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Monthly Archives: August 2013

IRS Open Aug. 30 – Furlough Postponed

On April 19, 2013 we posted "IRS Begins Furlough Notice" which discussed that the IRS planned furlough included May 24, June 14, July 5, July 22 and August 30, with another two days possible in August or September.  

The Internal Revenue Service announced on Aug. 7, 2013 that it will be open on Friday, Aug. 30, following the postponement of its fifth scheduled agency-wide employee furlough day.

 

"We have made substantial progress in cutting costs. … Our progress is such that we have decided to postpone the furlough day scheduled for Aug. 30.  

 

We still have more work to do on the budget and cost-savings, so we will reevaluate in early September and make a final determination as to whether we will need another furlough day in September," said Danny Werfel, IRS Acting Commissioner, in a message to IRS employees.

 

‪The IRS has so far taken three furlough days on May 24, June 14 and July 5 due to the current budget situation, including the sequester. 

 

‪Last month, the IRS was also able to cancel the previously scheduled July 22nd furlough day due to cost-cutting efforts.

Trouble Contacting the IRS to Resolve Your Tax Problem?
Contact the Tax Lawyers
at Marini & Associates, P.A.

 

 

for a FREE Tax Consultation at:
Toll Free at 888-8TaxAid (888 882-9243 begin_of_the_skype_highlighting 888 882-9243 FREE  end_of_the_skype_highlighting).
Source:

 

 IRS

 

 

Read more at: Tax Times blog

Need To Renew Your US Passport … IRS and State Department Begin “Cooperating”!

There are millions of Americans living overseas but only a fraction file United States tax returns and even fewer file Reports of Foreign Bank and Financial Accounts (“FBARs” for short). Back in the 1970’s, Congress passed the Bank Secrecy Act, which requires U.S. taxpayers with aggregate offshore financial assets in excess of $10,000 to report those assets annually to the IRS. Until 2008, the law was largely unenforced.

Beginning with the criminal investigation of Swiss bank UBS in 2008, the IRS and Justice Department has put a great deal of resources into enforcing the foreign reporting laws. Several big changes to these rules are coming which puts all those not in compliance at tremendous risk.

The newest and biggest risk to financial privacy is FATCA. Beginning next year, FATCA – the Foreign Account Tax Compliance Act – requires “foreign financial institutions” to review their accounts and report those with ties to the United States. Foreign banks, hedge funds, some precious metal companies and even some life insurance companies are all subject to the new law. Under the threat of huge financial penalties, Uncle Sam is making foreign bankers become the eyes and ears of the IRS.

FATCA isn’t the only risk, however. Back in 1986 Congress authorized the IRS and State Department to share information. Although the provision laid dormant for years, the IRS says it is readying new regulations; regulations that will require the State Department to disclose to the IRS the social security number and foreign residency information of those persons obtaining or renewing passports.

The law, codified at 26 U.S.C. section 6039E, applies to both new passports and renewals. More ominously, it sets the stage for even more disclosures. As passed by Congress, the law allows the IRS to require the State Department to require applicants to provide “such other information as the Secretary [IRS] may prescribe.”

You can refuse to supply your SSN to the State Department but that sets you up for a $500 fine and more importantly, an IRS audit or investigation. Refusing to provide a social security number won’t get you far and will only raise giant red flags.

Many taxpayers simply didn’t know of their foreign reporting requirements. Some folks just received bad accounting advice. Still others have been sitting on the fence wondering if they will get caught. In this age of big data, the odds are not in their favor.

So what should you do? While there is much talk of renouncing citizenship, few have done so (although the numbers are trending up dramatically). More importantly, the United States won’t allow you to renounce citizenship if you are currently delinquent in your taxes.

We advise that you bring your foreign reporting into compliance NOW!

The IRS is offering an Offshore Voluntary Disclosure Program, although it carries a large price tag – a one time 27.5% penalty for most participants. Not a great deal unless your previous noncompliance was willful. For most participants, amnesty comes with a get-out-of-jail free card and no audit.

If you are like most Americans and simply didn’t know or understand the foreign reporting rules, there are much better alternatives. Sometimes all penalties can be waived.

Not sure what to do?
Well considering that:
  1. The expected exchange of information between the IRS and State Department could be a real nightmare for many Americans.
  2. The government has become quite adept at finding people with unreported income and offshore accounts.
  3. The solution isn’t repatriating your money back to the United States; and
  4. It’s probably already to late anyway since the new FATCA foreign reporting requirements have banks performing a retroactive review on many accounts.
The best option is to comply while you still have options!
 

Want to Make an Offshore Voluntary Disclosure? 
  

Contact the Tax Lawyers
of  Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid ( 888 882-9243 begin_of_the_skype_highlighting 888 882-9243 FREE  end_of_the_skype_highlighting ). 

 

 Source :

 

Read more at: Tax Times blog

New Florida Sales & Use Exemption For Machinery & Equipment

On May 17, 2013 Governor Rick Scott signed into law one of the main agenda goals of his term in office. Specifically, Sec. 212.08(7)(kkk), Florida Statutes (F.S.), was enacted to allow a 100% exemption for machinery and equipment purchased for the use in Florida based manufacturing and processing companies.
 
A simply exemption certificate can be supplied to the vender selling the equipment and no sales or use taxes are theoretically due. If your company or your clients are in the manufacturing industry, then this is a huge win. However, there are a few nuances of the law to which you should pay attention. For example, by the terms of the law, the exemption will expire on April 30, 2017 if not extended.
 
For more on these nuances as well as the full text of the new law go to article by James H Sutton Jr CPA Esq.
 
Sales or Use Tax Problem?

