Archive for May 22, 2014

Crimes Under The IRC — Part 1 of 2 – Failure To File, Supply Information or Pay Tax

Underpinning the vast power of the IRS to collect our tax money is the Internal Revenue Code (26 U.S.C), hereafter referred to as the IRC. Subtitle F, Chapter 75, Subchapter A, of the IRC lists the crimes and punishments for anyone convicted of violating our tax law.

The most common violations of the IRC are crimes of omission. The following is a brief discussion of Section 7203, Failure to File, Supply Information or Pay Tax.

Generally, there are four separate offenses described here:

1. Failure to pay the tax — The person is required by law to pay a tax at a time required by law and willfully failed to pay the tax. Willfulness simply means an intentional, voluntary violation of a known legal duty. Read More

Written by | Posted in Tax Fraud/Evasion/Crimes

Congress Moves to Restrict Corporate Tax Inversions

On Tuesday, May 20th the Democrats in the House and Senate introduced legislation to tighten the restrictions on corporate tax inversions, limiting the ability of U.S.-based companies to avoid U.S. taxes by combining with a smaller foreign business and moving their tax domicile overseas. As a background, there have been dozens of corporate inversions in the last decade alone, costing the U.S. tax base billions of dollars, according to the bill’s proponents. The Treasury Department estimates that the President’s FY 2015 budget proposal set forth this past March on inversions would raise $17 billion in revenue over the next decade.

Under current law, a corporate inversion is not recognized for U.S. tax purposes if 80% or more of the new combined corporation incorporated offshore is owned by historic Read More

Written by | Posted in Corporate • Treasury Regulations

Learn How Tax Professionals Are Winning New Clients Through TaxConnections

By far the best part of being Founder and CEO of www.taxconnections.com is listening to how excited our members become when they realize we exist to drive business to tax professionals. An AICPA member told me recently, we can teach all the courses about social media to our members but once they close the books and step away from the courses it ends there as they generally do not have the time to market their services to new clients. They also told me “TaxConnections is in a space no one else is occupying and that is the pure focus on driving new business to its members! The enormity of weight of driving new business to tax professionals has been lifted thanks to TaxConnections!”

This month I am focused on personally talking to new members and walking them through features on TaxConnections. Hearing the excitement in their voices of what the Read More

Written by | Posted in TaxConnections

Canadian Tax Issues With Foreign Inheritances

Many immigrants to Canada will ultimately inherit substantial wealth from family members who did not follow them here.

Usually, those new Canadians are not aware of the Canadian income tax implications of those future inheritances and the fact that careful planning in that regard can often reap rewards, in terms of savings in future Canadian taxes, that far exceed any related costs.

Firstly, the good news: inheritances, whether from non-resident relatives or from Canadians are never taxable income.

However, the income and capital gains earned from such inherited assets (whether in their original form, or reinvested in other assets) will be subject to tax in Canada. Read More

Written by | Posted in Capital Gains • Income Tax • International

Should I Stay or Should I Go? – Part 8

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)

XI. I made a quiet disclosure by filing amended returns. Will the IRS audit me? If so, will I be eligible for OVDP?

The IRS is reviewing amended returns and could select any amended return for examination. It has identified, and will continue to identify, amended tax returns Read More

Written by | Posted in FBAR • OVDP

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 2 – 2.4.3)

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

2.4 THE RELEVANCE OF PAJA AND THE PRINCIPLE OF LEGALITY

2.4.3 Recent developments in the principle of legality Read More

Written by | Posted in Africa • Audit

Avoid Future Headaches – Remember To File IRS Form 8594 When Buying Or Selling Business Assets

Buying and selling business assets can be complicated. The last thing you want – BELIEVE ME – is the hassle of explaining inconsistent treatment of the sale for tax purposes 3 YEARS INTO THE FUTURE. Avoiding this is simply accomplished by remembering to file one extra tax form. Basically the US tax law requires both the seller and purchaser of a group of assets that makes up a trade or business to file IRS Form 8594 to report the sale if:

1. Goodwill or going concern value attaches, or could attach, to such assets.
2. The purchaser’s basis in the assets is determined only by the amount paid for the assets. In other words no other substantiation of market value … Read More

Written by | Posted in IRS

Thousands of Canadian Expats In The U.S. Needlessly Pay Canadian Tax!

