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Archive for IRS

What US Expats Can Learn From the Paul Manafort Indictment

Hugo Lesser, Tax Advisor

President Trump’s former campaign manager Paul Manafort, along with his associate Richard Gates, were indicted last week, with a long list of criminal charges filed against them.

The charges include engaging in conspiracies against the United States and to launder money, making false statements, acting as an unregistered foreign agent, and failing to report foreign bank and financial accounts.

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IRS Has Not Yet Released Date For Accepting 2017 Tax Returns

Barry Fowler, Tax Advisor

It seems that a whole lot of taxpayers are anxious to get their taxes in to the IRS!

I’ve never seen the IRS issue a statement that they have yet to determine the date when they will be accepting tax returns; however, they’ve done just that this year.

Below, I outline various reasons that could be responsible for this sudden frantic rush:

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Appeals Should Accept Good Faith Requests to Review Section 6702 Penalty Abatement Cases

Nina Olson, Taxpayer Advocate

In last week’s blog, I discussed my concerns regarding the failure of the IRS Office of Appeals (Appeals) and Wage & Investment (W&I) to adequately identify the particular frivolous position prompting mailing of a notification letter. This letter provides taxpayers with 30 days to withdraw the frivolous position included on an income tax return or in a submission to the IRS, and thereby avoid application of the $5,000 frivolous return penalty imposed by IRC § 6702. The lack of clear identification regarding the objectionable issue, however, can sometimes make it very difficult for taxpayers to timely determine and correct the frivolous position.

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IRS’ Information Reporting Program Advisory Committee Issues Annual Report Recommending FATCA Delays

William Byrnes, Tax Advisor

The Information Reporting Program Advisory Committee (IRPAC) has issued its annual report for 2017, including numerous recommendations to the Internal Revenue Service on new and continuing issues in tax administration. The report includes a discussion on how to improve some processes, such as for penalties, abatement requests and levies, as well as business master file entity addresses. The report also recommended enhancements to Form W-9 and the truncation of Social Security numbers on Form W-2, IRC § 6050S and Form 1098-T reporting.

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Offshore Law Firm’s Data Stolen In Cyber Attack, Denies Wrongdoing

Ronald Marini, Tax Advisor

On September 5, 2017, ‘How Will the IRS Know About My Foreign Account?’ was published. In that blog post, we discussed how taxpayers who have financial assets outside the United States often ask the question:

“How will they (IRS) know about my Foreign Account?”

Many ask this when they are considering how (or whether) to come forward and inform the IRS about their previously undisclosed foreign financial accounts.

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Top 3 Reasons US Expats Should Catch Up With Their IRS Tax Filing Using the Streamlined Procedure

Hugo Lesser, Tax Advisor

Living abroad is an incredible adventure that inevitably broadens our horizons and minds, thanks to the perspective we gain from living in a foreign country and experiencing a new culture.Living abroad is an incredible adventure that inevitably broadens our horizons and minds, thanks to the perspective we gain from living in a foreign country and experiencing a new culture.

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IRS Should Identify Potentially Frivolous Positions in the Letters It Mails To Taxpayers

Nina Olson, Taxpayer Advocate

In the early 1980’s, Congress became concerned with the rapid growth of deliberate defiance of the tax laws by taxpayers objecting to the payment of tax on frivolous grounds or through reliance on obviously unsupportable tax positions. As a result, Congress passed Internal Revenue Code (IRC) § 6702, which, as currently formulated, generally imposes an immediately assessable $5,000 penalty on tax returns adopting a position that the IRS has identified as frivolous or reflecting a desire to delay or impede the administration of Federal tax laws. This penalty, however, was primarily intended to address “protest” returns and was not aimed at taxpayers who were unintentionally non-compliant, such as in the case of innocent mathematical or clerical errors. The goal was to establish a regime that discouraged obstructive returns, but not one that adopted punitive measures against potentially good-faith taxpayers.

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2018 IRS Income Tax Deduction And Exclusion Rates – What US Expats Need to Know

Hugo Lesser, Tax Advisor

The IRS has announced the annual inflation adjustments for over 50 tax provisions for the 2018 tax year. In this article we’ll look at how some of those provisions will affect expats. It’s worth bearing in mind though that some of the new adjustments announced may never happen, assuming that the Trump Tax Reform Plan is passed before it’s time to file 2018 tax returns. Assuming that they do though…

The IRS has announced the annual inflation adjustments for over 50 tax provisions for the 2018 tax year. In this article we’ll look at how some of those provisions will affect expats. It’s worth bearing in mind though that some of the new adjustments announced may never happen, assuming that the Trump Tax Reform Plan is passed before it’s time to file 2018 tax returns. Assuming that they do though…

Standard Deduction & Personal Exclusion
American expats find themselves in the almost unique position of having to file US taxes even if they live abroad. This is because the US taxes based on citizenship rather than on where someone lives. As such the Standard Deduction and Personal Exclusion Rates are as relevant to expats as they are to Americans living Stateside.

