Tag Archive for Tax Blog

Dealing With Research And Development Incentives In Washington

In the most recent Washington legislative session, lawmakers declined to extend several important research and development (R&D) tax incentives in Washington. The High Technology B&O Tax Credit for R&D Spending and the High Technology Sales and Use Tax Deferral/Waiver, will expire December 31, 2014. While there is some possibility these incentives will be restored in 2015, taxpayers should proceed as if these incentives will expire permanently at December 31, 2014.

Many taxpayers know of the high technology B&O tax credit, which provides a B&O tax credit of roughly 1.5% of taxpayer’s research and development expenditures. Although not as well known, the high technology sales and use tax deferral is also a valuable incentive to high-technology businesses investing in research and development facilities. Although the Read More

Written by | Posted in R&D Credit Services

Should I Stay or Should I Go? – Part 1

Answers to the Most Frequently Asked Questions Regarding Offshore Voluntary Disclosure Program

As a tax attorney specializing in the Offshore Voluntary Disclosure Program (OVDP), nary a day goes by that I don’t get a call from a person inquiring about the OVDP. The questions asked are relatively the same. After a while, I began to make a list of the most frequently asked questions. Below are my answers to them:

I. Why should I make a voluntary disclosure?

Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties, and Read More

Written by | Posted in FBAR • OVDP

TaxConnections Members Generate Revenue 24/7 – Exciting Preview

TaxConnections has made significant advances for tax professionals online. Our primary focus is driving new business that generates revenue for our members. During May 2014, we will release a feature that enables any of our members to upload and promote their training videos on their Tax Professional Profile page. As a preview of what is to come we encourage you to go to this link “PREVIEW” and take a look at our first member to go live with her tax expertise later this month. You can view Shamen Dugger’s Intro Video for ideas that will be very valuable in creating your very own video series. Shamen Dugger will be unveiling all of her tax training videos later this month so you have to wait for a couple more weeks to access her series on tax provision preparation. We are proud to have Shamen Dugger as a member of the TaxConnections community as she brings her extraordinary expertise Read More

Written by | Posted in TaxConnections

Former Credit Suisse Banker Pleads Guilty

Josef Dörig, 72, of Switzerland, pleaded guilty on April 30th to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as the owner of Dorig Partner AG, a trust company in Switzerland.

In a statement of facts filed with the plea agreement, Dörig admitted that between 1997 and 2011, while owning and operating a trust company, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret bank accounts held in the names of sham entities at Credit Suisse.  In 1997, the Credit Suisse subsidiary spun off these sham entities into a trust company, Dorig Partner AG, owned and operated by Dorig, the Justice Department said. Read More

Written by | Posted in FATCA • International • IRS

Dividends from Foreign Corporations Part 2 – “Controlled Foreign Corporations”

As detailed in my last blog posting, “qualified dividend income” is taxed at beneficial lower tax rates and can be received from both domestic (US) corporations and certain “qualified” foreign (non-US) corporations. A “qualified foreign corporation” excludes a so-called “Passive Foreign Investment Company” or, PFIC. Subject to this limitation, the term “qualified foreign corporation” means any foreign corporation that is incorporated in a possession of the United States or that is eligible for the benefits of a comprehensive US income tax treaty which the IRS has determined is satisfactory for qualified dividend purposes. In addition, a foreign corporation will be treated as a “qualified’ with respect to any dividend paid by the corporation on stock which is readily tradable on an established securities market in the United States. The Internal Revenue Code does not exclude a so-called “controlled foreign corporation” Read More

Written by | Posted in Corporate • International

Florida Welcomes Amazon!

This month, May 2014, Amazon was welcomed with open arms to the sunshine state. Florida should be happy by its theoretical increase as Amazon will begin charging, collecting and remitting tax in Florida. Sparking the collection agreement was the fact that Amazon has built two large distribution centers in Florida, which gives it the fatal sales tax nexus. For customers, this means that they will be charged the 6% state sales tax rate plus the local sales surtax rate, which can run between 0% and 1.5%.

