December, 2020 | TaxConnections

15 Dec 2020

Call To Action For Tax Professionals Worldwide: This Taxpayer Needs Help Resulting From Form 3520 Filing

Note From TaxConnections CEO: Is This Happening To Your Clients?

We frequently receive requests from taxpayers for referrals on a wide range of tax issues. This particular issue with a Form 3520 Filing and IRS response has happened to thousands of unknowing taxpayers. If you have advice for this taxpayer please leave it in comments section which we will now collect and memorialize for taxpayers.

There were numerous posts and comments on the matter and unfortunately (for some reason) many of the comments have been cut off. We are uncertain why this happened except perhaps WP wanted to save space. There were hundreds of valuable comments on the topic of Form 3520 mostly from taxpayers experiencing this nightmare scenario.

Here is an important comment made on TaxConnections last evening and at the end of this post will be a series of posts you will want to read to get up to date with tax professionals around the world on TaxConnections regarding filing Form 3520. Read More

Written by TaxConnections Admin | Posted in Tax Professional Help Wanted

15 Dec 2020

When An IRS Tax Lien Arises

The Internal Revenue Code (IRC) governs when and how a federal tax lien arises. The federal tax lien—sometimes referred to as a “statutory lien” or “silent lien”—is often confused with the notice of the lien’s existence, which is generally filed by the IRS at a later date (i.e. a Notice of Federal Tax Lien or NFTL).

A Notice of Federal Tax Lien is a document that is publicly filed with state and local jurisdictions in order to put other creditors on notice of the IRS’s lien interest. As a result, the NFTL itself does not actually create the lien—it merely informs others of a lien that already exists by statute. However, the date of the NFTL filing is important for determining the IRS’s priority against other creditors.

Tax liens are one of the primary tools that the IRS uses to collect outstanding taxes. The IRS also uses the levy process or seizures to collect taxes where available. See our separate post on IRS Seizures: The Good, the Bad, and The Ugly for more on topics related to levies and seizures.

What is a Tax Lien?

Written by Jason Freeman | Posted in Freeman Law • What Is A Tax Lien

15 Dec 2020

Common Sense And Tax Policy – Any Connection?

I think that often, there is some common sense consideration of tax policy before enacting or changing tax rules. One example was the 1954 decision to enact IRC section 174 to allow for expensing of R&D expenditures. That simplified the law to avoid uncertainties and taxpayer/IRS disputes on the life for amortization purposes of these expenses. It also incentivized these expenditures that also benefit the economy through new technologies to improve our lives. I’m sure we can find more recent examples too.

Of course, before leaving my example, I should note that the 2017 Tax Cuts and Jobs Act modified the R&D expensing rule starting after 2021 to require R&D expenditures to be capitalized each year and amortized over 5 years (15 years for foreign R&D). That’s an odd provision for a piece of legislation intended to improve international competitiveness of our tax system when most other countries have research incentives in their tax law, but oh well. (I think we’ll see this rule forever postponed and hopefully repealed at some point to go back to expensing.)

Written by Annette Nellen | Posted in Tax Policy

15 Dec 2020

IRS Provides Guidance On Legislation That Increases Automatic Enrollment Cap Percentage And Eases Burdens For Certain Safe Harbor Plans

The Internal Revenue Service today issued Notice 2020-86 PDF addressing certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) affecting safe harbor plans, including safe harbor 401(k) plans and certain 403(b) plans.

A safe harbor 401(k) plan is similar to a traditional 401(k) plan but is structured in a way that certain compliance testing can be avoided. Among other things, a safe harbor 401(k) plan must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals.

Written by IRS | Posted in 401K Plans • IRS Notice • Safe Harbor Plans

15 Dec 2020

Tax Treaties: United States And India

Quick Summary. Situated in South East Asia, India is the second most populous country in the world. India is comprised of 28 states and eight union territories. A democratic republic founded by the constitution of India, its seat of government is located in New Delhi.

India taxes resident companies on worldwide income; non-resident companies are tax on Indian-sourced income. The Taxation Laws (Amendment) Act 2019 provide for beneficial, lowered rates with respect to certain newly established domestic manufacturing companies. In addition, India imposes a Minimum Alternative Tax (MAT).

Recent tax reforms include The Finance Act of 2020, which abolished the levy of the dividend distribution tax (DDT) effective April 1, 2020. The recently-enacted Direct Tax Vivad se Vishwas Act, 2020 (Scheme) provides a program for settling direct tax litigation. Moreover, the scope of the equalization levy was extended by the Finance Act, 2020 to e-commerce related providers.

Treaty

Written by Jason Freeman | Posted in Tax Treaties: United States And India

11 Dec 2020

Find Unclaimed Money Governments Or Businesses Owe You

Written by TaxConnections Admin | Posted in Unclaimed Money Owed You

11 Dec 2020

Tax Treaties: United States And United Kingdom

Quick Summary. The income tax serves as the largest source of revenue for the UK government. The United Kingdom generally taxes resident companies on their worldwide income and capital profits, and taxes UK resident individuals on their worldwide income.

