Archive for November 26, 2014

The Power Of The Federal Tax Lien

A lot of people get confused between Tax Liens and Tax Levies – let us break this down for you.

A lien is not a levy. A lien secures the government’s interest in your property when you don’t pay your tax debt. A levy actually takes the property to pay the tax debt. If you don’t pay or make arrangements to settle your tax debt, the IRS can levy, seize and sell any type of real or personal property that you own or have an interest in.

When would the IRS file a Federal Tax Lien?

The IRS will file a lien when the agency feels there is a chance that collection is in peril. It does not just grab your assets. Filing of a tax lien is normally dictated by the dollar Read More

Written by | Posted in IRS

How To Avoid Becoming The Next “Cooked Goose” Gracing The IRS’s Offshore Tax Evasion Table This Thanksgiving – Part I

If your name was mentioned in the same sentence as Raoul Weil, Carl Zwerner, or Ty Warner, you can rest assured that you haven’t been nominated for an academy award or a Pulitzer Prize. Nor did you win the Publisher’s Clearinghouse Award. Instead, you’d have joined a disgraced group of taxpayers who have had the misfortune of being targeted by the U.S. government in their crusade to stamp out offshore tax evasion.

In stark comparison is John Doe, a conflicted taxpayer who recently entered the Offshore Voluntary Disclosure Program (OVDP). Neighbors and friends who run into John are a captive audience for him as he wallows in his self-pity. John regrets the decision to enter OVDP and tells his tale of woe to anyone who will listen: “I don’t know what I’m doing in this program. I know 500 people with foreign accounts like mine, and they’re not coming Read More

Written by | Posted in FATCA • OVDP • Tax Fraud/Evasion/Crimes

Church Exemption From Filing Form 990 Challenged

Churches are exempt from having to file Form 990 with the IRS. This exemption has been in place since the early 1940’s when Form 990 was adopted, and non-profit organizations were required to file the form with the IRS. This was brought about by a concern that tax-exempt organizations were using their status to engage in unfair competition with for-profit businesses. Churches have held to be exempt, as to do so would violate the First Amendment to the Constitution.

The Freedom From Religion Foundation (FFRF) has filed suit in a federal district court in Wisconsin, alleging that it was required to file a “detailed application” (Form 1023) and pay a fee before obtaining tax exempt status, and has also been required to file “detailed, intrusive and expensive annual reports” (Form 990) in order to maintain that status. Read More

Written by | Posted in IRS • Religion • Tax Controversy • Tax Provision/Tax Reporting

Tax Court Affirms Net-Worth Method Used to Support Fraud Determination Against Surf Shop Owners

If you think that by keeping sloppy records, the IRS cannot determine how much income you earned – think again.

The Worth family, Donald, Marie, and their son, Frank, operated a chain of seven surf and skateboard shops across California, called White Sands. Their business was selected for audit by the IRS. In the course of the audit the IRS learned that Frank was responsible for about half of the stores and Donald and Marie operated the other half. Marie also managed the books and prepared tax returns. As manager of the heavily cash-based business, Frank had the authority to write checks on certain White Sands bank accounts, wrote checks or used cash to pay vendors for merchandise as it came in, and wrote checks to reimburse himself for business expenses he paid. Frank also supervised Read More

Written by | Posted in Income Tax • Tax Fraud/Evasion/Crimes

CCA 201446018 – IRS Addresses Non-compensatory Prior Period Costs Under §199

In Industry Director Directive on Domestic Production Deduction #3 (3/4/2009) (the “IDD”), the IRS addressed the treatment of post-2004 compensation deductions (e.g., pension expense and medical-related costs) that relate to services rendered prior to 2005. The IDD held that the treatment of such deductions requires an analysis under the “section 861 method”. In lieu of detailed support regarding the lack of a factual relationship between a deduction and domestic production gross receipts (“DPGR”), the IDD allowed taxpayers to treat such deductions as not properly allocable to DPGR, subject to a 10% haircut. The haircut relates to the — sometimes real, sometimes theoretical – possibility that some of the services rendered prior to 2005 may relate to the production of (post-2004) DPGR. The scope of the IDD was limited to expenses not subject to §263A. Read More

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What If I Own Real Estate In A Foreign Country? Answers Here!

There’s this question that I always get from my clients: “Do I have to report my real estate holdings in a foreign country?” To which, my answer (in true accountant style) is always: “It depends”. Let me explain further.

