Fluent in English, Spanish & Italian | 888-882-9243

call us toll free: 888-8TAXAID

Yearly Archives: 2016

Tax Court Rejects IRS's Proposed $1.36 Billion Section 482 Tax Assessment

June 21, 2016

The Tax Court rejected the IRS's proposed transfer pricing method of re-allocating income between a U.S. parent corporation and its foreign subsidiary and ruled against the Internal Revenue Service's attempt to collect $1.36 billion in tax deficiencies, finding that the assessment did not reflected the economic realities of manufacturing these medical devices. in a case involving licenses for the intellectual property necessary to manufacture and sell high-risk, heavily regulated implantable medical devices in Medtronic, T.C. Memo. 2016-112. 

 
The Tax Court held that Medtronic met its burden of showing the Internal Revenue Service (IRS) abused its discretion by  making arbitrary and capricious Internal Revenue Code (IRC) Section 482 reallocations with respect to taxable income of Medtronic’s Puerto Rico subsidiary.
 
The Court also found that IRS's re-allocations undervalued the role of the licensee in a number of ways, including the skill of its workforce, the high premium on quality control, and the amount of economic risk it assumed.
 
However, while the Court approved the method used by the taxpayer group, it found that the royalties paid under the licenses had to be significantly adjusted upwards.
 
 Have a Tax Problem?  




 
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).
 
 

 
 
 
 

Read more at: Tax Times blog

US Taxpayers Are Receiving Automated $10,000 Penalty Assessments For Late Filed Form 5471's & 5472's – We Can Help!

June 21, 2016

We previously posted Numerous US Taxpayers Are Receiving Automated $10,000 Penalty Assessments For Late Filed Form 5472's - We Can Help! where we discussed that we have been receiving a lot of calls from businesses who have recently received penalty notices regarding late filed or non-filed Form 5472's. The Internal Revenue Service imposes an automatic penalty of $10,000 whenever an individual or company is late in filing an information return disclosing their interest in a foreign corporation, regardless of whether there is any associated underreported of income or tax deficiencies.

U.S. persons including businesses with at least a 10 percent interest in a foreign corporation or who are officers of a foreign corporation in which any U.S. person owns or acquires a 10 percent interest are required to file a Form 5471 with their tax return to disclose their ownership.

The IRS has begun to automatically applying the $10,000 penalty for each Form 5471 and Forms 5472 that was filed after the due date. 

There are ways to defend against these automatic assessments and request penalty abatement. There are four defenses that you should consider when assess the penalty for filing an international information return after the due date.

  1. Follow the Delinquent Information Return Procedure - First, the taxpayer can file through the Service's procedures for delinquent international information returns. This procedure is appropriate for taxpayers who can establish reasonable cause for their failure to file or whose failure to file has caused no or nominal tax non-compliance. This procedure cannot be used, however, if the taxpayer is already under audit or investigation or has otherwise been contacted by the Service about the delinquent information returns. Under this procedure, the taxpayer files the delinquent returns with a statement of the facts establishing reasonable cause for the failure to file. In the "Frequently Asked Questions" section, the Service explains that taxpayers with tax noncompliance can use this procedure, but that the Service may impose penalties if it does not accept the taxpayer's reasonable cause explanation.
  2. Ask for a First-Time Offender Abatement (FTA) - Generally, an FTA can provide penalty relief if the taxpayer has not previously been required to file a return or has no prior penalties (except the estimated tax penalty) for the preceding three years with respect to the same IRS  File (IRM §20.1.1.3.6.1). With respect to a Form 5472 late-filing penalty, the IRM provides for an FTA if an FTA was applied to the taxpayer's related Form 1120 late-filing penalty or no penalty was assessed on the related Form 1120 (IRM §21.8.2.20.2).
  3. Reasonable Cause Defense - Under Section 6038 of the tax code, which lays out the information reporting requirements for individuals and businesses with an interest in foreign corporations and the penalties for delinquent filing, penalties may be abated if a reasonable cause exists for the failure to file. However, neither the statute nor the applicable regulations define a reasonable cause standard for the abatement. Treasury Regulations Section 301.6651-1(c) provide a definition of what constitutes reasonable cause for failure to file corporate income tax returns and says that "if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time, then the delay is due to reasonable cause." and
  4. Statute of Limitations - Though a $10,000 penalty may discourage some from filing in international information return after the deadline, there is a greater exposure to not late filing and information return and that is that the statute of limitations for tax returns which is generally three years does not apply for returns that are missing the information reports and the statute remains open indefinitely. Under the indefinite statute of limitations, not only can the IRS make adjustments to items related to the international information returns, but they also can examine any other area on the tax return.

Has  Your Company  Been Assessed an
Automatic $10,000 Penalty for a Late Form 5471 or 5472?

