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Archive for Virginia La Torre Jeker, J.D.

Becoming US Tax Compliant Poses A Hidden Problem For Many Iranian-Americans

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Along with a host of others, many US-Iranian dual nationals are now becoming aware of their US tax and reporting obligations and trying to become US tax compliant.  All fine and good.  In advising these clients, however, the professional cannot forget that Iran is a sanctioned country and that the US has some very complicated sanction rules in place with Iran.  Generally, the sanction rules prohibit US persons from engaging in most business activities with Iran unless a license is first obtained from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).

My blog post today, imparts knowledge graciously shared by George M. Clarke, a tax partner at Baker & McKenzie in Washington D.C. George and I have worked on a number of very complex tax matters together and George has an expertise in dealing with the Read more

IRS Just Made Life Easier: Fillable Forms for Streamlined 2014

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The IRS has really streamlined the Streamline Procedures. IRS has just updated the Streamlined Procedure forms for both its “offshore” and “domestic” procedures. All is now in fillable format; even the statement of facts can be cut and pasted right onto the Form.

Certification for Persons OUTSIDE the US

Certification for Persons INSIDE the US

You can learn more about the new Streamlined Procedures at my blog post, here.

Original Post By:  Virginia La Torre Jeker, J.D. Read more

Foreign Persons As S Corporation Shareholders: Risky Business – Part II

Gold letter S

Part I of this blog post detailed the requirements for eligibility for electing S corporation status, maintaining it, as well as the tax benefits of being an S corporation. It also outlined how S corporation status can be lost. The possible loss of S corporation status becomes very tricky when a foreign shareholder is involved, since nonresident aliens are not permitted to be shareholders in an S corporation. If a foreign national is a shareholder and is a US “resident” for income tax purposes, then S corporation status is fine, but it must be remembered that the other shareholders do not have control over the individual’s maintenance of his US “resident” status.

How to Prevent Inadvertent Termination of S Corporation Status

Steps to prevent the inadvertent termination of S corporation status should be undertaken Read more

Dear Mr. President… Why I Must Expatriate….

US and Canada

This letter was posted by Robert Wood on Forbes’ website. Robert is a US tax lawyer based in San Francisco, California. He received this letter in the course of his practice. I thought it was well worth passing on and have reproduced it in full:

“Dear Mr. President,

I am writing with a heavy heart as I, my husband, and our daughter are all seriously contemplating giving up our U.S. citizenship. We are doing this not to avoid paying U.S. taxes but because we strongly object to a system that is blatantly discriminatory and unfair to law-abiding Americans living outside the country. In addition, it has become too expensive, too difficult, and frankly, too frightening, to try to comply with all of the tax filing Read more

Foreign Persons As S Corporation Shareholders: Risky Business – Part I

Gold letter S

Often, a small business or start-up will utilize an S corporation election for their business. An S corporation is a corporation formed under a particular State’s incorporation laws (or an organization that has elected to be treated as a corporation for US income tax purposes). The corporation must be eligible to elect S corporation status and its shareholders must consent in writing on Form 2553 to have the corporation elect S corporation status. The Form 2553 must be filed with the Internal Revenue Service (IRS) on or before the 15th day of the 3rd month of the corporation’s tax year in order for the election to be effective as of the beginning of that tax year. If the corporation is on a calendar tax year, the Form 2553 must be filed on or before March 15th in order for the election to be effective for that tax year. Read more

US Banks With Foreign Clients – Update on Reciprocal FATCA Reporting

Businessman and dollar symbol

The Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) proposed rules on July 30 requiring US financial institutions to collect “Customer Due Diligence” information. The FinCEN proposed rules are aimed at non-US persons who have not been tax compliant in their home countries and who are using their US financial accounts to hide income from their home governments.  The full Treasury announcement can be accessed here and the proposed rules can be accessed here.