As stated above, Amazon is building two fulfillment centers in Florida, creating more than 3,000 jobs. The locations will be on Florida’s west coast. Specifically, the centers will be just outside of Lakeland (East of Tampa and South of Orlando) and Ruskin (South East side of Hillsborough County). The project should also be a boom for the local economy and allow all Read More

Written by | Posted in Sales/Use Tax

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 2 – 2.2.3)

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

2.2 THE RELEVANT CONSTITUTIONAL PROVISIONS

2.2.3 Other Constitutional provisions
In addition to this, ss 41(1) and 195(1) of the Constitution (apart from public Read More

Written by | Posted in Africa • Audit

So Where Does The Oft Cited $150 Billion Figure Of Offshore Evasion Come From?

Well known tax author and journalist Denis Kleinfeld suggests the following answer to this question.

The Congressional Research Service (CRS) provided a Memorandum of July 23, 2001 referencing an inquiry made by the House Majority Leader as to the method used by attorney Jack Blum to construct the estimate of $70 billion of illegal tax evasion losses due to tax havens. This figure was contained in Jack Blum’s Affidavit submitted in support of the government’s request from the federal court for a John Doe summons for records from MasterCard and American Express.

Dennis Kleinfeld states that, according to the CRS:* Read More

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

Online Sales And Physical Presence Nexus

All of the energy and focus on the Marketplace Fairness Act (MFA) has lulled many online sellers into a false belief that they do not need to collect retail sales tax on their online sales until Congress takes action on the MFA. What many online sellers forget is that states can still require online sellers to collect retail sales tax if the online sellers have physical presence nexus in a state. Further, this physical presence nexus need not be necessarily connected with their online sales.

Recently, I have worked with a number of companies facing significant tax exposure for uncollected retail sales tax on their online sales. Although these sales are generated exclusively from customers developed over the Internet, these companies failed to recognize that physical presence of their employees or representatives pursuing wholesale sales Read More

Written by | Posted in Sales/Use Tax • State And Local Tax (SALT)

Lifting The Veil On The Civil FBAR Penalty

It should come as no surprise that the IRS has authority to assess FBAR civil penalties. However, what might come as a surprise is that an FBAR violation doesn’t automatically mean that a penalty will be asserted. Why not? Examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted. For example, the examiner may determine that the facts do not justify asserting a penalty. In that case, the examiner will issue an FBAR warning letter, Letter 3800.

According to IRM 4.26.16.4, the sole purpose of the FBAR penalty is to promote compliance with the FBAR reporting and recordkeeping requirements. In exercising their discretion, examiners should consider whether issuing a warning letter and securing delinquent Read More

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

Reporting Investments In Certain Foreign Corporations for United States Tax Purposes

As we increasingly become more connected on this planet US Taxpayers are compelled more than ever before to hold investments in multiple countries. As a direct result timely filing IRS Form 5471 is becoming profoundly significant. I’ve been involved with enough international tax matters to appreciate this form and subsequent schedules. This post is a summary of my experiences to date.

Basically if you are a U.S. citizen or resident who is an officer, director, or 10% shareholder in certain foreign corporations this form is required to satisfy the reporting obligations of IRC 6038, and IRC 6046 and related regulations. Generally speaking, all U.S. persons described in Categories of Filers below must complete the schedules, statements, and/or other information. Read More

Written by | Posted in Treasury Regulations

How Much Is Actually Lost Each Year To Offshore Noncompliance?

The Senate Subcommittee staff reported that: “According to the IRS, the current estimated annual U.S. tax gap is $450 billion, which represents the total amount of U.S. taxes owed but not paid on time, despite an overall tax compliance rate among American taxpayers of 83 percent. Contributing to that annual tax gap are offshore tax schemes responsible for lost tax revenues totaling an estimated $150 billion each year.”

To justify the reporting of the number of $150 billion a year of lost tax revenue due to “offshore tax schemes”, the Senate Report primarily cites its own investigatory reports and third party articles that refer to transfer pricing issues.  While transfer pricing regulations have been under scrutiny, at least by the Democrats, in the Senate, it is certainly not commonly held by those same Democrats that transfer pricing is illegal or constitutes an “offshore scheme”. Read More

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