Archive for November 30, 2013

Revised IRS FBAR Penalty Appeals Procedures

On October 28, 2013 the IRS revised the Internal Revenue Manual (IRM) providing guidance and clarification regarding the administrative review of FBAR penalties by the IRS Office of Appeals. See http://www.irs.gov/irm/part8/irm_08-011-006.html

The IRM is essentially the operational manual providing guidance and procedures for the various functions carried out by the IRS.With respect to FBAR penalties being considered for resolution by IRS Appeals, the revised IRM 8.11.6 provisions reference 10 key points:

IRS FBAR Administrative File.

Limited Jurisdiction for Post-Assessed FBAR Penalties. Read More

Written by | Posted in FBAR • IRS

DOJ Keeping Quiet On New Lists of US Depositors from Foreign Banks

United States taxpayers with unreported foreign bank accounts may not get warning that the DOJ has knowledge of their account!

The Justice Department’s Tax Division has a lot of information that is not public regarding foreign bank accounts and is communicating with banks in countries that don’t have a treaty relationships with the U.S., according to Assistant Attorney General Kathryn Keneally, who on November 6, 2013 spoke at the American Institute of CPAs Fall Tax Division Meeting.

The DOJ has been aggressively cracking down on U.S. individuals holding money in secret offshore bank accounts (See our post “UBS Criminal Casualties, so Far and More Guilty Pleas Over Offshore Accounts in the Works! “) and has had some success in getting Read More

Written by | Posted in FBAR • International

Offshore Voluntary Disclosure Program: The Basics (2013)

Let us start with the fact that the 2009 Offshore Voluntary Disclosure Program and the 2011 Offshore Voluntary Disclosure Initiative had deadlines but the new Offshore Voluntary Disclosure Program (OVDP) does not. This new program will be available until further notice to taxpayers who wish to come forward and disclose their foreign bank assets.

What Does the OVDP do? This program seeks to bring taxpayers who had undisclosed foreign bank accounts or undisclosed foreign entities for the purpose of evading or avoiding tax into compliance with the laws of the United States.

This program is a counter-part of the Criminal Investigation’s Voluntary Disclosure Practice. It Read More

Written by | Posted in FATCA • OVDP

Year End Tax Planning: US Expats Making Charitable Contributions

Many Americans living and working overseas are involved in charitable causes. The question often arises whether US expats living abroad can obtain the tax benefit for a charitable contribution deduction? The answer depends on various factors, including those discussed below.

Where is the Charity Organized or Created?

The mere fact that a United States taxpayer is living abroad will not prevent the taking of a charitable deduction on the tax return. The more critical consideration involves where the charity is created to which he is making the contribution. Under the US tax laws governing charitable deductions, the organization must be “created or organized in the United States or Read More

Written by | Posted in Expatriate

Income Tax Aspects of Non-business Capital Gains and Losses – Part IV

Non Government Debt Securities – General Aspects

Price of a Bond

The price of a bond is the present value of future interest payments (an annuity) plus the present value of the maturity (face) value at its yield rate (rate to maturity). There is an inverse relationship between the yield rate and selling price (present value). The higher the yield rate, the lower the present value (selling price); the lower the yield rate, the higher the present value (selling price).

Bond Quotation Prices Read More
Written by | Posted in Capital Gains • Income Tax

A Practical Guide To Identifying, Gathering, And Documenting A Sustainable Research Tax Credit Claim

Introduction

The Research and Experimentation Tax Credit (hereinafter “RTC”) was added to the Internal Revenue Code (hereinafter “the Code”) in 1981 as a temporary provision of the Code at a time when research and development based jobs were significantly declining in the United States due to these jobs being moved overseas where labor rates and overall operating costs were considerably less. For this very reason, the RTC was introduced into the Code in 1981 to motivate business entity taxpayers to incur significant and qualifying research and development expenditures with the high expectations that such an advantageous tax incentive would facilitate in stimulating job growth and investment in the United States and Read More

Written by | Posted in Tax Provision/Tax Reporting

7 Habitual Mistakes Companies Make – Chapter 3 (14)

TaxConnections Blog Post
Determine the Closure Date

A CLOSURE DATE for the tax risk management process is important. Setting open-ended goals will defocus the participants. The closure date may, however, change, depending upon the outcomes of some of the tax risk issues.

Set the Parameters of the Future Maintenance Process

THIS WILL BE driven by the nature of the tax risk issues dealt with in the tax risk management process. The Tax Risk Management communication system will also be implemented to ensure effective communication. This is dealt with in greater detail under chapter 7 of this special report. Read More

Written by | Posted in Tax Risk Management

7 Habitual Mistakes Companies Make – Chapter 3 (13)

TaxConnections Blog Post
Plan the Factual Gathering Process

TAKE EACH ON-the-radar screen and off-the-radar screen tax risk identified and create a unique file number, file (hard copy and electronic [pdf] copy), and start assembling all correspondence, documents, notes, agreements, opinions, memoranda, and any other relevant information into date order.

Priorities will differ on a case-by-case basis. The factual gathering process is dealt with in more detail in chapter 5 of this special report.

Plan the Analytical and Solutions Process

Read More

Written by | Posted in Tax Risk Management

Income Taxation of Foreign Trusts and Beneficiaries

The income taxation treatment of foreign trusts and beneficiaries takes into account whether the party or entity has entered United States taxing jurisdiction. It is essential to draw a distinction between a foreign trust and a United States, domestic trust. A foreign trust is defined as one that is not a domestic trust. (1) The term trust itself embraces the notion of an inter vivos declaration in which trustees take title to property for the purpose of protecting or conserving it for beneficiaries in accordance with ordinary rules applicable in chancery or probate courts. (2)

The income taxation of a foreign trust requires there be certain contact factors. The factors to be considered, prior to the 1996 Tax Act, (Small Business Job Protection Act of 1996) in this Read More

Written by | Posted in Estate Planning Tax • International

Income Tax Aspects of Non-Business Capital Gains and Losses – Part III

Part III – Equity Securities
Wash Sales

A wash sale occurs when the same securities are purchased 30 days before or after the sale. If a loss results, all or part of the loss is disallowed. If an equal or greater number of the same securities that were sold are purchased, the entire loss is disallowed. If fewer shares are purchased than were sold, part of the loss is disallowed. The disallowed loss is added to the basis of the securities purchased.

Example 1-total loss disallowed

On February 15, 2013, Joe sold 200 shares of Microsoft for $7,000 that he purchased on July Read More

Written by | Posted in Capital Gains • Income Tax

Amazing Amazon Opens Another California Facility

Amazon has implemented an interesting sales and use tax strategy over the past few years. The battle between the online juggernaut can be best exemplified in California. California attempted to force Amazon to collect California sales and use tax in 2011. Amazon called California’s ultimatum by threatening to pull any ties with California which would cost thousands of jobs. On second thought, California agreed to not force Amazon to collect sales and use tax until September 2012 in exchange for a promise by Amazon to open numerous distribution facilities, which would increase job opportunities in the state.

Putting personal feelings and constitutional implications aside, the move makes sense from both sides. California has the highest statewide sales tax rate of about 7.5%, Read More

Written by | Posted in North America • Sales/Use Tax
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