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Transfer Pricing And Intra-Group Financial Transactions

Transfer Pricing And Intra-Group Financial Transactions

Christodoulos Damianou, together with colleagues Christos Theophilou and Demis Ioannou of Taxand Cyprus present a case study of how the Cypriot tax authorities use safe harbour rules in determining arm’s-length interest rates.

Transfer pricing has always been a challenging exercise, in particular in regard to intra-group financial transactions. It was not until February 2020 that the OECD eventually published specific guidance on financial transactions, namely the “Transfer Pricing Guidance on Financial Transactions: Inclusive Framework on BEPS Actions 4, 8-10”.[1]

In the context of intra-group loans, to provide administrative simplicity for both the taxpayers and the tax authorities, safe harbour (or safe haven) rules are often used by tax authorities in determining arm’s-length interest rates. Such rules are usually optional (i.e. the taxpayer can elect to either apply the safe harbour rule or follow the country’s domestic transfer pricing guidelines).

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IRS Letters Explain Why Some 2020 Recovery Rebate Credits Are Different Than Expected

IRS Letters Explain Why Some 2020 Recovery Rebate Credits Are Different Than Expected

As people across the country file their 2020 tax returns, some are claiming the 2020 Recovery Rebate Credit (RRC). The IRS is mailing letters to some taxpayers who claimed the 2020 credit and may be getting a different amount than they expected.

It’s important to remember that the first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible people already received the first and second payments and shouldn’t or don’t need to include this information on their 2020 tax return.

People who didn’t receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. They must file a 2020 tax return to claim the credit, even if they don’t usually file a tax return.

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250+ Motivational Quotes To Inspire You

250+ Motivational Qoutes - Free eBook

What is done in love is done well ~ Vincent Van Gogh

Nothing truly stops you. Nothing truly holds you back. For your own will is always within your control.~ Epictetus

Over the years, I’ve learned that a confident person doesn’t concentrate or focus on their weaknesses – they maximize their strengths.~ Joyce Meyer

Always try to associate yourself with and learn as much as you can from those who know more than you do, who do better than you, who see more clearly than you. ~ Dwight D. Eisenhower

The one who can drive them self further once the effort gets painful is the one who will win. ~ Roger Bannister

One person with conviction will overwhelm a hundred who have only opinions. ~ Winston Churchill
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National Taxpayer Advocate Report To Congress

National Taxpayer Advocate

IRC § 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to prepare an Annual Report to Congress that contains a summary of the ten most serious problems encountered by taxpayers each year. For 2020, the National Taxpayer Advocate has identified, analyzed, and offered recommendations to assist the IRS and Congress in resolving ten such problems.

Most Serious Problems Encountered by Taxpayers

IRS RECRUITMENT, HIRING, AND EMPLOYEE RETENTION: Quality Taxpayer Service and Protection of Taxpayer Rights Are Directly Linked to the IRS’s Need to Improve Its Recruitment, Hiring, and Retention Strategies
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IRS, Treasury Disburse More Economic Impact Payments Under The American Rescue Plan; Total Tops 130 Million With More To Come

IRS, Treasury Disburse More Economic Impact Payments Under The American Rescue Plan; Total Tops 130 Million With More To Come

Today, the Internal Revenue Service, the U.S. Department of the Treasury and the Bureau of the Fiscal Service announced they are disbursing several million more payments in the third batch of Economic Impact Payments from the American Rescue Plan. This brings the total disbursed so far to more than 130 million payments worth approximately $335 billion.

As announced on March 12, Economic Impact Payments continue to roll out in batches to millions of Americans. The third batch of payments began processing on Friday, March 26, with an official payment date of March 31, with some people receiving direct payments in their accounts earlier as provisional or pending deposits. Here is additional information on this batch of payments:

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Be Careful What You Tell The IRS: Federal Appeals Court Upholds Criminal Obstruction Charge

Be Careful What You Tell The IRS: Federal Appeals Court Upholds Criminal Obstruction Charge

Section 7212 makes it unlawful for any person to attempt to interfere with the administration of the laws of the Internal Revenue Code.  For example, that provision makes it unlawful for any person to make certain threats against an Internal Revenue Service (IRS) employee.  Moreover, the “omnibus clause” of Section 7212 prohibits corrupt acts designed to obstruct or impede the due administration of the Internal Revenue Code.  Those who violate Section 7212 may face felony charges with up to a maximum of three years in prison.