Contact the Tax Lawyers at
Marini & Associates, P.A.

for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

325% Cost Where IRS Discovers Your Offshore Account! — Do You Feel Lucky?

There are both civil and criminal penalties for failure to file a

Foreign Bank Account Report 90-22.1 (FBAR).  

Criminal Penalties:

FAQ  #6:  What are some of the criminal charges I might face if I don't come in under OVDP and the IRS examines me? 

Possible criminal charges related to tax returns include tax evasion (26 U.S.C. § 7201), filing a false return (26 U.S.C. § 7206(1)) and failure to file an income tax return (26 U.S.C. § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322. 

· A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000.

· Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000.

· A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000.

· Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000. 

Civil Penalties

FAQ  #5: What are some of the civil penalties that might apply if I don't come in under the OVPD and the IRS examines me? How do they work? 

Depending on a taxpayer’s particular facts and circumstances, the following penalties could apply:

· A penalty for failing to file the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”). United States citizens, residents and certain other persons must annually report their direct or indirect financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year. Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

· Beginning with the 2011 tax year, a penalty for failing to file form 8938 reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign securities and interests in foreign entities, as required by I.R.C. §6038D. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

· A penalty for failing to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Taxpayers must also report various transactions involving foreign trusts, including creation of a foreign trust by a United States person, transfers of property from a United States person to a foreign trust and receipt of distributions from foreign trusts under IRC § 6048.This return also reports the receipt of gifts from foreign entities under section 6039F.The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

· A penalty for failing to file Form 3520-A, Information Return of Foreign Trust With a U.S. Owner. Taxpayers must also report ownership interests in foreign trusts, by United States persons with various interests in and powers over those trusts under IRC § 6048(b).The penalty for failing to file each one of these information returns or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.

· A penalty for failing to file Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations. Certain United States persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) are required to report information under IRC §§ 6035, 6038 and 6046.The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

· A penalty for failing to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Taxpayers may be required to report transactions between a 25 percent foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United States and a related party as required by IRC §§ 6038A and 6038C. The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.

· A penalty for failing to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Taxpayers are required to report transfers of property to foreign corporations and other information under IRC § 6038B. The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

· A penalty for failing to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. United States persons with certain interests in foreign partnerships use this form to report interests in and transactions of the foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions and changes in foreign partnership interests under IRC §§ 6038, 6038B, and 6046A. Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

· Fraud penalties imposed under IRC §§ 6651(f) or 6663. Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

· A penalty for failing to file a tax return imposed under IRC § 6651(a)(1). Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.

· A penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2). If a taxpayer fails to pay the amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding 25 percent.

· An accuracy-related penalty on underpayments imposed under IRC § 6662. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.
 

FAQ  #8: Example of Application of Civil Penalties

It is assumed for purposes of the example that the $1,000,000 was in the account before 2003 and was not unreported income in 2003.

Year
Amount on Deposit
Interest Income
Account Balance
2003
$1,000,000
$50,000
$1,050,000
2004
 
$50,000
$1,100,000
2005
 
$50,000
$1,150,000
2006
 
$50,000
$1,200,000
2007
 
$50,000
$1,250,000
2008
 
$50,000
$1,300,000
2009
 
$50,000
$1,350,000
2010
 
$50,000
$1,400,000

(NOTE: This example does not provide for compounded interest, and assumes the taxpayer is in the 35-percent tax bracket, does not have an investment in a Passive Foreign Investment Company (PFIC), files a return but does not include the foreign account or the interest income on the return, and the maximum applicable penalties are imposed.) 

If the taxpayers didn’t come forward, when the IRS discovered their offshore activities, they would face up to $4,543,000 in tax, accuracy-related penalty, and FBAR penalty (325% of the Highest Balance in the Account!).

The civil liabilities outside the Offshore Voluntary Disclosure Program potentially include:

· The tax, accuracy-related penalties, and, if applicable, the failure to file and failure to pay penalties, plus interest, as described above,

· FBAR penalties totaling up to $3,825,000 for willful failures to file complete and correct FBARs (2005 - $575,000, 2006 - $600,000, 2007 - $625,000, 2008 - $650,000, and 2009 - $675,000, and 2010 - $700,000),

· The potential of having the fraud penalty (75 percent) apply, and

· The potential of substantial additional information return penalties if the foreign account or assets is held through a foreign entity such as a trust or corporation and required information returns were not filed.

Note that if the foreign activity started before 2003, the Service may examine tax years prior to 2003 if the taxpayer is not part of the OVDP
 
The taxpayers would also be liable for interest and
possibly additional penalties, and an examination
could lead to criminal prosecution.
 
 
 
 
What about Reasonable Basis For Failure to Include Income & File an FBAR Report?

If the holder of an offshore account can successfully convince the IRS that the failure to file the FBAR was not willful then the penalties would be limited to $10,000 per violation. However, the IRS takes the position that a separate violation occurs for each bank account that is not listed on the FBAR. So for example if an offshore bank account holder has 6 separate accounts the penalty would be $60,000. As with the willful FBAR penalty this penalty, this penalty can be imposed for multiple years so that the total of these penalties can easily grow into the hundreds of thousands of dollars. 

It is only if the holder of an offshore account can convince the IRS that the failure to file an FBAR is due to "reasonable cause" that the FBAR penalty will be waived. 
Generally speaking the IRS has been intransigent on this topic, and it is the rare case where the IRS will agree that there is reasonable cause for failure to file an FBAR. In appropriate cases the only way to relief may be through litigation.

Undeclared Income from an Offshore Bank Account?
 
 
Want to Make an Offshore Voluntary Disclosure? 
  
Contact the Tax Lawyers
of  Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid ( 888 882-9243 ).
 

 

Read more at: Tax Times blog

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