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)
 
 
 

Sources:

Law360
TaxAdvisor

 

Read more at: Tax Times blog

New IRS Procedure to Allow Request For Return of Property or Funds in Specific Structuring Cases

June 17, 2016

We previously posted on November 10, 2014, IRS Seizure of Assets Using Anti-Structuring Laws where we discussed thatthere were reported a series of cases in which the IRS has seized money from innocent Americans based on purported violations of so-called “anti-structuring” laws, which make it a crime to deposit less than $10,000 cash in the bank in order to evade bank reporting requirements.
Now the Internal Revenue Service has established a special procedure for people whose assets were involved in structuring to request a return of their forfeited property or funds. The new process follows a change of IRS policy on structuring cases in October 2014 and ongoing discussions with members of Congress.

The IRS will begin mailing letters this week to potentially eligible property owners to participate in this initiative.  Since 2014, the IRS has already considered a number of petitions from property owners.  The new mailing is being taken to ensure that eligible property owners in this category are aware of this option.

Background on Structuring
The special procedure to request a return of funds or property applies to a specific category of property owners whose assets were forfeited because they were involved in “legal source” structuring, in which their regular cash transactions fell below the $10,000 reporting threshold established under the Bank Secrecy Act.

The October 2014 policy change meant the IRS would no longer pursue the seizure and forfeiture of funds associated solely with “legal source” structuring, unless there are exceptional circumstances justifying the seizure and forfeiture.  The 2014 policy change -- and the new special procedure -- does not affect funds involving "illegal source" structuring violations, including those cases where structuring activity is indicative of serious crimes ranging from tax and money laundering violations to drug dealing.

Details on Who May Be Eligible to Participate
The IRS will be mailing letters to those property owners it has identified as potentially having an interest in assets that were forfeited because they were involved in structuring violations prior to the change in the IRS policy.  Property owners who participate in this process to seek a return of their funds or property must qualify by establishing that the underlying funds came from a legal source and there is no evidence the requesting party engaged in structuring to conceal other criminal activity.

In those "legal source" structuring cases which were “administrative” and did not involve a formal judicial proceeding, the IRS has authority in appropriate cases to remit funds directly to the affected property owner.  In judicial cases involving "legal source" structuring, the IRS can make recommendations in appropriate cases to the Department of Justice, but the Department of Justice has final authority on any decision to be made.

The IRS is considering certain cases dating back to Oct. 1, 2009 and certain property owners should receive a letter from the IRS this month. If property owners are in this category and do not receive a letter, the IRS encourages them to contact the IRS at [email protected] to get more information.

“The IRS recognizes that seizure and forfeiture are powerful law enforcement tools, and must be administered in a fair and appropriate manner,” IRS Commissioner John Koskinen told the House Ways and Means Committee on May 25, 2016. “We understand we have a duty not only to uphold the law, but to protect the rights of individuals as well.  We look forward to working with property owners who come forward, and we will continue working to ensure that we handle all cases with fairness and respect for taxpayer rights in every instance.”

Have a 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

HM Treasury Published a List of 41 Countries Which Are Committed to Share Beneficial Ownership Information

June 15, 2016

 

We previously posted on April 25, 2016 that Over 20 Countries Join UK-led Pilot for Automatic Data Sharing! where we discussed the international expansion of a UK-led deal to automatically share information on the ultimate owners of companies as over 20 jurisdictions, including British crown dependencies, overseas territories and EU member states sign up.

Now HM Treasury has published a list of 41 countries which have committed to sharing beneficial ownership information. 

Shortly after the leak of the “Panama Papers,” the G5 countries, spearheaded efforts to take such collective action, unveiling a new agreement to do so at the International Monetary Fund (IMF) meeting in Washington, D.C. in April 2016. 

Belgium, Bermuda, Cayman Islands, Cyprus, Gibraltar, Isle of Man, Jersey, Luxembourg, Malta and Netherlands, are countries where many trusts and companies are established for worldwide tax planning based upon their favorable local tax laws and there confidentiality laws; have also joined the list of other countries that have agreed to take collective action on increasing beneficial ownership transparency, including disclosing the real person associated with each company or trust. 

The list include the following countries which support the initiative for Automatic Exchange of Information on Beneficial Ownership:

  1. Afghanistan

  2. Anguilla

  3. Austria

  4. Belgium

  5. Bermuda

  6. Bulgaria

  7. Cayman Islands

  8. Croatia

  9. Cyprus

  10. Czech Republic

  11. Denmark

  12. Estonia

  13. Finland

  14. France

  15. Gibraltar

  16. Germany

  17. Greece

  18. Hungary

  19. Iceland

  20. India

  21. Ireland

  22. Isle of Man

  23. Italy

  24. Jersey

  25. Latvia

  26. Lithuania

  27. Luxembourg

  28. Malta

  29. Mexico

  30. Montserrat

  31. Netherlands

  32. Nigeria

  33. Poland

  34. Portugal

  35. Romania

  36. Slovakia

  37. Slovenia

  38. Spain

  39. Sweden

  40. United Arab Emirates

  41. United Kingdom

The next stage will be for the development of a global standard for this exchange.  

 Have "Unreported" Offshore Income?
 

Want to Know which OVDP Program
is Right for You?


 
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

Live Help