Tag Archive for Tax Blog

Discharging Taxes in Bankruptcy – Part 6

Bankruptcy and Retirement Accounts:

If the debtor can access the funds in a retirement account, so can the IRS. Unless the account is listed as exempt (§6334), the fiduciary of the account will yield to an account collection by the IRS.

If the lien is against an exempt asset, such as a retirement account, the IRS can and will pursue the lien for the remainder of the tax liability not paid off in the bankruptcy. This will remain attached until the taxpayer can access the funds or the CSED runs out unless the debt is settled prior to that time. (I.R.M. 5.11.6.2)

The IRS will not usually levy a retirement account unless the taxpayer meets the definition Read More

Written by | Posted in Individual

The Basics of Offshore Tax Planning For Canadian Corporations – Part 9

Techniques for Minimizing Tax on the Sale of Forco Shares

In many cases, Forco will not be saleable by Canco as a stand-alone entity. Its value is strictly tied in to functions it performs for Canco’s corporate group.

However, there may be cases where Forco has value, and is saleable, on its own. This might particularly be the case if it owns valuable IP.

This article will discuss three techniques that may be used to eliminate or minimize the tax that would otherwise be payable by Canco on any gain resulting from the sale of Forco shares. Read More

Written by | Posted in Corporate • Expatriate • International

Ironclad Defenses To Tax Crimes – Part III

III. Cash-Hoard Defense

In the indirect methods of proof, the government must prove one of two things: either (1) an increase in net worth or (2) that deposits made by the defendant into his bank account were not reported as income. The most common defense to these indirect methods is that the defendant had substantial quantities of cash at the beginning of the period under investigation. This defense is known as the cash hoard defense.

A typical cash hoard defense asserts that the defendant in earlier years received gifts or an inheritance from family and/or friends, which he then spent during the prosecution period. The Supreme Court of the United States described the cash hoard defense as Read More

Written by | Posted in Tax Fraud/Evasion/Crimes

Investments In Foreign Pensions And Annuities

I always liked the interestingly unique name, Phileas Fogg from “Around The World in Eighty Days”. Having traveled the world through books, I always wondered how different life would have been if I had the chance to live and work in many different countries!

Not so much any more as I encounter clients, many US citizens who were based out of the country for a few years. Especially those who could have contributed into or had employers contribute into their then resident country’s retirement accounts. These were either mandated by the resident’s country’s employer rules or were used as a tax saving strategy.

What is a foreign pension or foreign annuity?

Read More

Written by | Posted in Corporate • International

1000 Tax Continuing Professional Education Videos Coming To You

For the first time in history, tax professionals and consumers can now access valuable tax education online! TaxConnections spent four years building a tax platform that enables consumers and tax professionals to gain better tax education. This week TaxConnections offers the first 162 Tax Education Videos of the 1000 Tax Videos we will upload in the weeks ahead. What is very exciting is that consumers now have access to a valuable tax education. TaxConnections offers the very first online Tax Video Library in the world accessible to tax professionals for continuing education and to consumers who want to be more informed about taxes.

TAX PROFESSIONALS – JOIN TAXCONNECTIONS TODAY!      We invite everyone to

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Written by | Posted in Tax Education • TaxConnections

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 3 – 3.3.3.5)

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 3 – LIMITATIONS TO INVOKING SECTIONS 74A AND 74B OF THE INCOME TAX ACT

3.3.3.5 Arbitrary and capricious decision-making Read More

Written by | Posted in Africa • Audit

The Basics of Offshore Tax Planning For Canadian Corporations – Part 8

The New Upstream Loan Rules

A Canco that will be using one or more Forcos as part of its offshore tax planning, should be aware of the new upstream loan rules.

Before the introduction of these rules, there were no Canadian tax consequences if Canco received a loan from Forco, even if that loan remained outstanding indefinitely.

