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Tag Archive for Virginia La Torre Jeker

How IRS Shutdown Affects Offshore Voluntary Disclosure Program

TaxConnections Picture - Dollar In OceanWhat Does the Shutdown Mean for the IRS Offshore Voluntary Disclosure Program (OVDP)?

Taxpayers wishing to enter the OVDP usually submit a request for a so-called “pre-clearance” regarding the taxpayer’s eligibility to join the program. This initial inquiry is made to the Internal Revenue Service Criminal Investigation Lead Development Center which responds by fax advising whether the taxpayer has been initially cleared to make a voluntary disclosure. Prior to the shutdown, there was a short delay due to high volume. With the shutdown, we have learned that pre-clearance inquiries are still being accepted at the following fax number — (+1 267-941-1115), but you can expect a processing delay.

Assuming a pre-clearance request is given the “green light”, taxpayers have 45 days from the receipt of the fax to submit a so-called Offshore Voluntary Disclosure Letter and its attachment which details all information regarding the unreported accounts. Once IRS receives that Letter, it will reply advising a taxpayer if he has been “preliminarily accepted” into OVDP. Preliminary acceptance into the OVDP is conditioned upon the information provided by the taxpayer being, and remaining, truthful, timely, and complete. The taxpayer must submit the FULL OVDP package along with payments of tax, penalties and interest to the IRS within 90 days of the preliminary acceptance letter.

No one knows how the shutdown will affect these time deadlines. The inevitable delays caused by the shutdown has clearly thrown significant uncertainty into the mix and many taxpayers are afraid that their foreign banks may close out their accounts before they have had a chance to be accepted into OVDP.

Please see FAQs 23, 24 and 25 discussing the procedural steps involved in the OVDP.

In accordance with Circular 230 Disclosure

Tailor Loses Shirt To FBAR Penalties

TaxConnections Picture - suit with a shirt and a tieA few weeks ago, Mohanbhai Ramchandani, pled guilty to violating the laws implementing the United States Treasury Department’s Foreign Bank and Financial Accounts Report (FBAR) as well as to filing false tax returns to conceal $3.2 million earned in his swanky New York City tailoring business. While the tailor could probably easily estimate a customer’s suit size, he had completely underestimated the tenacity of the Internal Revenue Service to “follow the money”… But, find it they did, in bank accounts located at the Bank of India, in Hong Kong and at accounts in Canada and India (some in his son’s name). Between 2007 and 2009, Ramchandani did not pay tax on the hidden $3.2 million he had stashed in the foreign bank accounts and, in violation of FBAR laws, he failed to report that he had those accounts. Ramchandani’s cheating resulted in a tax loss of US$ 736,002 for the 3-year period 2007, 2008 and 2009. When sentenced, Ramchandani faces up to five years in prison (let’s hope the tailor likes black stripes!). Also, he faces a penalty of $1.6 million for the FBAR violations, restitution to the Internal Revenue Service of $736,002.00 for unpaid taxes and probably oodles and oodles of interest!

Meanwhile… back at the ranch, eighty percent of the Treasury’s workforce has been furloughed.

In accordance with Circular 230 Disclosure

TaxConnections Worldwide Tax Bloggers Awards – Read What Is In The Tax Blogosphere

TaxConnections Awards Quarter 3 Top Tax BloggersTaxConnections is pleased to announce the Worldwide Top Tax Blogger Awards for the third quarter 2013. With thousands of readers spending considerable time each month on TaxConnections Worldwide Tax Blogs, we recognize it is the quality of our tax experts that attracts our visitors. We pride ourselves on building a community of high-quality, tax experts who offer valuable tax advise on a wide range of tax matters.

Four times a year, each quarter, we count the number of blog posts submitted by each tax expert and we award the highest contributors. The third quarter Top Tax Blogger Awards go to the following Tax Bloggers:

1) Ronald Marini, Marini & Associates, Miami, FL – Click To View Ronald’s Posts

2) Brian Mahany, Managing Partner, Mahany & Ertl, Milwaukee, WI

3) Virginia La Torre Jeker, US Tax Attorney – Click To View Virginia’s Posts

4) Harold Goedde, Tax Practitioner, Clifton Park, New York – Click To View Harold’s Posts

5) Annette Nellen, Professor, San Jose State University, California – Click to View Annette’s Posts

We are very excited to have this opportunity to award and promote the outstanding members who contribute to TaxConnections Worldwide Tax Blogs.

