Tag Archive for Tax Blog

More Net Investment Income Tax: 3.8% NIIT And The NRA-Spouse

Taxpayers working on their 2013 tax returns are now grappling with the new 3.8% Medicare surcharge imposed on high wage earners. This tax is more commonly called the “Net Investment Income Tax” or (“NIIT”). There is a lot of confusion because the rules governing application of the NIIT contain nuances with regard to Americans working overseas and with regard to so-called nonresident alien individuals (NRA).

See my previous blog posting “NIIT-Picky Nuances For Americans Overseas Or With Offshore Investments” concerning how the NIIT impacts Americans overseas or those with offshore investments.

Broadly speaking, the NIIT is a 3.8% surtax on “net investment income” that applies to Read More

Written by | Posted in Expatriate • Income Tax

A Collection… The Humorous Side of Tax… (17)

♦ It’s that wonderful time of year when the flowers bloom, the weather warms, and the taxman cometh. Sam Bari, Jamestown Press, 4-18-12

♦ Yes, every year, despite my best intentions, I wind up rushing to complete my returns at the last minute. A dark cloud and a constant nagging doubt haunt the entire first quarter of every year. Danny Tyree, Summit Daily, 4-13-14

♦ An engineer dies and reports to the pearly gates. St. Peter checks his dossier and says, “Ah, you’re an engineer. You’re in the wrong place.” So the engineer reports to the gates of hell and is let in.

Pretty soon, the engineer gets dissatisfied with the level of comfort in hell, and starts Read More

Written by | Posted in Tax Humor

A Primer On The Foreign Earned Income Exclusion

Ordinarily, the United States taxes U.S. citizens and resident aliens on their worldwide income, even when they live and work abroad for an extended period of time. To provide some relief, a U.S. citizen or resident who meets certain requirements can elect to exclude from U.S. taxation a limited amount of foreign earned income plus a housing cost amount. A double tax benefit is not allowed, however, and a taxpayer cannot claim a credit for foreign income taxes related to excluded income.

1. Exclusion versus Credit

Because the foreign earned income exclusion is elective, an expatriate must decide whether to elect the exclusion or to rely on the foreign tax credit. A key factor in deciding which option is most advantageous is the relative amounts of U.S. and foreign taxes Read More

Written by | Posted in Income Tax • International

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 1 – 1.2)

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

1.2 THE CONTRIBUTION THAT THIS DISSERTATION WILL MAKE TO TAX LAW LITERATURE

Although the Constitution has been in existence for some 18 years, the rights of taxpayers Read More

Written by | Posted in Africa • Audit

S Corp – Charitable Donations

The most intriguing aspect of maintaining this tax blog is the pleasure of meeting and engaging a wide variety of successful people all with the courage to take the risk of venturing out on their own profession in pursuit of dreams and aspirations. Sharing with me the lessons learned through experiences chalked up to enduring hard knock after hard knock I have learned from my readers and subscribers along the way of which I am profoundly thankful.

I couldn’t help but notice that many of my friends and clients alike, particularly those of you in the business of providing services to the community, have become successful beyond anyone’s wildest expectations and are now more prepared than ever to accept the significance of gifting in the greater scheme of life’s affairs. Because people that read my Read More

Written by | Posted in Corporate • Tax Deductions

IRS And Treasury Department to Amend Definition of Shareholder of A PFIC

In Notice 2014-28, 2014-18 IRB, IRS has announced that it will amend the regs under Code Sec. 1291 to provide that a U.S. person that owns stock of a passive foreign investment company (PFIC) through a tax-exempt organization or account will not be treated as a shareholder of the PFIC. Code Sec. 1291 imposes a special tax and interest charge on a U.S. person that is a shareholder of a PFIC and receives an excess distribution (defined in Code Sec. 1291(b) from the PFIC or recognizes gain derived from a disposition of the PFIC that is treated as an excess distribution under Code Sec. 1291(a)(2). Code Sec. 1298(a) sets forth attribution rules that treat a U.S. person as the owner of PFIC Read More

Written by | Posted in IRS • Treasury Regulations

Recent Important IRS And Court Rulings

1. If an employer offers both a FSA and a HSA, the IRS indicated that a participant covered by a health FSA during the year, solely as a result of a carryover, cannot make payments to a HSA during the year. This is the case even for months of the year after the balance of the FSA is fully liquidated.

