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IRS Simplifies Reporting of Canadian Retirement Plans (RRSP’s); Eliminates Form 8891

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On October 7, 2014, the IRS made it easier for taxpayers who hold interests in certain popular Canadian retirement plans to get favorable U.S. tax treatment. Rev. Proc. 2014-55. As a result of the change, many Americans and Canadians with either registered retirement savings plans (RRSP’s) and registered retirement income funds (RRIF’s) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRA’s) and 401(k) plans. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.

In general, U.S. citizens and resident aliens will qualify for this special treatment as long as they have filed and continue to file U.S. income tax returns for any year they held an Read More

4 Easy Steps For Knocking The FBAR Calculation Out of the Park

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Making Sense of the FBAR Penalty Mitigation Guidelines:

This blog is intended for the taxpayer who plans on making a “quiet disclosure” of his unreported foreign financial assets and finds it necessary to estimate his FBAR liability in case of a doomsday scenario. By “doomsday scenario,” I’m referring to a situation where the IRS selects one or more years for examination, culminating in the assertion of onerous FBAR penalties.

No discussion of FBAR penalties would be complete without a discussion of the penalty mitigation guidelines. What are the penalty mitigation guidelines? Some background information is in order. FBAR penalties have varying upper limits, but no floor. For Read More

Premium Tax Credit Problems

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Two of three recent federal court rulings held that the premium tax credit (PTC) is only available to individuals obtaining coverage through their state exchange, not the federal exchange. This is a big deal because the PTC serves to help make health insurance affordable to individuals with income between 100% and 400% of the federal poverty line. Also, the majority of states did not create their own exchange, forcing individuals in need of insurance to go to the federal exchange (if they are eligible for a PTC).

Resolution of this big issue likely won’t happen until next year. Meanwhile, the upcoming filing season will involve millions of individuals having to reconcile the PTC they may have received in advance, with their true amount. There is also a lot of complexity for practitioners too. Another key piece of the Affordable Care Act that comes into play in 2014 Read More

IRS Simplifies RRSP Treaty Benefit Election For U.S. Citizens

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The IRS recently released a new Revenue Procedure regarding U.S. citizens and residents holding Canadian Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Fund (RRIF). The IRS has simplified some of the reporting requirements for these taxpayers.

In the past, filing a 1040 tax return for a taxpayer who held RRSPs required the filing of form 8891 for each and every RRSP and RRIF account owned by the taxpayer. This form reported the December 31st balance of these accounts and claimed treaty benefit, Article XVIII(7), which is enshrined in the U.S.-Canada Income Tax Convention (herein referred to as treaty) whereby a taxpayer could defer taxation on the earnings within these accounts until distribution. This treatment was intended to give similar treatment to RRSP that was Read More

The Unknown Tax Comic – Part 11

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♦ An investor went to a tax expert and said: “If I give you $1,000, will you answer two questions?” The expert replied: “Certainly. And what is the other question?”

♦ Q: How do you humble a person that flaunts their wealth?
A: Have them fill out a tax return.

♦ America is the land of opportunity. Everybody can become a taxpayer.

♦ IRS MOTTO: “We’re not happy until you’re not happy!”

♦ Did you hear about the cannibal tax accountant? She charges an arm and a leg.

♦ A window sign in Chicago: “Tax Returns Prepared – Honest Mistakes Are Our Specialty.” Read More

FBAR Account Reporting – Imperative

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FBAR Foreign bank account reporting is imperative, Please pardon my writing you again about this but I am deeply concerned.

If you have a bank account anyplace outside of the USA, it doe not matter why even if it is an account with money to obtain your spouse or retirement visa, you need to report it. The law says, “total aggregate of all accounts exceeding $10,000″ but I am not sure I trust the IRS to abide by those regulations, I recommend to file for any significant amount. And do so for the last SIX (6) years, 2013 and back 5 more years, as required by law.

PLEASE understand the penalties for non-compliance are draconian that start at $500 and go up from there and can even include criminal prosecution if your failure to file was Read More

Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 2 of 2

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From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Tax Write-Off: Personal Expenses

This is a category business owners can easily get into trouble with if they’re not careful.

• Key Issue: You simply can’t deduct services of a purely personal nature that aren’t related to your business.

• How to Do It Right: Getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense. The cost of high-speed internet Read More

Playing Russian Roulette With The IRS: Zwerner Learns The Cost of Hidden Offshore Accounts

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Whether you have chosen to hide your account willingly or failed to file an FBAR by mistake, you may not know the full ramifications of your activities or your best course of action now. If you haven’t heard the horror stories yet, you’re about to have a couple to remember. For those who have kept an offshore account secret, there are three options: quiet disclosure, OVDP, or the streamlined offshore procedures. Some may even feel they have a fourth option: keeping the account a secret. The average person may have a hard time deciding what course of action they should take. It may not seem to matter much, but Charles Rettig gives us two frightening examples in his articles, “Jury Determines 150-Percent FBAR Penalty” and “U.S. Seeks FBAR Related Forfeiture of $12 Million!” These stories teach an important lesson, but first, let’s discuss proper offshore account Read More

Problems With The Streamlined Program

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There are some shortcomings of the Streamlined Program:

“Despite the seemingly taxpayer-friendly incentives, the streamlined program has several shortcomings. The devil is in the details! First, participants are not guaranteed immunity from criminal prosecution. Second, with respect to the Streamlined Domestic Offshore Procedures, the five-percent penalty is imposed on a broader base of foreign assets – not just those relating to FBAR reporting.

Finally, to the extent that the IRS undertakes an examination of the taxpayer’s returns and finds that the taxpayer was willful, the taxpayer could be subject to any one of the following parade of horribles. First, and most obvious, the taxpayer will be barred from participating Read More

Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1 of 2

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From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Tax Write-Off: Travel Expenses

Here’s a write-off that sometimes is difficult deciding just where to draw the line. Can you deduct the cost of going to see a Cirque du Soleil show in Las Vegas if you’re treating your client? The answer is yes, as long as you can justify it as a business expense. And what if your spouse goes along on the trip? As long as they’re a partner or employee of your business and attended conventions or meetings on the trip you took together, then his or her travel and 50% of his or her meals are also deductible. Read More

From The IRS With Love – FATCA

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What to Do When Your Foreign Bank Writes to You about Reporting Your Account under FATCA

Nothing can ruin the taste of your martini, shaken not stirred of course, than a letter from your foreign bank demanding that you report the account that you hold with them to the U.S. government. For many, this can scare The Living Daylights out of them, especially since this probably has the IRS written all over it. However, the IRS doesn’t have a License to Kill. Yes, they expect you to pay, but you need to understand what you’re up against first, so read on.

Why Your Friendly Foreign Bank Became Dr. No Read More

Leading Tax Educators Attracted To Global Tax Education Platform

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One of the many exciting benefits of TaxConnections is the aggregation of the finest tax instructors in the industry to one global platform. With nearly 200 tax courses currently available on https://www.taxconnections.com/taxeducation with CPE or without CPE, and hundreds more in line to be uploaded on our tax education video platform, it is exciting to attract an increasing number of the very best tax educators around the world to TaxConnections. A  group of experienced tax instructors are being assembled that are committed to promoting the very best tax education in the profession. TaxConnections is the catalyst  bringing together an extraordinary group of tax educators in order to connect them to one worldwide platform.

During the year, we have interviewed many of tax instructors and are proud to introduce Read More

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