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Yearly Archives: 2015

Five- to Seven-Year Turnaround on Whistle-Blower Awards – Get Your Whistles Ready!

September 25, 2015

On August 8, 2014 we posted Get Your Whistles Ready - IRS Issues Final Regs. on How To Get Your Reward! where we discussed that the IRS has issued final regs that provide comprehensive guidance for IRS' Code Sec. 7623 award program (i.e., whistle blower awards).

Summary. These regulations provide comprehensive guidance for the award program authorized under Internal Revenue Code (Code) section 7623. The regulations provide guidance on:

  1. Submitting information regarding underpayments of tax or violations of the internal revenue laws and filing claims for award,
  2. The administrative proceedings applicable to claims for award under section 7623.
  3. The regulations also provide guidance on the determination and payment of awards, and provide definitions of key terms used in section 7623.
  4. Finally, the regulations confirm that the Director, officers, and employees of the Whistle blower Office are authorized to disclose return information to the extent necessary to conduct whistle blower administrative proceedings.

The regulations provide needed guidance to the general public as well as officers and employees of the IRS who review claims under section 7623.
 
To supplement these Regs, the Whistleblower Office Published Two New Fact Sheets to guide Whistleblowers on how to make a claim:
 

Publication 5232, The Whistleblower Claim Process, provides guidance to potential claimants on how to properly file the Form 211, Application for Award for Original Information.

Publication 5232-A, What Happens to a Whistleblower Claim for Award, describes the steps in the whistleblower claim process after filing a Form 211.


Filing a claim.  In large part, the final regs track the previously issued guidance in the existing regs, Notice 2008-4, 2008-1 CB 253, and the Internal Revenue Manual, including the general information that individuals should submit to claim awards and the descriptions of the type of specific and credible information on taxpayers that should be submitted.

An individual submitting a claim should identify a person and describe and document the facts supporting the claimant's belief that the person owes taxes or violated the tax laws. The regs also reaffirm IRS's practice of safeguarding the identity of individuals who submit information under Code Sec. 7623 whenever possible. (Reg. § 301.7623-1)

The final regs include eligibility requirements for filing claims for awards and a list of ineligible claimants. In finalizing the regs, IRS has removed State and local government employees and members of a Federal or State body or commission from the categories of ineligible whistle blowers.
The final regs require individuals to file a formal claim for award, Form 211, Application for Award for Original Information. The regs allow IRS to specify an alternative submission method (such as electronic claim filing) pursuant to additional guidance.

Under the final regs, in cases in which the Whistleblower Office recommends payment of an award under Code Sec. 7623(a), the whistleblower administrative proceeding begins when the Whistleblower Office send a preliminary award recommendation letter to the claimant. The claimant has 30 days to respond with comments. This period may be extended at the sole discretion of the Whistleblower Office. (Reg. § 301.7623-3(b)(1)).


Disclosure.  The final regs also confirm that the Director, officers, and employees of the Reg. § 301.6103(h)(4)-1(b)).
Whistleblower Office are authorized to disclose return information to the extent necessary to conduct whistle blower administrative proceedings.

Effective date.  Reg. § 301.7623-1, Reg. § 301.7623-2, Reg. § 301.7623-3, and Reg. § 301.6103(h)(4)-1 apply to information submitted on or after Aug. 12, 2014, and to claims for award under Code Sec. 7623(a) and Code Sec. 7623(b) that are open as of Aug. 12, 2014. Reg. § 301.7623-4 applies to information submitted on or after Aug. 12, 2014, and to claims for award under Code Sec. 7623(b) that are open as of Aug. 12, 2014.

Time Frame.  It can take from five to seven years, or more, for the IRS Whistleblower Office to make a decision about whether to pay an informant for information about individuals or businesses that don't pay all of the tax they owe.

 _________

 Want a Reward of Between 15- 30% 
of Underpaid IRS Tax Liabilities for
Blowing the Whistle on a Tax Cheat?

_____

____

Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation
at: www.TaxAid.us or www.TaxLaw.ms
or Toll Free at 888-8TaxAid (888 882-9243).



 

Read more at: Tax Times blog

Australia Turns Over To The IRS Data Regarding 30,000 Australian Bank Accounts Of US Taxpayers!

September 24, 2015

The Australian Taxation Office (ATO) has undertaken its first ever automatic sharing of bank information with the United States (US) Internal Revenue Service (IRS).

Details of over 30,000 financial accounts worth over $5 billion are being provided to the US under the new powers of the US Foreign Account Tax Compliance Act (FATCA).

The information provided on US citizens and tax residents with Australian bank accounts is the first step in a wave of transparency measures being implemented globally by Governments and tax administrations. Beginning in 2017, close to 100 countries will be sharing non-resident data under the OECD Common Reporting Standard (CRS).

In return the ATO will receive data from the IRS about Australians with financial accounts in the US and will use that data to detect cases of undeclared offshore income and tax evasion.

Automatic exchange of financial account information is the new international standard to eliminate tax evasion. The ATO is committed to ensuring that taxpayers are disclosing their offshore income and in 2017 will implement the CRS, under which it will exchange financial account information with almost 100 countries.

The new transparency initiatives further strengthen Australia’s existing network of international treaties and information exchange agreements with over 100 jurisdictions. During 2014-15 the ATO engaged in 519 exchanges of information resulting in total tax liabilities of $255 million (up from $250 million in 2013-14).

Do You Have Undeclared Income from an Australian Bank
 Who Is Handing Over Names to the IRS?
 
Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 
Marini& Associates, P.A.  
for a FREE Tax Consultation
at: www.TaxAid.us or www.TaxLaw.ms or
Toll Free at 888-8TaxAid (888) 882-9243

Read more at: Tax Times blog

Some Nonresidents with U.S. Assets Must File Estate Tax Returns

September 23, 2015

Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.

