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Tag Archive for Tax Lawyer

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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Written by | Posted in John Richardson Tax Lawyer • TaxConnections

New Deduction For Pass-Through Entities

Haik Chilingaryan- Tax Deductions For Passthroughs

Under the new tax laws (“TCJA”), there is a new deduction available to owners of pass-through entities. Section 199A of the Internal Revenue Code allows owners of pass-through entities to deduct up to 20% of their business income from their income taxes. The first portion of this article provides an overview on the various types of pass-through entities that are included under Section 199A. The second portion of the article provides an analysis on the conditions that the owners of pass-through entities must satisfy in order to qualify for the 199A deduction.

PASS-THROUGH ENTITIES

For purposes of Section 199A, the following entities are entitled to the deduction: sole proprietorships, partnerships, limited liability companies, S corporations, trusts, and estates. The most distinguishing characteristic of pass-through entities is that the entities themselves generally do not pay tax. Instead, all of the earnings and expenses are passed through to the owners who pay the taxes on their individual tax returns. The sections below provide an overview on the general characteristics of each type of pass-through entity.

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Written by | Posted in Passthrough Entities • Tax Cuts and Jobs Act

How To Deal With IRS Revenue Officers

What Are Revenue Officers?

Revenue officers are the senior-most collection agents at the IRS.  They get assigned the cases with the highest priority within the IRS.  If your case is assigned a revenue officer it means that the IRS considers your collection matter a top priority and you should take it seriously.  I highly recommend you seek professional representation if your case is assigned a Revenue Officer.  In the event that you cannot do so, I have outlined some of the best strategies for dealing with these highly-trained people.  Read More

Written by | Posted in TaxConnections

Estate Planning In A Nutshell

Haik Chilingaryan, Estate Planning Tax Lawyer, Los Angeles, CA

What Is Estate Planning?

An estate plan includes trusts, wills, health care directives, financial directives, guardian designations, and living wills. However, proper estate planning does not merely include the delivery of these documents, but the process of identifying the objectives sought by our clients and putting in place the strategies that help them achieve their goals. Thus, estate planning primarily consists of the advice and guidance that you get from a professional who can be a steward in the preservation of your wealth.

In a nutshell, our firm takes the comprehensive approach to estate planning, which includes not only the methods in which a person’s assets are distributed upon death, but also the implementation of strategies that preserve the most amount of wealth during one’s life. It follows that the most amount of wealth that can be preserved during one’s life can increase the overall value of the estate, which the beneficiaries will receive upon one’s death. Our firm also uses the various tools available in the legal realm in order to protect the assets of our clients from creditors and predators.

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Written by | Posted in Estate Planning • Haik Chilingaryan

Tax Planning Is More Than Just Tax Filing

Haik Chilingharyan, Tax Planning

Tax planning involves a wide range of strategic decisions and implementations which affect your overall estate plan. In fact, there is arguably no other area of law that is more complex and that contains as many guidelines as the U.S. tax law. In addition, there are also State and Local Tax laws (SALT). The impact of SALT has become even more significant ever since the passage of the Tax Cuts And Jobs Act, primarily because the legislation now limits the SALT deductions to only $10,000.

The understanding of such complicated set of rules is a fundamental key to tax planning. Proper tax planning is a proactive measure that one takes to arrange and rearrange their finances in order to limit his or her tax liability to the lowest amount allowed by law. The confusion often arises because people often make the mistake of thinking that by hiring somebody to file their taxes they are engaging in proactive tax planning. However, the filing of tax returns is usually a reactive activity, not a proactive one.

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Written by | Posted in Haik Chilingaryan • Tax Planning

Anatomy Of A Corporation

Haik Chilaryan, Anatomy Of A Corporation Structure

Corporations are treated as separate entities under the law. They generally have the capacity to perform the same types of functions that individuals perform including entering into contracts and promulgating or defending lawsuits. The primary incentive for forming a corporation is to grant limited liability to its owners.

One common misconception among the business community is that by merely filing proper documents with the state, the business owner has established a legally enforceable corporation. However, compliance with formalities is essential in order for the corporation to be granted with the status of limited liability and protect its owners from personal liability. Formalities are especially critical for corporations since they generally contain more rigorous standards than other business entities, such as LLCs.

WHAT STEPS ARE REQUIRED FOR ESTABLISHING A CORPORATION?

