Archive for May 27, 2014

Expatriation – What Happens to the “Principal Residence?”

Certain individuals who give up their US citizenship or their green cards are subject to the so-called ”Exit Tax” imposed under Section 877A of the Internal Revenue Code.

Under the so-called “expatriation” tax rules, harsh tax consequences will result if the individual giving up his US citizenship or “long-term” permanent residency (generally, this is an individual who has held a green card for 8 out of the past 15 years) is a so-called “covered expatriate”. Only “covered expatriates” will suffer the onerous tax consequences.

One is a “covered expatriate” if the individual has either a net worth of US$2 million at the time of expatriation; or, if he has a certain average income tax liability over the past 5 years prior to expatriation. One is also automatically treated as a “covered expatriate” if the Read More

Written by | Posted in Expatriate

Timely Filed Petition? Miami Tax Court

Miami Tax Court Report Back

Judge Ronald L. Buch – timely filed petition?

IRS filed a motion to dismiss for lack of jurisdiction. The USPS click and ship process was used by a representative of the taxpayer. She printed the label with payment from the USPS site at 11:48 pm. Petition had to be timely filed by 12 – 12 minutes later. IRS averred that it was impossible for her to print, stick and deliver the petition to the USPS in Jupiter, FL within 12 minutes as the petitioner’s address was about 20 minutes from the USPS. What IRS did not know, as testified, was that the petitioner had moved, and lived 3 minutes from the USPS. This evidence was led in court. So it was possible to timely mail Read More

Written by | Posted in Tax Controversy • Tax Risk Management • Tax Tips • Treasury Regulations

FBAR US Citizens Alert!

US CITIZEN ALERT!

I have just learned from an enrolled agent that the new Treasury Dept./IRS rules have become much stricter and this involves you if you have ANY foreign deposit account(s), no matter what the balance was for the year.
Forget the $10,000.00 maximum balance! If you have any foreign bank or other deposit account you need to file the FBAR form FinCEN Report 114 electronically on the BSA website.  The old TD F 90-22.1 form is no longer valid.

The new web filing is supposed to be better (easier) but whose idea was it? Big government, so if you do not want to do it yourself contact someone with experience. Read More

Written by | Posted in FATCA • FBAR

A Sudden Death For The Canadian “Immigrant Trust”!

As a general rule, Canadian residents are subject to Canadian income tax on their worldwide incomes. This is true regardless of whether or not such income is remitted to Canada.

In order to prevent Canadians from deferring or avoiding tax on investment income by forming offshore trusts, there are complex rules in section 94 of the Income Tax Act (“the Act”) that generally come into play whenever a Canadian resident makes a “contribution” to an offshore trust. In general terms, such trusts are deemed to be resident in Canada for most purposes of the Act, and the Canadian “contributor” is jointly liable with the trust for any Canadian tax liability. Read More

Written by | Posted in International

Crimes Under The IRC — Part 2 of 2 – Crimes of Commission: Tax Perjury, Aiding Another and Hiding Assets

Knowingly filing a false tax return and aiding another to do so are violations of the IRC, Section 7206. Briefly summarized, those violations encompass:

• Tax perjury — knowingly signing a false tax return that is false
• Willfully aiding another person to commit tax fraud
• Hiding assets with the intent to evade or defeat the assessment of taxes or in connection with a tax settlement or compromise offer

Penalties are stiff

The law says that anyone convicted of the foregoing is guilty of a felony. An individual can face a fine of $250,000 ($500,000 in the case of a corporation or go to prison for not more Read More

Written by | Posted in IRS • Tax Fraud/Evasion/Crimes

You Can Now Pay Your Taxes On IRS Website

The Internal Revenue Service announced the successful start of its new web-based system — IRS Direct Pay — on IRS.gov, which lets taxpayers pay their tax bills or make estimated tax payments directly from checking or savings accounts without any fees or pre-registration.

IR 2014-67 further reports that “To date, more than 150,000 taxpayers have paid more than $340 million in taxes through the new IRS Direct Pay system. With IRS Direct Pay, taxpayers receive instant confirmation that the payment has been submitted, and the system is available 24 hours a day, 7 days a week. Bank account information is not retained in IRS systems after payments are made. Read More

Written by | Posted in Individual • IRS

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 2 – 2.5.2)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

2.5 ADEQUATE REASONS

2.5.2 The relevance of s 74 of the Income Tax Act Read More

Written by | Posted in Africa • Audit

IRS To Commence Pilot Program For Penalty Relief For Small Business Retirement Plans

On Thursday, May 22nd The Internal Revenue Service (hereinafter the “Service”) announced that it will begin a one-year pilot program in June to help small businesses with retirement plans that owe penalties for not filing reporting documents.

By filing current and prior year forms during this pilot program, small businesses can avoid penalties. The Service issued Rev. Proc. 2104-32 earlier this month describing the scope and application of the program. The Service indicated that it is also reaching out to certain small businesses that maintain retirement plans that may have been unaware that they had a filing requirement. The Service estimates that the new program will bring a significant number of small business owners into compliance with the reporting requirements. Read More

Written by | Posted in IRS • Retirement • Small Business

The IRS Gives Foreign Financial Institutions Additional Time to Register for FATCA

Under one of the provisions of the Foreign Account Tax Compliance Act (“FATCA”), withholding agents are required to withhold 30% of certain payments to a foreign financial institution (“FFI”) unless the FFI has entered into an agreement with IRS to report certain information with respect to U.S. accounts in an effort to bring an end to international tax evasion. Recently, in Notice 2013-43 and Notice 2013-31 IRB 113, the Treasury Department and the IRS extended the deadline for certain FFIs to implement certain FATCA requirements.

What is FATCA?

FATCA is an IRS initiative aimed at preventing U.S. citizens and taxpayers from avoiding paying income tax on their foreign investments and accounts. The law was enacted Read More

Written by | Posted in FATCA • FBAR • International

Should I Stay or Should I Go? – Part 9

Answers to the Most Frequently Asked Questions Regarding OVDP

As a tax attorney specializing in the Offshore Voluntary Disclosure Program (OVDP), nary a day goes by that I don’t get a call from a person inquiring about the OVDP. The questions asked are relatively the same. After a while, I began to make a list of the most frequently asked questions. Below are my answers to them: (continued)

XII. I have properly reported all of my taxable offshore income. I only recently learned that I should have been filing FBARs in prior years to report my personal foreign bank account. Must I come forward to disclose this?

Read More

Written by | Posted in FBAR • OVDP

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 2 – 2.5)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

2.5 ADEQUATE REASONS

2.5.1 Introduction
If a decision by SARS in terms of ss74A and 74B is ‘administrative action’ as defined Read More

Written by | Posted in Africa • Audit

United States LLCs And Canadian Residents – A Bad Combination!

There is a big problem for Canadian residents who use U.S. LLCs- the Canada Revenue Agency (“CRA”) considers them to be corporations, even if they are considered disregarded entities (if only one shareholder) or partnerships (with two or more shareholders) for US tax purposes.

Furthermore, the CRA does not consider the LLC itself to be a resident of the US for the purposes of the Canada-U.S. Income Tax Convention (“the Treaty), since the LLC is not liable to tax (assuming it has not elected to be treated as a corporation under the US “check the box rules”).

In fact, in many cases, US LLCs that are controlled by Canadians will be considered Read More

Written by | Posted in Income Tax • International
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