U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. A nonresident’s stock holdings in American companies are subject to estate taxation even though the nonresident held the certificates abroad or registered the certificates in the name of a nominee.

Exceptions: Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank accounts not used in connection with a trade or business in the U.S., and insurance proceeds.

Having worked for the Internal Revenue Service for 32 years as a senior attorney in international estate tax, and having subsequently prepared several hundred nonresident alien estate tax returns (form 706NA) for aliens who died owning property in the US with a value in excess of $60,000, I am aware that many attorneys/accountants who prepare tax returns in this somewhat limited area (perhaps 1,200 to 1,500 filings per year) are not familiar with a number of tax savings devices which are not intuitively obvious. 

The most obvious device for reducing tax, is a tax treaty or convention between the United States and the country from which the decedent originated or was domiciled. Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. Executors for nonresident estates should consult such treaties where applicable.

However, this will not cover most countries since there are approximately 193 countries in the world and the treaties encompass about 20 of these countries. The bulk of the countries covered by treaty are in Europe, England, and Canada. The treaties themselves are very poorly written and difficult to understand so I would recommend that when you do use such a treaty, you also look at the interpretation of the treaty created by the Treasury Department so that mere humans can understand the incomprehensible.

Beyond treaties, there were a number of devices which exist, the purpose of which is to reduce the federal estate tax. The most prevalent of these is offered in section 2106, IRC, where one is invited to, by verifying the value of the gross estate outside the United States, take apportioned deductions for debts and expenses incurred worldwide by the decedent or his estate. Very critical to remember is the fact that the IRS must believe your depiction of the non-US assets and their fair market value. Many people come to me and said that they want to use a zero figure for the gross estate outside the United States and that the IRS will have to live with it. Wrong! If the IRS has even a scintilla of suspicion about the purported foreign assets or their value, the IRS will simply disallow all the debts and expenses.   

At that point, if you wish to continue to pursue the deductibility of the debts and expenses, you are required to prove both the expenses themselves and the fair market value of the assets which means, words that you don't like to hear, an IRS audit!  It is much easier to try to verify the value of the foreign assets as part of your due diligence and avoid a confrontation with an estate tax attorney. 

Community property is an area with rich rewards for the tax preparer; it is also very poorly understood. If the decedent lived in a country in which the presumption of marriage is community property of assets, all assets (except gifts and inheritances) obtained by the wedded couple become community property. When one of them dies, irrespective of title, one half of the assets are excluded from the estate since they are legally the property of the other person. Generally the IRS is somewhat skeptical about this claim so if I have an estate from which I wish to exclude a portion based on community property, I generally get an opinion of law from counsel in the country where the marriage occurred. 

The marital deduction-since the 1990s, the IRS is not allowed a marital deduction for property passing to a nonresident alien spouse. The criteria for this was that in virtually every instance, the nonresident alien would receive the assets, tax free, and leave the US, paying no tax on assets which had been sitused in the United States. Ergo, no more marital deduction. To try to soften this blow, Congress, in section 2056A, created the qualified domestic trust. The qualified domestic trust basically allows assets passing through a special trust to a nonresident alien spouse to qualify for a marital deferral. Each time the spouse removes assets from the trust, he/she, is required to file a form 706QDT. 


Executors for nonresidents must file an estate tax return, Form 706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States, if the fair market value at death of the decedent's U.S.-situated assets exceeds $60,000. 

However, if the decedent made substantial lifetime gifts of U.S. property, and used the applicable $13,000 “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s U.S. situated assets is less than $60,000 at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). See Unified Credit (Applicable Credit Amount) Section in Publication 559, Survivors, Executors, and Administrators, and the Form 706NA Instructions for more information.

Have a US Estate Tax Problem?
 

Estate Tax Problems Require
an Experienced Estate Tax Attorney
Contact the Tax Lawyers at
Marini & Associates, P.A.
 for a FREE Tax Consultation Contact US at

www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243).

Robert S. Blumenfeld  - 
 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.








Read more at: Tax Times blog

The OECD Challenges Aggressive Tax Planning

September 23, 2015

The OECD, in promulgating the discussion draft for action 12 of the base erosion and profit shifting project, sought to have tax authorities mandate disclosure initiatives that target the aggressive tax planning community. The drafters’ goal is to ‘‘rein-in’’ unwarranted activities by enabling tax administrations to challenge both domestic and international aggressive tax schemes. The draft itself, however, has significant limitations:

·       It focuses almost exclusively on mass market tax schemes, minimizing the taxing jurisdiction’s potential remedies against perpetrators of individualized, in-house, international schemes;

·        It seeks to curtail, rather than expand, tax administrations’ remedies against aggressive international tax planning schemes; and

·        While the OECD designed action 12 to address aggressive tax planning, the drafters failed to address many of the parameters that determine the nature of this tax aggressiveness. 

In addition, the draft fails to specify the scope of the aggressive tax shelter community itself. At various times, and depending on the specific context, the draft could apply such participant rules to promoters, advisers, material advisers, intermediaries, taxpayers, users, end-users, and others who provide ‘‘material assistance’’ to such schemes. The drafters acknowledge that those terms will need to be defined. It is unlikely that the action 12 drafters can weld these definitions into country-specific legislation.

For more on this see The OECD Challenges Aggressive Tax Planning: A Moving Target
by Robert Feinschreiber and Margaret Kent,  Tax Notes Int’l,September 21, 2015, p. 1037.

Do You Have a Tax Problem?
 

 

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

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

Read more at: Tax Times blog

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