In many cases, the question in Section 7212 cases is what conduct constitutes “obstruction”?  The recent decision in U.S. v. Avery, No. 19-2429, 2021 WL 1157846 (6th Cir. Mar. 26, 2021) provides some additional color on the scope of such language and is the topic of this Insight.

U.S. v. Avery.

Background

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Taxpayers, Bankruptcy, And The Statutory Notice of Deficiency

Taxpayers, Bankruptcy, And The Statutory Notice of Deficiency

Although extended unemployment benefits, eviction moratoriums, stimulus payments, small business loans, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, and other government programs may have stemmed the tide of anticipated COVID-related bankruptcy filings, seeking bankruptcy relief may still be the most appropriate option for some taxpayers experiencing financial difficulties in the wake of the COVID pandemic. Bankruptcy relief allows debtors to receive forgiveness of many of their debts, subject to complex rules. Further, upon filing a petition in bankruptcy court, debtors generally receive a reprieve from their creditors’ collection actions, and that includes the IRS.

The filing of a bankruptcy petition generally triggers an “automatic stay” that immediately stops current and future collection actions for pre-petition debts and property of the bankruptcy estate for the pendency of the bankruptcy case. Pre-petition debts include taxes incurred before the filing of the bankruptcy petition, even if they were not yet assessed. Income taxes are considered incurred on the last day of the income tax year. Generally, the automatic stay lifts upon conclusion of a bankruptcy case, either upon entry of an order discharging the debtor’s eligible debts or an order dismissing the case.

While the automatic stay does not prohibit the IRS from assessing deficiencies that have been agreed to by the taxpayer’s signature of consent or full payment of tax, it does limit certain IRS compliance activity for unagreed deficiencies covered by the bankruptcy.

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Comptroller Of Maryland Extends Certain 2021 Tax Deadlines

Comptroller Of Maryland Extends Certain 2021 Tax Deadlines

Written by Allyn Tax Author Meghan O’Hehir

Tax Alert 01-06-21 issued by the Comptroller of Maryland has extended due dates for certain tax types to assist individuals and businesses impacted economically by the Covid-19 pandemic. This is a similar extension to what was granted by the state of emergency issued by Governor Lawrence J. Hogan, Jr on March 5, 2020.

The new extensions will only apply to tax types handled by the Comptroller of Maryland with original filing and payment deadlines from January 1, 2021 through April 14, 2021. Below is a summary of tax types where these extended deadlines have been granted. The full Tax Alert issued by Comptroller, along with the detailed guidelines and qualifications for relief, can be located online at:  https://www.marylandtaxes.gov/forms/Tax_Publications/Tax_Alerts/Tax-Relief-Tax-Alert-Jan2021.pdf

  • Sales and Use Taxes
  • Withholding Taxes
  • Admissions and Amusement Taxes
  • Alcohol Taxes
  • Tobacco Taxes
  • Motor Fuel Taxes
  • Tire Recycling and Bay Restoration Fees
  • Corporate and Pass-Through Entity Income Taxes
  • Individual and Fiduciary Declaration of Estimated Income Taxes

Tips for the Taxpayer

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IRS Bulletin On Revenue Ruling Requests: 2021 Update

IRS Revenue Procedures Update

Rev. Proc. 2021-1, Page 1.
This procedure contains revised procedures for letter rulings and information letters issued by the Associate Chief Counsel (Corporate), Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes), Associate Chief Counsel (Financial Institutions and Products), Associate Chief Counsel (Income Tax and Accounting), Associate Chief Counsel (International), Associate Chief Counsel (Passthroughs and Special Industries), and Associate Chief Counsel (Procedure and Administration). This procedure also contains revised procedures for determination letters issued by the Large Business and International Division, Small Business/Self Employed Division, Wage and Investment Division, and Tax Exempt and Government Entities Division. Rev. Proc. 2020-1 superseded.

Rev. Proc. 2021-2, page 116.
This procedure explains when and how an Associate office within the Office of Chief Counsel provides technical advice, conveyed in technical advice memoranda (TAMs). It also explains the rights that a taxpayer has when a field office requests a TAM regarding a tax matter. Rev. Proc. 2020-2 superseded.

Rev. Proc. 2021-3, page 140.
The revenue procedure provides a revised list of areas of the Code under the jurisdiction of the Associate Chief Counsel (Corporate), the Associate Chief Counsel (Financial Institutions and Products), the Associate Chief Counsel (Income Tax and Accounting), the Associate Chief Counsel (Passthroughs and Special Industries), the Associate Chief Counsel (Procedure and Administration), and the Associate Chief Counsel (Employee Benefits, Exempt Organizations
and Employment Taxes) relating to matters on which the Service will not issue letter rulings or determination letters. Rev. Proc. 2020-3, 2020-1 I.R.B. 131 is superseded.