You may be a first generation immigrant to the US and still have strong ties to your home country; by way of family elders who live there or a strong sense that you would like to some day retire back there, where you grew up. Or you are an adventurous investor who would like to invest in a little vacation home by the beach in the Caribbean. Or you were stationed abroad through your job and loved it so much that you invested in some property there. Then this blog is for you to read! Read More

Written by | Posted in Expatriate • FATCA • FBAR • International • IRS • Real Estate

The New American Expat: More Collateral FATCA Damage

As I reported in a previous article, the Department of Justice (DOJ) and the IRS instantly began to drool in anticipation when The Foreign Account Tax Compliance Act was passed in March of 2010. This gives them enforcement tools to make foreign countries and banking institutions play by our rules whether they like it or not. The Department of Justice has gone even further thinking it has been given the power to make foreign treaties without the constitutionally required Senate ratification. The Senate so far doesn’t seem to mind, but some other countries and taxpayers are taking offense.

FATCA Basics

FATCA gets its teeth from two provisions: Read More

Written by | Posted in Expatriate • FATCA • IRS

IRS Clarifies Application of One-Per-Year Limit On IRA Rollovers, Allows Owners of Multiple IRA’s A Fresh Start In 2015

If you have an IRA beware of this new rule that limits the number of IRA Rollovers that are not “trustee to trustee” to one per year.

When you receive a distribution from a traditional IRA or your employer’s plan, you would normally report it as income unless you rollover that distribution to another IRA no later than 60 days after the day you receive the distribution from your traditional IRA or your employer’s plan. In the absence of a waiver or an extension, amounts not rolled over within the 60-day period do not qualify for tax-free rollover treatment. You must treat them as a taxable distribution from either your IRA or your employer’s plan. These amounts are taxable in the year distributed, even if the 60-day period expires in the next year. You may also have to pay a 10% additional tax on early distributions as discussed later under Early Distributions. Read More

Written by | Posted in Retirement • Tax Planning • Tax Tips

EU’s New VAT “MOSS” – Relevance For MFA?

On January 1, 2015, the EU’s new approach for charging and collecting VAT on B2C sales of e-services and digital goods begins. The key to the approach is that all businesses will charge based on the customer’s location (destination basis). That makes sense for a consumption tax, but has its challenges. One key one is knowing where the customer is, which is not always easy to determine for digital goods relative to physical goods.

One administrative simplification is the Mini One Stop Shop or MOSS. This allows a business to register in one country for filing purposes. The business still has to collect the appropriate VAT for the country where the consumer is, but rather than quarterly filing in each country, the business just files in the MOSS country. That country makes sure the funds get to the right country (and handles the currency translation since not all EU countries use the Read More

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The Unknown Tax Comic – Part 12

♦ “People who complain about taxes can be divided into two classes: men and women.”  — Anonymous

♦ When your ship comes in, it’s always docked by the Government.

♦ Income tax is Uncle Sam’s version of “Truth or Consequences.”

♦ It’s hard to believe America was founded to avoid high taxation.

♦ Suggested simplified tax form: How much money did you make last year? Mail it in. — Stanton Delaplane

♦ “Worried about an IRS audit? Avoid what’s called a red flag. That’s something the IRS Read More

Written by | Posted in Tax Humor

Questions To Ask NOW Regarding The Affordable Care Act

As an astute navigator of the Internal Revenue Code over the last decade or so I’ve been asked by media heads for my opinions on the Affordable Care Act. Even though I have many to offer the fact of the matter is the deeper I get into the compliance reporting abyss the less sense it seems to make. The following four quotes I can hang my hat:

“For sure the ONLY thing we can rely on, barely, seems to be TITLE 26 and the best place to start your journey in these regards is with the Department of Health & Human Services.”

“The IRS is implementing the tax provisions of Affordable Care Act – and the 2014 filing season is shaping up to be a N-I-G-H-T-M-A-R-E! So be nice to our friends who work in bureaucracy, we are all in this together.” Read More

Written by | Posted in Affordable Healthcare Act

Government Expands Forfeiture Program

In 1984, George Orwell’s novel about a dystopian near-future society, Oceania was constantly at war with one of its geopolitical rivals. The grandfatherly yet sinister O’Brien later admitted that victory over Eurasia or Eastasia was not the war’s objective – the ongoing conflict was simply an excuse for the totalitarian government to intervene in peoples’ affairs.

The United States is in the midst of several wars, many of which are against rather amorphous opponents. Case in point: the war on drugs. It’s not exactly like Oceania’s war against Eurasia/Eastasia, but there are some common elements. Both conflicts are seemingly endless, and both have political overtones. Perhaps most significantly, in both conflicts, bystanders are caught in the crossfire. Read More

Written by | Posted in Federal • Individual • IRS • Tax Risk Management
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