In accordance with Circular 230 Disclosure

How to Prevent US Taxation on Your Worldwide Income

How to Prevent US Taxation on Your Worldwide IncomeOnce a non-US individual is classified for income tax purposes as a “resident” he is subject to income tax in the same manner as a US citizen: i.e., taxed on his worldwide income (meaning income from all sources whether from within or outside the US) at a maximum rate of 39.%. This worldwide income tax covers the period from commencement of the residency period until its conclusion (determination of which is also tricky under the tax laws). Income that is taxed includes but is not limited to wages, interest, dividends, rents, capital gains, royalties, gambling winnings etc. regardless of whether these items arose from outside the US.

The person also becomes responsible for filing tax returns and various information returns (such as “FBAR”). Often, foreigners do not understand these rules and do not realize they have a duty to file even if they are only earning wages from an employer in a foreign country. Filing is required even if the salary and / or housing allowance is below the foreign earned income (and / or housing) exclusion amount thresholds permitted for US taxpayers working overseas. Failure to file could result in loss of the ability to claim these exclusions. Read more

Are Foreign Gamblers Winning Big Time In The United States?

TaxConnections Picture - Las VagesGambling winnings usually make people really happy! Imagine the euphoria of the foreign national on vacation in Las Vegas or Atlantic City when she wins $1,000,000 at the casinos. Now, imagine her extreme disappointment and unhappiness when the casino pays her only $700,000 and tells her that the balance will be paid over directly by the casino to the United States taxation authorities, the IRS. “Is this possible?”, she wonders. YES, it is! Here are the basic facts about gambling winnings won by a nonresident alien individual (NRA) in the United States.

By way of background, a NRA who is considered to be “engaged in a US trade or business” at any time during the tax year, is taxed at regular graduated US rates on the net taxable income effectively connected with that business. This means she is taxed on the US source gross income minus all permissible deductions. Sometimes, depending on the facts, professional gamblers may be considered “engaged in a business”.

On the other hand, a NRA is taxed by withholding, at a flat 30% (or lower treaty rate, if applicable) on certain US-source income that is not treated as effectively connected with a US trade or business. In this context, the 30% withholding regime would apply to the casual as opposed to the professional gambler on certain types of gambling winnings. Some types of gambling winnings are specifically exempt from tax. Generally, these are winnings from blackjack, baccarat, craps, roulette or big six wheel, except to the extent provided in IRS regulations. Read more

The Accidental American & The Taxman

TaxConnections Picture - We The PeopleObtaining Citizenship at Birth

The Fourteenth Amendment to the United States Constitution was adopted on July 9, 1868. Section 1, Clause 1 states that all persons born in the United States are US citizens. This Clause overruled the landmark 1857 United States Supreme Court case of Dred Scott vs. Sandford. The Dred Scott case held that black persons could not be citizens of the United States.

Citizenship due to an individual’s birth in the US results regardless of the tax or immigration status of the individual’s parents. Thus, every individual born within the United States is automatically a US citizen regardless of whether his or her parents were there for a day, a month, as students, on a visit or as illegal immigrants. (There is an exception for children born to foreign diplomats officially serving in the US).

It is also often the case that a person born outside the United States becomes a US citizen at birth. Generally, this happens if at least one parent is a US citizen and has lived in the United States for a certain period of time.

For example, under US Immigration laws, an individual is considered to have acquired US citizenship at birth even if the individual was born overseas and born out of wedlock after December 23, 1952 and his / her mother was a US citizen who was physically present in the United States or its outlying possessions for at least one year of continuous presence prior to the individual’s birth. As another example, an individual born abroad is considered to have acquired US citizenship at birth if one parent is a US citizen at the time of birth, the birth date is on or after November 14, 1986, the parents were married at the time of birth and the US-citizen parent had been physically present in the US or its territories for at least five years prior to the birth, and at least two of those years were after the citizen parent’s 14th birthday. Read more

US Tax Laws Pushing Americans to Expatriate; OVDI “Arbitrary and Capricious” – An Interview With Bill Yates – Former Attorney, Office of Associate Chief Counsel (International), IRS, continued…

TaxConnections Picture - Statue Liberty and FlagToday’s blog post completes the interview with Willard (Bill) Yates, who recently retired from the Office of Associate Chief Counsel (International), Internal Revenue Service after 31 years of service. During his tenure as a Chief Counsel Attorney, Bill was the recipient of 10 awards, including the Albert Gallatin Award, Treasury’s highest career service award. The Gallatin is awarded only to select federal employees who served twenty or more years in the Department and whose record reflects fidelity to duty. Bill received the Gallatin award for his work throughout his IRS career, including his work on implementation of some of the compliance requirements of the Foreign Account Tax Compliance Act (FATCA).