Canadian citizens are not subject to Canadian tax on worldwide income if they are not resident in Canada. Rather, a Canadian citizen who is a non-resident of Canada is only subject to Canadian tax on certain Canadian source income (most commonly, rents or capital gains from Canadian real estate; dividends from Canadian companies; income from employment in Canada). This is no different than any other non-resident-citizenship generally is not relevant in determining liability for Canadian taxation.

Every year thousands of Canadians move to the U.S. to continue their careers there. In many cases, these Canadian expats continue to file Canadian tax returns and pay Canadian tax on their U.S. employment income under the assumption that they are still tax residents of Canada. This generally translates into a big tax cost. Even though Canada Read More

Written by | Posted in Expatriate • International

Alimony? What Is That? And… Do I Have To Report It On My Taxes?

The word Alimony comes from the Latin Word alimonia which means nourishment or sustenance. It also comes from Scots Law which is the legal system of Scotland and their concept of aliment. This was a rule of sustenance to assure the wife’s lodging, food, clothing and other necessities of divorce.

In the 1970s, the United States Supreme court ruled against gender bias in alimony awards. You may remember some high profile divorces, where women such as Britney Spears, Jessica Simpson etc., have paid multimillion dollar settlements in lieu of alimony to their ex-husbands.

Alimony is not child support. Child support is paid by one parent to the custodial parent Read More

Written by | Posted in Income Tax • Individual • Treasury Regulations

Should I Stay or Should I Go? – Part 7

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)

X. I failed to file an FBAR disclosing an offshore bank account in my name and failed to report income from that same account on my tax return. I subsequently filed an amended return reporting all of my offshore income. Now I’m having second thoughts and want to apply to the OVDP. Am I still eligible?

Read More

Written by | Posted in FBAR • OVDP

Florida Department of Revenue Continues To Bully C-Store Industry

For the last three years, our firm has been relentless writing and warning any business that sells beer, liquor, and/or cigarettes, that the Florida Department of Revenue was coming. The onslaught of the industry all stemmed from a law change in 2011. With little support, a new law went into effect in Florida that required all wholesalers, manufacturers, and distributors of alcohol and tobacco to provide annual sales information the Florida DOR. Shockingly, some ABT retailers were purchasing multiples of gross sales of alcohol and tobacco alone. For example, the average Florida C-store purchased about $50,000 a month in ABT items alone but only reported gross sales of $20,000 for sales tax purposes. As predicted, we were told that approximately 200 audit notices were going out every three months (DR-846 – “desk audits” & DR-840 – “full audit notices”) and each of Read More

Written by | Posted in Audit • IRS • Sales/Use Tax • State And Local Tax (SALT) • Tax Fraud/Evasion/Crimes

Lowering The Bar For Willfulness For FBAR Penalties

The IRS has authority to assert FBAR civil penalties. Before delving into the FBAR abyss, this is a good time to debunk some FBAR myths. First, there is no such thing as an FBAR penalty within the Offshore Voluntary Disclosure Program (OVDP). The FBAR penalty exists only outside of the OVDP framework. However, there is a penalty within the OVDP that is often considered to be the equivalent of the FBAR penalty. That penalty is commonly referred to as the offshore penalty. Generally, it is 27.5% of the highest aggregate balance of all foreign accounts during the disclosure period.

Second, contrary to popular belief, an FBAR violation doesn’t automatically mean that a penalty will be asserted. Examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether a penalty Read More

Written by | Posted in FBAR • OVDP • Tax Fraud/Evasion/Crimes
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