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Archive for John Richardson

Canada’s FATCA IGA Is About Government Of Canada Turning Dual Citizens Over To The United States

John Richardson FATCA Interview

What the Canada U.S. FATCA IGA is NOT about

Canada’s FATCA IGA is NOT about information exchange. The United States does NOT exchange information under the FATCA IGAs.

Canada’s FATCA IGA is not about residency. After all the purpose of FATCA is to transfer information from a country where the person DOES actually reside (and is a tax resident) to a country where the person does NOT actually reside (but is deemed to be a tax resident).

What the Canada U.S. FATCA IGA IS about

Canada’s FATCA IGA IS about the Government of Canada surrendering its citizens to the United States (effectively stripping them of their rights as Canadian citizens).

Canada’s FATCA IGA is about assisting the United States in imposing worldwide taxation on Canadian citizens who actually live in Canada, are tax residents of Canada and pay full taxes in Canada. Transition Tax anyone? Do you feel GILTI today? What were you thinking by buying that Canadian mutual fund in Canada?

Canada’s FATCA IGA is NOTHING like the OECD Common Reporting Standard. In simple terms, under the CRS information is transferred from a country where the person does NOT live to a country where he does live.

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Americans Abroad And The Transition Tax – Leaves Taxpayers In Tough Situation

John Richardson - Transition Tax Leaves Taxpayers In Tough Situation

As 2018 comes to and end many individuals are still trying to decide how to respond to the Sec. 965 “transition tax” problem. The purpose of this post is to summarize what I believe is the universe of different ways that one can approach Sec. 965 transition tax compliance. These approaches have been considered at various times and in different posts over the last year.

As 2018 comes to an end the tax compliance industry is confused about what to do. The taxpayers are confused about what to do. For many individuals they must choose between: bad and uncertain compliance or no attempt at compliance. (I add that the same is true of the Sec. 951A GILTI provisions which took effect on January 1, 2018.)

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Retroactive Taxation And The Sec. 965 Transition Tax

John Richardson - December 14

The 2017 U.S. Tax Reform AKA – The Tax Cuts and Jobs Act ushered in significant changes for Americans abroad who carry on business through small business corporations. Section 965 was an attempt to impose retroactive taxation on 31 years of corporate earnings that were NOT subject to U.S. taxation at the time that they were earned. In Canada Canadian Controlled Private Corporations are used as private pension plans. The effect of the Sec. 965 transition tax was/is to confiscate the pensions which were earned in Canada by Canadian residents. It’s simply wrong.

In early of 2018 Dr. Karen Alpert and I worked on a series of videos to explain the Sec. 965 Transition Tax. Those vides spawned a series of 27 posts about the Sec. 965 transition tax.

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US Transition Tax Hearing – Argues Regulatory Flexibility Act Should Apply And/Or De Minimis Rule Be Created

John Richardson - ACA

“The Tax Cuts And Job Act brought in a whole new level. Small locally owned businesses we caught up in an effort to repatriate money from the likes of Google and Amazon. These small business owners were forced to recalculate their earnings dating back to 1986 (just like a large multinational corporation). The tax preparation for this alone could easily be in the tens of thousands of dollars. The retroactive back taxes will likely bankrupt thousands of businesses.”

The Section 965 “Transition Tax” saga continues. Americans abroad may have political differences. They may have philosophical differences. They may live in different countries with different tax treaties. But, opposition to the Section 965 Transition Tax and GILTI appear to have unified all Americans abroad.

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The Purpose Of The United States “Regulatory Flexibility Act”

John Richardson - The United States Regulatory Flexibility Act

The purpose of the “Regulatory Flexibility Act” is to ensure that when making regulations the U.S. Government makes a distinction between large corporations (for example Apple) owned by millions and shareholders and small corporations (for example Joe The Plumber) owned by Joe himself.

The text of “Regulatory Flexibility Act” is here.