Most of Bill’s career at IRS focused on offshore compliance, including his participation in a massive overhaul of outdated foreign trust reporting requirements Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner). Bill was the principal drafter of the regulations under section 679, Foreign trusts having one or more United States beneficiaries, Notice 2003-75, RRSP and RRIF Information Reporting and Notice 2009-85, Guidance for Expatriates Under Section 877A.

Our focus for this series will be on Bill’s comments on the American Citizens Abroad working paper titled, RBT, Residence Based Taxation: A Necessary and Urgent Tax Reform (RBT Proposal), which recently was submitted to the International Tax Reform Working Group of the House Ways and Means Committee. Read more

US Tax Laws Pushing Americans to Expatriate; OVDI “Arbitrary and Capricious” – An Interview With Bill Yates – Former Attorney, Office of Associate Chief Counsel (International), IRS, continued…

TaxConnections Picture - Tax BriefcaseThis is a continuation from yesterday’s post of the interview with Bill Yates:

Yates: Everyone in the room who knew me turned and looked at me. I’ve been involved in horses since I was five. Believe me, no one makes $50 million raising bucking horses. That is patently ridiculous. What it shows is that LGT would accept any explanation regarding the source of a prospective client’s funds or assets. Then, the UBS scandal broke. That’s when things really got ridiculous.

La Torre Jeker: How?

Yates: Well, we started seeing how European governments were shocked, I mean shocked, really, to find out that any of their banks could be involved in promoting and facilitating tax evasion. Give me a break. How could you live in the EU and not know about what was going on in Switzerland, Lichtenstein and the Caribbean tax havens, many of which by the way are British protectorates?

La Torre Jeker: So, are you saying that foreign banks had it coming to them? I mean FATCA. Read more

US Tax Laws Pushing Americans to Expatriate; OVDI “Arbitrary and Capricious” – An Interview With Bill Yates – Former Attorney, Office of Associate Chief Counsel (International), IRS

TaxConnections Picture - AgentToday’s blog post is a continuation of the interview that provides valuable insight from Willard (Bill) Yates, who recently retired from the Office of Associate Chief Counsel (International), Internal Revenue Service after 31 years of service. During his tenure as a Chief Counsel Attorney, Bill was the recipient of 10 awards, including the Albert Gallatin Award, Treasury’s highest career service award. The Gallatin is awarded only to select federal employees who served twenty or more years in the Department and whose record reflects fidelity to duty. Bill received the Gallatin award for his work throughout his IRS career, including his work on implementation of some of the compliance requirements of the Foreign Account Tax Compliance Act (FATCA).

Most of Bill’s career at IRS focused on offshore compliance, including his participation in a massive overhaul of outdated foreign trust reporting requirements Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner). Bill was the principal drafter of the regulations under section 679, Foreign trusts having one or more United States beneficiaries, Notice 2003-75, RRSP and RRIF Information Reporting and Notice 2009-85, Guidance for Expatriates Under Section 877A.

Our focus for this series will be on Bill’s comments on the American Citizens Abroad working paper titled, RBT, Residence Based Taxation: A Necessary and Urgent Tax Reform (RBT Proposal), which recently was submitted to the International Tax Reform Working Group of the House Ways and Means Committee.

In general, the RBT Proposal offers an alternative to citizen-based taxation (CBT).

La Torre Jeker: Bill, please give us your general impression of the RBT Proposal. Read more

How Can The IRS Enforce Tax Collection Overseas?

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Enforcement: Collecting United States Taxes Abroad

It is difficult for the IRS to collect taxes if they are assessed against a US/non-US taxpayer assuming the person is overseas and has no US assets. Once an assessment has been issued, procedural mandates require that the IRS give the taxpayer notice of the assessed amount and demand payment within 60 days.  If the taxpayer fails to pay the assessed amount after such demand, a so-called federal tax lien arises which attaches to the taxpayer’s property wherever situated, including property located in a foreign jurisdiction. The IRS has no express statutory authority to take administrative collection action against such foreign-situs property.

Using Tax Treaties

If a tax treaty is in place between the US and the foreign jurisdiction where the taxpayer has assets,  it may contain a collection assistance provision.  The United States has 64 bilateral income tax treaties currently in force. Only a small percentage of tax treaties negotiated with the US currently contain a collection assistance provision, although this may change as the US and other countries have clearly evidenced a strong desire to join forces in efforts to crack down harder on tax evasion. Of the 64 income tax treaties the US has negotiated, only 5 of them have expanded collection provisions — Canada, Denmark, France, Netherlands, and Sweden. Even though these treaties contain somewhat  robust collection assistance provisions, there are many ambiguities and uncertainties as to their parameters.  Twenty-four bilateral income tax treaties have a limited tax assistance collection provision, but these are so ambiguous that commentators have noted they probably have very limited use. Read more

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