The first step required for establishing a corporation is filing an application for formation (e.g., Articles of Incorporation) with the state. It is generally recommended to establish the corporation in the state in which the business is going to operate. Of course, the corporation can do business in other states provided that the state allows the entity to operate in its state. However, a corporation will be required to file tax returns and pay taxes in any state that mandates state corporate income tax. In addition, different states have different requirements for other forms of compliance (e.g., Statement of Information).

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Written by | Posted in Haik Chilingaryan

Streamlined Installment Agreements: The Pros And Cons

Venar Ayar, IRS Streamlined Installment Agreements
More Taxpayers Now Qualify Under the Temporarily Expanded Program

IRS agents are determined to take your money. At least they are also determined to make it fairly easy to pay. You just have to know the right places to look, and in many cases, an IRS streamlined installment agreement may be just the ticket.

Three times since 2012, the government has significantly expanded this program. But all good things must come to an end. When the sun sets on the current expansion in September 2018, that may be the end of this particular good thing. My mother always said that you should strike while the iron is hot. She usually gave pretty good advice, and her suggestion may be relevant here.

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Written by | Posted in Streamlined Installment Agreements

Another Blow Delivered To Business Owners By California, This Time On The Classification Of Independent Contractors

The Supreme Court of California issued a ruling on April 30, 2018, which is likely to have a significant adverse impact on business owners. The primary issue in the matter of Dynamex Operations West Inc. v. The Superior Court of Los Angeles County was whether an entity that hires an individual worker can classify such a person as an employee or an independent contractor.

The ruling now creates a rebuttable presumption that such individuals are considered employees. The ruling, however, is limited to only California’s wage orders. As such, it would not currently apply in other contexts such as for workers’ compensation or for tax purposes. Therefore, an entity may be able to classify a worker differently depending on the context.

Wage Orders

In 1913, the Industrial Welfare Commission (IWC) was established in California in order to regulate wages, working hours, and working conditions. In 2004, the legislature of California defunded IWC, however, the wage orders established by IWC are still enforced to this day by the California Department of Industrial Relations, Division of Labor Standards Enforcement.

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Written by | Posted in Independent Contractors • Supreme Court Of California

Seven Things Not To Do During An Audit

Venar Ayar, Tax Lawyer, Seven Things Not To Do In An Audit

We get it. Tax audits can be nerve-racking, to say the least. And while there is a lot of information out there on what is appropriate to do, there isn’t much on what not to do. So allow us to outline some of the things you should never do during an IRS audit.

1.  Do Not Lie Or Submit False Documents

This is one that should go without saying, but you’d be surprised. Lying to an auditor or submitting false documents could be considered criminal conduct. Just because you are being audited, it doesn’t necessarily mean the auditor is looking for fraud or criminal conduct, so don’t give them any reason to find any by lying or submitting false documents. Just be honest and forthcoming with whatever they ask for and the whole thing will be over shortly.

2. Do Not Be Rude, Unprofessional, Or Fail To Cooperate

While it is fully acceptable and advisable even to have an attorney present, you should never be full-on uncooperative with the auditor.  There is no need to be hostile with them or uncooperative.  They will be professional with you and although the situation is an unpleasant one, at the end of the day, the auditor is just a person doing his or her job and you need to remember that.  The nicer you are to them, the better the audit will go for you.

3. Do Not Do The Government’s Job For Them

While it is very important to be courteous and professional with the auditor, you should also remember they are working for the government. So while you do have to substantiate many of the items on your return, the burden of proof of any wrongdoing is on the government’s, so don’t give them any reason to investigate you.

4. Do Not Make Unnecessary Remarks Or Say More Than Is Asked Of You

With that in mind, and in the same vain, you should also be careful with what you say. Don’t say more than what is asked of you. Making offhanded remarks that are not in response to what has been directly asked is simply foolish. Every time you open your mouth, the auditor learns more and more about you. Even if you think that what you said was harmless and completely innocuous, it can cause the auditor to expand the audit based on something they may have interpreted from your remarks. So just stick to what is asked of you and nothing more.

5. Do Not Pass Up The Opportunity To Ask The Auditor Questions About What They Are Doing, Should Be Doing And Why

As a taxpayer being audited, you have every right to ask questions where you see fit. You are not a push-over so don’t act like one. Just because an audit may feel intimidating or daunting does not mean you should feel powerless. Speak up. If you are unsure about what is going on or where the auditor is finding support for their decision, ask them. That way, if you feel that they are in the wrong, you can open up a discussion about it.

