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Whistleblower Office Releases New Expectations for Timely Awards

tax target concept

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

Over the last three fiscal years, the IRS has paid out more than $186 million in awards, on collection of more than $1 billion (19%) based on whistleblower information.

On Tuesday, August 12, 2014 we posted “Get Your Whistles Ready – IRS Issues Final Regs. on How To Get Your Reward!“regarding that the IRS has issued final regs that provide comprehensive guidance for IRS’ Code Sec. 7623 award program (i.e., whistle Read More

Textbook Sales Tax Exemptions

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New York and a few other states allow a sales tax exemption for college textbooks. That may be too broad of a statement – the exemption is for a college student buying a textbook noted on his/her course syllabus or a list from the college. It is not simple for the buyer or seller due to definitions, restrictions and recordkeeping.

While the exemption might sound like a great thing for students, and California often introduces proposals for such an exemption, it is not. There are better ways for legislatures to help college students including targeting relief to those who need it and not imposing extra work on third parties (booksellers) to handle the program.

What do you think? Read More

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 5.5.6 –

South Africa waving flag against blue sky

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution of The Republic of South Africa

CHAPTER 5 – JUDICIAL REVIEW WITH REFERENCE TO SS 74A AND 74B - Jurisdictional facts Read More

Proven Strategies For Eliminating Excess Credits

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There are three proven strategies for eliminating excess credits:

1. Foreign tax reduction planning,

2. Increasing the limitation, and

3. Cross-crediting.

Part I of this blog will cover the first two. Part II will cover the third, Cross-crediting.

A. Foreign Tax Reduction Planning

For U.S. persons in excess limitation positions, foreign tax reduction planning has no Read More

Taxpayer Allowed To Re-Elect §911 Exclusion After A Previous Revocation

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In PLR 201433002 which was issued on August 15, 2014, provided that a U.S. Citizen who resided in and was employed by a Company in foreign country A who elected to exclude his foreign earned income and housing costs under Code Sec. 911(a), was permitted to reelect Code Sec. 911 exclusion for the stated and subsequent tax years.


Taxpayer is a United States citizen who resided in, and was employed by a company in, Country A from Year 1 until Year 4. For Year 1 through Year 2, Taxpayer elected the foreign earned income and housing cost amount exclusions under section 911(a). During preparation of Taxpayer’s Year 3 return, Enrolled Agent, an enrolled agent of Consulting Firm in Country A, recommended to Taxpayer that he revoke his section 911 elections for Read More

Cop Out! Williams Saga Finally Ends

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Williams Court Yields To Government’s Claims That It Be Given Expansive Discretion For Asserting Willful FBAR Penalties

In Zwerner, the jury imposed multiple-year willful FBAR penalties at the maximum. Recall that the maximum willful FBAR penalty is the greater of $ 100,000 or 50% of the undisclosed account’s balance on the key date (June 30, as interpreted).

The jury was not asked to review the IRS’s assertion of the maximum willful FBAR penalty. Thus, a key issue left unresolved was whether the IRS’s decision to assert maximum willful FBAR penalties is reviewable. Assuming so, what standard would the trier of fact – here, the jury – apply in determining whether something less than the maximum penalty Read More

Colorado Shocked With Pot Tax Revenue

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One of the main goals accomplished by legalizing marijuana in Colorado was the perceived increased revenue stream from state tax. Lawmakers strongly believed Colorado would benefit financially from the legalization of marijuana in its state. To their shock and dismay, the legalization has not been as profitable as lawmakers had hoped.

By way of brief background, Colorado enacted a pot tax in 2013. Specifically, on November 5, 2013, Colorado voters passed the pot tax. The tax operated similar to other sin taxes in that it came at a hefty rate. Recreational marijuana sales were subjected to a 25% tax which went into effect on January 1, 2014. Of the 25%, 15% will be tagged for public school construction projects and 10% was earmarked to funding enforcement regulation on the retail pot sales. This excise tax, which is similar to tobacco and cigarette taxes, is in Read More

When Does A Hobby Become A Business?

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Many people enjoy hobbies and even earn money as a result. That income is reportable and business related to the income may be deductible so long as the activity is not truly a hobby. The way the activity is treated is important in determining whether the government will recognize the activity as a business. The IRS will analyze whether the activity is conducted in a businesslike manner, whether the taxpayer intends to make a profit, the amount of profit, current employment, efforts to increase profit and the causes of losses, along with other criteria.

If the activity is deemed to be a hobby, then the related losses are limited. For more information visit the IRS’ website.

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

Audit Assistance vs Audit Representation: Is There a Difference? Part 4

audit stamp
Loving and Cir. 230

In February of 2014 the U.S. Court of Appeals upheld the D.C. Circuit Court’s 2013 decision that the IRS had overstepped it’s authority in establishing certification and continuing education requirements for all tax preparers, not just the traditional “representatives” including Attorneys, CPA’s, and EAs.

The regulations had been seen by CPA’s and Enrolled Agents as a way to level the playing field. Without the regulations, we could be at a disadvantage because we are required to comply with competency and quality control regulations under IRS Circular 230, while unlicensed tax return preparers are not. Read More

Financial Institutions Get A New ‘Landing Page’ to Help With FATCA Registration

Register now signboard

Financial Institutions that want to register for the Foreign Account Tax Compliance Act have a new IRS FATCA Foreign Financial Institution Registration Page. The FATCA Registration tool is a secure, web-based system. They can access the FATCA online registration system through the new page which describes:

1. What is it? The FATCA Registration tool is a secure, web-based system that Financial Institutions (FI) can use to register under FATCA.
2. What does it do? It establishes an online account with a home page and issues Global Intermediary Identification numbers to FIs and their branches.
3. How do I register? Which has a link to the site where they can sign up or login to existing accounts. 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