The standard deduction for married expats filing jointly will rise from $12,700 in 2017 to $13,000 for tax year 2018. For single taxpayers and married individuals filing separately, the standard deduction will rise from $6,350 in 2017 to $6,500 in 2018, and for heads of households, the standard deduction will rise from $9,350 in 2017 to $9,550 for tax year 2018.

The personal exemption for tax year 2018 will rise from $4,050 to $4,150. The exemption is subject to a phase-out that begins with adjusted gross incomes of $266,700 ($320,000 for married couples filing jointly). It phases out completely at $389,200 ($442,500 for married couples filing jointly.)

It’s worth noting though that the Trump Tax reform plan proposes scrapping the personal exemption altogether and increasing the standard deduction to compensate, so it may well be that the figures currently proposed for 2018 never actually happen. The Foreign Earned Income Exclusion is one of the primary exemptions that expats can claim to prevent them paying US taxes on their income earned abroad, assuming they can prove that they live abroad by using either the Bona Fide Residence Test or the Physical Presence Test.

It is normally a good option for expats who earn less than around $100,000 and who pay a lower rate of income tax (or no income tax) abroad.

The exact amount of earned income that expats can exclude though rises a little each year in line with inflation, and the 2018 amount will rise from $102,100 in 2017 to $104,100 in 2018.

Retirement plan limitations and estate tax exclusion
Retiring abroad has never been more popular, however expats who have retired abroad or are thinking about retiring abroad should remember to consider the tax implications, both US and foreign, as part of their planning.

In 2018, employees who participate in 401(k), 403(b), most 457 plans will see the annual contribution limit rise from $18,000 to $18,500.

The basic estate tax exclusion will also rise in 2018, to $5,600,000 (from $5,490,000 in 2017).

Expats who need to catch up with their US tax filing
More and more expats who weren’t aware that they were required to file US taxes from abroad are choosing to catch up by using the Streamlined Procedure IRS amnesty program. The Streamlined Procedure requires expats to file their last 3 tax returns and last 6 FBARs (as appropriate), and self certify that their previous failure to file wasn’t willful evasion.

The Streamlined Procedure offers expats a way to catch up without facing any IRS penalties.

Have a question? Contact Katelynn Minott

Your comments are welcome!

How Should A Company Respond To IRS’s “Agreement of Facts” IDR?

Kevin Johnson, Tax Advisor

The IRS, within the last year or so, has begun issuing a final Information Document Request that requests the taxpayer to agree to underlying facts relating to an issue under audit (the Facts IDR).

My general advice to clients is to not respond to the Facts IDR.

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IRS 2017-2018 Priority Guidance Plan Includes Eliminating 18 Regulations

William Byrnes, Tax Advisor

The 2017-2018 Priority Guidance Plan contains guidance projects that we hope to complete during the twelve-month period from July 1, 2017, through June 30, 2018 (the plan year).

Part 1 of the plan focuses on the eight regulations from 2016 that were identified pursuant to Executive Order 13789 and our intended actions with respect to those regulations.

Part 2 of the plan describes certain projects that we have identified as burden reducing and that we believe can be completed in the 8 ½ months remaining in the plan year. As in the past, we intend to update the plan on a quarterly basis, and additional burden reduction projects may be added.

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Cryptocurrency: A Story And Tax Consequences

Thinking about writing about Bitcoin, I remembered my maverick of an Economics teacher back in high school in Mumbai, India whose very thick south Indian accent meant we did not know what he was saying more than half the time. He started off the chapter on currency by having everyone in class remain standing till we came up with a definition for “Money”. Thankfully someone said “medium of exchange” real quick!

Although the underlying meaning of currency remains the same, the simple concept of a medium of exchange has undergone several upgrades particularly so with the cryptocurrency or digital payment systems known more commonly as Bitcoin.

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TIGTA Says That Improvements Are Needed in the IRS’ Estate and Gift Tax Return Examination Process

Ronald Marini, Tax Advisor

The Internal Revenue Service (IRS) needs to make improvements in the classification, prioritization, and inventory assignment processes for the Estate and Gift Tax Return Examination Program, according to an audit report that the Treasury Inspector General for Tax Administration (TIGTA) issued today.

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