6. Do Not Give The Auditor Original Documents

I cannot stress this enough…make copies of everything.  You’ll be glad you did.  And whatever you do, do not give the auditor original documents.  The chances of you ever getting those back are slim to none and even if you do manage to get them back it will only be after you have asked and asked and months after the audit.  It is completely acceptable for you to give them copies of originals and you should definitely do so.  You should store all of your original documents someplace safe and keep copies handy.

7. Do Not Appear Before An Auditor Without An Attorney

This is actually the single, most-important piece of advice I can offer you.  Just as you would never speak to a police officer without an attorney, you should definitely have an attorney present when being audited.  Tax attorneys know the ins and outs of all the tax laws and they know the IRS manual backward and forward – the good ones do anyway – so they will know when the auditor is looking beyond his or her scope of authority and how to put a stop to it.  Tax lawyers also know all of the tax loopholes and various exceptions to the laws so they can better fight for you.

There you have it, a list of things not to do during an audit. Follow these simple guidelines the next time you or someone you know is being audited. They could save you a lot of trouble and needless headache.

Have a question about a tax audit? Contact Venar Ayar.

 

 

Written by | Posted in Tax Audits • TaxConnections

Responding To IRC Section 965 Transition Tax: Resistance Is Futile But Compliance Is Impossible

John Richardson, Tax Lawyer
 “This legislation is being interpreted by a number of tax professionals to mean that individual U.S. citizens living outside the United States are required to simply “fork over” a percentage of the value of their small business corporations to the IRS. Although technically “CFCs” these companies are certainly NOT foreign to the people who use them to run businesses that are local to their country of residence. Furthermore, the “culture” of Canadian Controlled Private Corporations is that they are actually used as “private pension plans”. So, an unintended consequence of the Tax Cuts Jobs Act would be that individuals living in Canada are somehow required to collapse their pension plans and turn the proceeds over to the U.S. government”
-John Richardson

I have previously suggested that the Section 965 “transition tax” should not be interpreted to apply to Americans abroad. This argument was based largely on a “lack of legislative intention” coupled with the fact that individuals (whether in the USA or living abroad) do NOT get the benefits of the transition to “territorial taxation”.

These are difficult times for many Canadians who are the owners of Canadian Controlled Private Corporations. Canadian residents use Canadian Controlled Private Corporations (“CCPCs”) to operate small businesses and to create pension plans for their retirement. Importantly a Canadian corporation meets the definition of a “CCPC” only if it is controlled by residents of Canada. By definition all “CCPCs” are local to their owners. The use of “CCPCs” reflects the reality of Canadian tax laws going back to 1972. Governments the world over are taking steps to ensure that corporations cannot be used for the deferral or avoidance of taxation.

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Written by | Posted in TaxConnections

Sentencing Guidelines For A Taxpayer Charged with FBAR Violations

Do You Have Foreign Income?

In case you have foreign income or assets, you might be under an obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) disclosing your assets and income to the IRS. The FBAR filing requirements specifically apply to US taxpayers with financial interest in, or signature authority over a financial account or foreign bank with a value of at least $10,000 at any point.

These FBAR requirements extend to U.S. residents, U.S. citizens and various kinds of business entities, such as limited liability companies (LLCs), corporations and partnerships. Keep in mind that FBAR violations, which usually involve failure to maintain relevant financial records or failure to file an FBAR, could result in severe penalties, especially if these violations are “willful.”

Failure To File

Since 2017, any failure to file can lead to harsh sentencing; this depends on how much you or your business has in foreign financial institutions or offshore accounts. A failure to disclose and furnish the information is usually an intentional act to deceive the IRS. You have to file the FBAR paperwork, as long as your accounts have over $10,000.

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Written by | Posted in FBAR • FBAR Violations • IRS • TaxConnections

Unintended Consequences Of Tax Jobs And Cuts Act On Canadian Citizens And Others Abroad

“This legislation is being interpreted by a number of tax professionals to mean that individual U.S. citizens living outside the United States are required to simply “fork over” a percentage of the value of their small business corporations to the IRS. Although technically “CFCs” these companies are certainly NOT foreign to the people who use them to run businesses that are local to their country of residence. Furthermore, the “culture” of Canadian Controlled Private Corporations is that they are actually used as “private pension plans”. So, an unintended consequence of the Tax Cuts Jobs Act would be that individuals living in Canada are somehow required to collapse their pension plans and turn the proceeds over to the U.S. government” -John Richardson Read More

Written by | Posted in British Columbia • Canada • Tax Cuts Jobs Act
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