Accordingly, if a dividend payment from Forco to Canco would have been taxable, because it was not derived from “exempt surplus”, Canco could, instead, just borrow money from Forco without paying any tax. This would be particularly relevant in connection with Forcos that operate in countries with which Canada has no tax treaty or tax information exchange Read More

Written by | Posted in Corporate • Expatriate • International

Discharging Taxes in Bankruptcy – Part 5

Chapter 13 Bankruptcy

Chapter 13 is better known as a “working man’s” bankruptcy. This is because debtors have cash flow and will “pay off” their debt over time in the bankruptcy. No assets are lost in a Chapter 13 as debtors “buyback” their equity in any assets during the payment period.

Eligible taxes, credit cards, medical bills, and other debts can be paid off in this type of bankruptcy. There are some debts, as with the Chapter 7 as well, that are not dischargeable in this type of bankruptcy such as child support and student loans.

The fee, as of 06/01/14, to file a Chapter 13 bankruptcy is $350. Read More

Written by | Posted in Individual

New Streamlined Filing Procedures: A Trap For the Unwary?

I recently attended the NYU’s Tax Controversy Forum. Two of the panelists were officials from the IRS: Jennifer Best, Senior Advisor, IRS Large Business and International Division, and John McDougal, special trial attorney and division counsel, IRS Small Business and Self-Employed Division.

Both offered insight into the newly expanded streamlined filing procedures. One of the issues they addressed was why the IRS implemented the new streamlined filing procedures. In paraphrasing their response, it was “in response to criticism that there wasn’t an appropriate compliance path for individuals whose failure to report offshore accounts wasn’t willful.” In addition, the new procedures were designed to “encourage folks who are considering quiet disclosures to come in with their hands up,” avoiding the Read More

Written by | Posted in IRS • OVDP

An Overview of S-Corporations

The S-corporation is the most popular tax entity in the United States and the number of S-corps is increasing faster than any other type of entity. A for-profit, state-chartered corporation may elect S Corp status. Additionally, one option available to an LLC is the ability to elect to be taxed as an S-corp. Note that an LLC that elects this status is not a corporation and will not be treated as a corporation other than for tax purposes.

The increasing number of S-corps can be attributed to at least two major factors. First, the attributes of an S-corporation are attractive to entrepreneurs. Major advantages are that losses can be passed on to the shareholders and deducted on their individual returns. The S-corp provides limited liability protection and it is easier to raise capital as a corporation. Additionally, S-corp earnings are not subject to self-employment taxes, Read More

Written by | Posted in Corporate • IRS

Making Sense of the Streamlined Filing Compliance Procedures

On Wednesday, June 18, 2014, the IRS announced that it had expanded and modified the streamlined filing procedures first offered in 2012 to accommodate a broader group of U.S. taxpayers. Major changes to the streamlined procedures include the following: (1) extension of eligibility to U.S. taxpayers residing in the U.S., (2) elimination of the $ 1,500 tax threshold, and (3) elimination of the risk assessment process associated with the 2012 streamlined filing compliance procedures.

These changes are expected to ease the financial and legal pain for almost six million expatriate Americans who live and work abroad, many of whom had no clue that they had to pay U.S. taxes on their foreign income. Read More

Written by | Posted in FATCA • FBAR • International • OVDP

Gifts From Foreign Corporations Included As Gross Income

When a U.S. person receives certain gifts or bequests from foreign corporations, those amounts may be considered as part of the U.S. person’s gross income under US International Tax regulations. The Internal Revenue Code’s regulations specifically state that when a “purported gift or bequest” is received “directly or indirectly,” the amount is included in the U.S. person’s gross income “as if it were a distribution from the foreign corporation” (1). As a result of this characterization, the purported gift or bequest has two possible treatments for tax purposes: as a dividend to the extent of the corporation’s earnings and profits, and as capital gain to the extent of the corporation’s excess over earnings and profit. Read More

Written by | Posted in Gift Tax • International
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