The United Kingdom has shifted towards a more territorial tax system, providing for a participation exemption regime and exempting dividends received by large- and medium-sized companies and, to a lesser degree, small companies.

Foreign branches of United Kingdom companies are generally subject to corporate taxation unless an irrevocable election for exemption is made.

Written by Jason Freeman | Posted in Tax Treaties: United States And United Kingdom

11 Dec 2020

Will A Spendthrift Trust Protect Against IRS Collection Actions?

The use of a spendthrift provision in a trust instrument is common. Generally, spendthrift provisions prohibit a third-party creditor from reaching a beneficiary’s interest in income and/or corpus of the trust until the trustee distributes such interest outright to the beneficiary. Because spendthrift provisions are creatures of state law, a common question is whether such protection extends to the IRS as a third-party creditor? This Insight discusses this topic more below.

The Federal Tax Lien.

A federal tax lien arises when a taxpayer owes tax and fails to pay such tax. Under the Internal Revenue Code, it also arises on the date the tax was assessed and continues until the tax is either paid or becomes unenforceable due to lapse of time. See I.R.C. § 6322.

Written by Matthew Roberts | Posted in TaxConnections

10 Dec 2020

Jury Convicts Roman Catholic Priest of Tax Evasion, Money Laundering, And Wire Fraud – Court Orders Restitution

A jury recently convicted Marcin Stanislaw Garbacz, a Roman Catholic priest, of 50 counts of wire fraud, nine counts of money laundering, one count of interstate transportation of stolen money and five counts of making and subscribing a false tax return. For the tax return years 2013 through 2017, the defendant had unreported income totaling $235,818 and income tax due totaling $46,008. As a result, the district court ordered tax-based restitution to the IRS of $46,008 under the Mandatory Victims Restitution Act. United States v. Garbacz.

The recent case of United States v. Garbacz reinforces the fact that the federal government often prosecutes tax violations, even violations involving relatively small amount of unpaid tax such as that involved in the case—some $46,008 over the course of five years. The case also illustrates the restitution provisions at when federal convictions involve amounts owed to the IRS.

Written by Jason Freeman | Posted in IRS • Wire Fraud

10 Dec 2020

NEW IRS Requirements: 10 Fast Facts About The 1099-NEC

The IRS has made a major change that could affect your information returns reporting for the upcoming season. Form 1099-NEC is taking the place of what used to be recorded in box 7 of Form 1099-MISC. Typically, this form is issued to contractors, janitorial services, third-party accounts and any other worker paid for services who is not on the payroll. Following are key points about this new form.

The 1099-NEC must be used for the 2020 tax year and beyond. In other words, your independent contractors will now receive Form1099-NEC.
NEC stands for Nonemployee Compensation. The new 1099-NEC is based on an old form that has been out of use since 1982. The IRS revived the form to address some time-management and administrative issues that arose under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The new Form 1099-NEC effectively separates certain data from Box 7 of the 1099-MISC, in addition to staggering the filing due dates.
Read More

Written by TaxConnections Admin | Posted in 1099-NEC • eFile4Biz

10 Dec 2020

Tax And Business Climate In The State Of Maine

This month we travel up the eastern seaboard to the Pine Tree State of Maine. Maine is the northeastern most state in the contiguous United States. It is known for its jagged rocky coastline, low, rolling mountains, heavily forested interior, picturesque waterways, and its seafood cuisine, especially clams and lobster.

Maine was part of the Commonwealth of Massachusetts until 1820 when it voted to secede from Massachusetts to become a separate state. There is no definitive explanation for the origin of the name “Maine,” but the most likely explanation is that early settlers named it after the former province of Maine in France.

Carved by glaciers, Somes sound in Maine is considered to be the only fjord on the eastern seaboard and reaches depths of 175 feet. The extreme depth and deep drop-off allow large ships to navigate almost the entire length of the sound. These features also have made it attractive for boat builders, such as the prestigious Hinkley Yachts.

Business Climate

Written by Monika Miles | Posted in Business In Maine • Maine Taxes

10 Dec 2020

IRS Has Begun Sending Letters To Taxpayers That May Need To Take Action Related To Qualified Opportunity Funds

The Internal Revenue Service has started sending letters to taxpayers that may need to take additional actions related to Qualified Opportunity Funds (QOF).

Taxpayers who attached or indicated they attached a Form 8996 to their return may receive Letter 6250, Self-certifying as Qualified Opportunity Fund (QOF). This letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.

To correct a 2018 self-certification as a QOF, these taxpayers should file an amended return or an administrative adjustment request (AAR). If an entity that receives the letter fails to take action to self-certify as a QOF, the IRS may refer its tax account for examination. Investors who made an election to defer tax on eligible gains invested in that entity may also be subject to examination for an invalid election.

Written by IRS | Posted in IRS