2. Low income earners receive a refundable tax credit to purchase health insurance through an exchange. If the taxpayer is married, they must file a joint return to claim the credit. But the IRS said it will allow victims of domestic abuse to file separately if the victim is not living with his or her spouse at the time their return is filed.

3. To be able to deduct passive losses, the Tax Court previously ruled that real estate Read More

Written by | Posted in IRS • Real Estate • Tax Policy

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 1 – 1.1)

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

1.1 THE THESIS CONTRIBUTION TO KNOWLEDGE IN TAXATION

The South African tax system has experienced significant changes within the purview of the advent of the Constitution, PAJA, and with the proposed promulgation of the Tax Read More

Written by | Posted in Africa • Audit

FATCA Picking Up Momentum And US Gives Foreign Banks More Time to Register

Under the Foreign Account Tax Compliance Act (FATCA), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000. Institutions that fail to comply could effectively be frozen out of U.S. markets.

“Since the 2012 release of the Model 1 and Model 2 intergovernmental agreements (IGAs) to implement the Foreign Account Tax Compliance Act (FATCA), there has been robust and growing interest from jurisdictions worldwide to enter into IGAs. To date, the United States has signed IGAs with 26 jurisdictions and has reached agreements in substance or is in advanced discussions with many others. Read More

Written by | Posted in FATCA

Deduction Denied For Repayment of Medical Grant

While in medical school a student agreed to work after completing medical school for four years as a doctor in the medically underserved area of Murfreesboro, TN. In exchange for doing this the University of Tennessee College of Medicine agreed to pay his tuition and reasonable expenses. After completing his residency, he changed his mind and went into private practice. Because he didn’t live up to his agreement, the school required him to repay $121,440.

He took a deduction for the repayment on Schedule C as a ordinary and necessary business expense. The IRS disallowed the deduction and he sued the IRS in a U.S. District Court. The court upheld the IRS’s disallowance. He then appealed to the Sixth Circuit Court of Appeals. Read More

Written by | Posted in Individual • IRS • Tax Deductions

A Collection… The Humorous Side of Tax… (16)

♦ “It’s fitting that April 14 is National Pecan Day because today, we recognize nuts. And tomorrow, on April 15, we pay our taxes to support them.” -Craig Ferguson

♦ As Tax Day approaches, those tempted to cheat on their income taxes will have to ask themselves a simple question: Is it worth it? Is the possibility of saving some money at the expense of Uncle Sam worth the risk of ending up in a federal prison? David Harper, 4/11/2010, Tulsa World

♦ Consider yourself: as tax day draws near, how many of you are waiting to hear good news from your accountants about various deductions and loopholes you can take advantage of when you file your returns next month? Is there anyone who’s looking to obey the actual spirit, Read More

Written by | Posted in Tax Humor

FAT(CA) – No One Is Getting “FAT” Except The IRS

President Obama in 2010, signed P.L. 111-147, the Hiring Incentives to Restore Employment Act. The purpose of the law is in its eponymous title, but the Internal Revenue Service got into the act with the Foreign Account Tax Compliance Act (FATCA) provisions.

FATCA is an attempt by the IRS to “improve reporting compliance” — translation: “widen the net” — to tax United States citizens who stash assets abroad.

The new FATCA reporting rules are broad and will impact U.S. corporations and high-income individuals with offshore financial holdings. The IRS issued its final regulations in January 2013 and put its Treasury Department “tax ambassadors” to work.

The result was a series of intergovernmental agreements with more than 50 other countries. Read More

Written by | Posted in FATCA • Individual • Tax Provision/Tax Reporting
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