domestic Production Activities Deduction Refund Claims

IRS Issues Alert On Improper Corporate Domestic Production Activities Deduction Refund Claims

WASHINGTON — IRS officials issued an alert concerning amended returns and claims for the Domestic Production Activities Deduction (DPAD). This provision of tax law was repealed as part of the Tax Cuts and Jobs Act for taxable years after December 31, 2017. In the wake of the repeal, the IRS has received a wave of questionable amended returns and claims for tax benefits in the billions of dollars.

“We have no qualms with taxpayers claiming benefits allowed by law,” said Doug O’Donnell, Commissioner, Large Business and International Division. “But a very high percentage of the claims for the now repealed Domestic Production Activities Deduction are not properly supported by those claiming it.”

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OZONE ALCHEMY: Turning Net 1231 Gains Into Gross 1231 Gains (And Losses)

IRC Section 1231 (Gains And Losses)

Key Takeaways

  • Treasury and IRS initially struggled regarding how to deal with IRC Section 1231 gains and losses in the context of the OZ program; however, the final OZ Regulations ended up being extremely taxpayer-friendly.
  • Understanding how and why Treasury arrived at its decision unlocks a remarkable, yet brief, planning opportunity for taxpayers and their advisors.
  • With the right planning, taxpayers can isolate gross 1231 gains for OZ reinvestment eligibility but still claim gross 1231 losses in the same year at ordinary income rates – resulting in permanent tax savings.
  • Taxpayers who already reported net 1231 gains in tax years 2019 and 2020 can still likely make tax-advantaged QOF investments for those years—but the window is closing fast – especially for 2019 1231 gains.
  • This ability to defer 1231 gain and recognize 1231 losses can further benefit certain taxpayers who would have otherwise been forced to pay ordinary rates on net 1231 gains in a given year as a result of the five-year “look-back” period under 1231(c).

The following discussion is arguably the most powerful planning opportunity for OZ investors with the right fact pattern.  This planning opportunity recently became available as a result of very taxpayer-friendly rules for IRC 1231 gains and losses contained in the final OZ regulations, as well as the issuance of IRS Notice 2021-10 – a secondary COVID-19 extension for OZ investors.

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But, Your Honor, There’s A Coronavirus Pandemic, Part II—United States v. Ishmael

But, Your Honor, There’s A Coronavirus Pandemic, Part II—United States v. Ishmael

In a previous blog, I provided an overview of Section 3582(c) with respect to the modification of prison terms. In addition, I looked at two recent cases (United States v. Higa [Hawaii] & United States v. McGrath [Ohio]) that dealt with defendants who cited the COVID-19 pandemic in their respective motions for compassionate release. For more information on those cases, see the following Insight Blog: But, Your Honor, There’s A Coronavirus Pandemic – Higa & McGrath.

Now, another recent criminal case provides another data point with respect to defendants serving prison time related to tax crimes who file a motion for compassion release under Section 3582(c)(1)(A) and invoke the COVID-19 pandemic. This time the district court is located in Pennsylvania. And, this time the district court denied the defendant’s motion.

Compassionate Release, Generally

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