The purpose of the “Regulatory Flexibility Act” is to require that

Congressional Findings and Declaration of Purpose

(a) The Congress finds and declares that —

(1) when adopting regulations to protect the health, safety and economic welfare of the Nation, Federal agencies should seek to achieve statutory goals as effectively and efficiently as possible without imposing unnecessary burdens on the public;

(2) laws and regulations designed for application to large scale entities have been applied uniformly to small businesses, small organizations, and small governmental jurisdictions even though the problems that gave rise to government action may not have been caused by those smaller entities;

(3) uniform Federal regulatory and reporting requirements have in numerous instances imposed unnecessary and disproportionately burdensome demands including legal, accounting and consulting costs upon small businesses, small organizations, and small governmental jurisdictions with limited resources;

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Transition Tax Bad Effect On Small U.S. Business Owners Operating Overseas

John Richardson - Nov 7

U.S. Treasury sought comments about the Sec. 965 transition tax. The deadline for comment was October 9, 2018. You can read the comments here. A particularly noteworthy comment was posted by James Gosart:

To: United States Department of the Treasury

Subject: Proposed Regulations under Section 965 [REG 104226-18]

The transition tax is a killer for small American owned overseas businesses. I am a small business owner of a consulting company in Hong Kong. Around the world, I’m sure there are thousands of small American business owners like me.

I formed the company in 2011 after spending more than 25 years based in China and Asia as an expat employee of a major US corporation. During the 7 years the company has been in operation, I have helped US companies and investors with their China and Asia strategies, ultimately growing their businesses in Asia and contributing to US based employment. My company paid corporate taxes annually in Hong Kong. I have now relocated to the US and I’m in the process of shutting the business down.

The new transition tax is so burdensome and complex that there is no way I would start such a business today.

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Dual Citizen, Canadian Lawyer: Does “Intent” Matter In The Interpretation Of The U.S.Transition Tax?

John Richardson- Transition Tax Intent

An example of the perspective of the “tax compliance” community -Look at what the statute says and not what was intended.

“Probably Congress and the Administration did not contemplate the fallout to these USC taxpayers. They were focusing on a different group of taxpayer. Nevertheless, Section 965 imposes immediate U.S. individual taxation on the “phantom income” (i.e. when no dividends are distributed to the USC shareholder) of the USC shareholder.”

Does the “intent” matter? If the application of the U.S. transition tax to Americans Abroad was an accident and not intentional, then why should it apply to them? Read the “965 Hammer” for USCs residing overseas.

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U.S. Constitutions 16th Amendment Authorized Income Taxes: Transition Tax Is Not An Income Tax

John Richardson - Transition Tax Is Not An Income Tax

Origin Of Internal Revenue Service

The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later. Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.

16th Amendment

In 1913, Wyoming ratified the 16th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to enact an income tax. That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.

In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped sharply in the post-war years, down to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments.

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Section 965 “Transition Tax”: Individuals Subject To U.S. State Tax Jurisdiction, The Response Of New York State

John Richardson - Transition Tax

U.S. tax laws impact the application of State tax laws. The “Tax Cuts and Jobs Act” has impacted State tax revenues in various ways. Therefore, the Section 965 “Transition Tax” will impact individual state tax revenues.

My previous posts have discussed the “transition/repatriation” tax from the perspective of individuals who (1) have small business corporations outside the United States, who are (2) tax residents of other countries. I have previously noted that the “transition tax” impacts individuals who are “tax residents” of ONLY the United States (actually giving them a “sweet deal”) very differently from how it impacts individuals who are “tax residents” of other countries (basically confiscating their retirement assets. If you are a U.S. citizen why are living outside the USA anyway?). See in particular Part 4 above.

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IRC Section 965 Transition Tax – Part 10

John-Richardson- Investigating the Transition Tax

Individuals Subject to U.S. State Tax Jurisdiction, the Response of New York State

This is the tenth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by taxpaying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.

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IRC Section 965 Transition Tax – Part 9

John-Richardson- Investigating the Transition Tax

From The “Pax Americana” To The “Tax Americana”

This is the ninth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by taxpaying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.

Introduction – The purpose of this post is …

to demonstrate that the “transition tax” is an example (particularly egregious) of the principle that (1) not only does the United States impose “worldwide taxation” on the “tax residents” of other countries, but  (2) it imposes a separate tax regime on certain “tax residents” of other countries that is different and far more punitive than the regime imposed on Homeland Americans. Yes, you read correctly!

It is the “Tax Americana”– a “form” (no pun intended) of an “empire” which is colonizing other countries through taxation.

A recent and most important example of the “Tax Americana” is the “transition tax” : A U.S. resident who has undistributed earnings in a U.S. corporation will NOT be subjected to the “transition tax”. A Canadian resident who has undistributed earnings in a Canadian corporation will be subjected to the “transition tax”!

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IRC Section 965 Transition Tax – Part 8

John-Richardson- Investigating the Transition Tax

This small business thought it was saving to invest in business expansion – Wrong, they were saving to be robbed by America!

This is the eighth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by taxpaying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen. Read more

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