The information required under the proposed rules mandates the identification of the true beneficial owners of US financial accounts.  One of the main goals for obtaining this information will be so that the USA can comply with the US government’s obligations to any countries with which it has a “reciprocal” Intergovernmental Agreement (IGA) under Read more

OVDP Hotline Nixes Practical Use of New Streamlined Program

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The inflexibility of the IRS in the offshore area is starting to get some professionals down. I am one of them, but there are some others voicing similar frustration.

Taxpayers and professionals alike, were very pleased when the IRS announced the new Streamlined procedures in mid-June. You can learn more about the new Procedures here.

It seemed that sensibility and reason were beginning to prevail over at the IRS! Finally, “benign actor” (as opposed to “bad actor”) taxpayers with undisclosed offshore assets, could obtain relief and come into tax compliance without driving themselves into both fiscal and physical bankruptcy. Read more

US Income Taxation of Nonresident Alien Individuals – What About Alimony Income?

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A nonresident alien individual (NRA) is generally subject to US income tax on two types of income categories:

Income that is “effectively connected” with a trade or business in the United States (so-called “ECI”); Income from US sources that is “fixed, determinable, annual or periodical” (so-called “FDAP” income)

ECI versus FDAP

When income is “effectively connected” with a US trade or business, the income is taxed at graduated rates. These are the same rates that apply to US citizens and residents (the highest marginal rate is 39.6%). Such “effectively connected income” ECI, is to be Read more

Overstayed Your Welcome? “Substantial Presence” In The USA

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Under US tax laws, any individual with a “substantial presence” in the United States runs the risk of being classified as a US person for tax purposes.  Those who are physically present in the United States for a long enough time may find themselves owing taxes on their worldwide income to the IRS even if they are neither a US citizen nor a green card holder, and even if they earn no income from US sources.

The Substantial Presence Test

The criteria often cited for meeting the substantial presence test is residing in the US for more than 182 days in a given calendar year.  This is very misleading, as the actual calculation used by the IRS is more complicated and looks at US residency over a Read more

Newsweek Delves Into FATCA And The Growing Trend In Expatriation

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I was recently interviewed by Newsweek for a story covering FATCA and its effects on US citizens abroad, as well as the perceived impact it has had in causing many individuals to give up their US citizenship. The questions asked by the reporter, Barbara Stcherbatcheff, were quite illuminating; my responses even more so. Many of my statements did not make it into the ultimate Newsweek article, but I believe readers will find the entire interview most revealing. Read on, and learn the true FACTS behind FATCA.

1. NEWSWEEK: The compliance cost of FATCA to financial institutions alone has been roughly estimated at US$8 billion a year, approximately ten times the amount of estimated US tax revenue estimated to be raised ($792 million.) Unusually, FATCA was not subject to a cost/benefit analysis by the Committee on Ways and Means. So why do you believe that Read more

IRS Announces New Policy For Individual Taxpayer Identification Numbers / ITINs

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What is an ITIN and What is it Used For?

An ITIN is a nine-digit tax processing number issued by the IRS for federal tax reporting only. The ITIN is not intended to serve any other purpose. The ITIN does not authorize one to work in the US and it cannot be used as an identification number or for any purpose outside the US tax system.

Who Needs an ITIN?

The IRS issues ITINs to individuals who are required to have a US taxpayer identification number but who are not eligible to obtain a Social Security Number (SSN). If an individual is eligible to obtain a SSN, he should NOT be applying for an ITIN. ITINs are issued to Read more

Got’cha! Delinquent Taxes Owed to IRS, Now Owed Indefinitely? What About Tax Non-Compliant Expatriates?

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It was recently reported in the press that the Social Security Administration was collecting old debts of many deceased persons by intercepting the tax refunds of their children. After much unwanted publicity, the Social Security Administration announced it would stop doing this with regard to debts that were over ten years old. What implications does this case raise for tax noncompliant expatriates?

The case of the Social Security Administration is quite alarming and raises serious concerns for persons with unpaid US tax liabilities. It is widely reported and recognized that there has been a vast increase in expatriations. I suspect that some expatriations will involve taxpayers who were not fully tax compliant and I foresee that this area is ripe for IRS audit and controversy. Read more

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