EMPLOYEE PLANS
Rev. Proc. 2021-4, page 157.
This document updates Rev. Proc. 2020-4, 2020-1 I.R.B. 148, relating to the types of advice the IRS provides to taxpayers on
issues under the jurisdiction of the Commissioner, Tax Exempt and Government Entities Division, Employee Plans Rulings and Agreements, and the procedures that apply to requests for determination letters and private letter rulings.

EXEMPT ORGANIZATIONS
Rev. Proc. 2021-5, page 250.
This revenue procedure sets forth procedures for issuing determination letters on issues under the jurisdiction of the Director, Exempt Organizations (EO) Rulings and Agreements. Specifically, it explains the procedures for issuing determination letters on tax-exempt status (in response to applications for recognition of exemption from Federal income tax under § 501 or § 521 other than those subject to Rev. Proc. 2021-4, this Bulletin (relating to pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans)), private foundation status, and other determinations related to exempt organizations. These procedures also apply to revocation or modification of determination letters.

This revenue procedure also provides guidance on the exhaustion of administrative remedies for purposes of declaratory judgment under § 7428. Finally, this revenue procedure provides guidance on applicable user fees for requesting determination letters.

INCOME TAX
Rev. Proc. 2021-7, page 290.
Areas in which rulings will not be issued, Associate Chief Counsel (International).

The IRS Mission
Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).

Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.

Part III
26 CFR § 601.201: Rulings and determination letters.
Rev. Proc. 2021-1

View Full IRS Document

Good News For The Taxpayer With Foreign Accounts—United States v. Boyd

Good News For The Taxpayer With Foreign Accounts—United States v. Boyd

In previous blogs, Freeman Law discussed recent federal cases related to 31 U.S.C. § 5321—specifically, whether Section 5321 authorizes the IRS to impose multiple non-willful penalties for the untimely filing of a single accurate FBAR that includes multiple foreign accounts. In United States v. Bittner,[1] the District Court for the Eastern District of Texas held for the taxpayer (i.e., non-willful FBAR penalties should be assessed on a per-reporting basis, not a per-account basis). For more information, see the following Insight Blogs: The Largest Non-Willful FBAR Penalty Case Ever? and Court Strikes Down Largest Non-Willful FBAR Penalty Ever. Now, that case is currently pending with the Fifth Circuit Court of Appeals.

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Mr. FBAR: Rule Of Law vs. Rule By Law

FBAR LAWS

Introduction: Looking For Mr. FBAR – Outside Looking In Rather Than Inside Looking Out

FBAR cases are newsworthy. For the last decade blogs and legal journals have been populated by some of the most important FBAR questions of the day.

These questions (most of which are unresolved) include:

– What does willfulness mean in the context of the failure to file an FBAR? What if an individual incorrectly answers the FBAR question on Schedule B?

– What accounts are required to be reported? Gambling accounts? Crypto currency accounts? Gift card balances?

– What does “reasonable cause” mean and when can reasonable cause apply?

– and most recently: Can the Government impose a separate penalty on each unreported account or can only one penalty be reported based on the requirement of one FBAR form?

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Pennsylvania’s Tax And Penalty Relief Program For Inventory

Pennsylvania’s Tax And Penalty Relief Program For Inventory

How Pennsylvania’s 90-Day Voluntary Compliance Program Can Save Your Business Years’ Worth of Taxes and Penalties

Written by Allyn Tax Author Eleene Ismail

The Pennsylvania Department of Revenue is offering a limited time Voluntary Compliance Program for retailers who have inventory or store property in the state but are not registered to collect and remit Pennsylvania taxes. This program, which runs through May 8, 2021, offers a limited lookback period with tax and penalty relief when the business becomes and remains compliant.

Businesses may choose to participate in the program and become qualified for the relief provided by completing the Physical Presence Activity Questionnaire either online or by mailing a paper copy.  After this submission, the PA Department of Revenue will review the BAQ and contact the business to discuss steps to become compliant. Taxpayers that are then qualified and approved for this program will not be liable for any taxes owed prior to January 1, 2019. Additionally, taxpayers will also be relieved of penalties for any such taxes which were due January 1, 2019 or after.

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