Yearly Archives: 2017

As it relates to potential tax changes as a result of the Trump administration, we posted:

1. Border Tariff or Border Adjustment Tax or US VAT?
2. Trump Presidency Could Be Death Knell For Estate Taxes!
3. President-Elect Donald Trump Is Less Than Ideal for Tax Advisers?

First, they are assuming that there is a repeal of the ACA and associated taxes and that there is also a general framework for a replacement bill. At this time, it is unclear what a replacement bill may look like. However, for the purposes of our analysis, we assume that the ACA is replaced with a similar-sized plan resulting in little if any additional changes in the size of the federal budget deficit over their forecast horizon, the end of 2018. 

They are also assuming that corporate tax cuts are enacted in the following way: 

• lowering the top corporate rate to 30 percent from the current 35 percent and
• capping the top rate on pass-through entities at 25 percent.  

Wells Fargo also expects a permanent reduction in the tax rate for profits from overseas to 8.75 percent for cash and cash-equivalent profits and 3.5 percent on other profits.

Wells Fargo currently does not have any trade policy changes, such as tariffs, incorporated into their forecast at this time but fully recognize that there is a decent probability of such policies becoming unilaterally enacted by President Trump, at least on a one-off basis.

Need Tax Advice?

 

 

 

Contact the Tax Lawyers at 

Marini& Associates, P.A.  

 

 

for a FREE Tax Consultation

at: www.TaxAid.com or www.OVDPLaw.com or

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

 

 

 

 

U.S. taxpayers who have foreign bank and/or financial accounts should be watching the clock.

According to Tax Analysts Exclusive: Conversations: Koskinen Looks to Future of Tax Administration, IRS Budget, IRS Commissioner John Koskinen stated on December 12, 2016 that, the Offshore Voluntary Disclosure Program (OVDP) will continue at least through November 2017.

• John Koskinen also stated that One of the reasons people have talked about winding it down is trying to encourage people you've got to get in. 
• At some point, it's going to end and then you're going to be stuck with the normal process and you don't want people saying, 'I'll just wait as long as I can.' 
• The real incentive, though, is if we find out about you after we know you exist with the banks, then the penalties and the implications go up significantly. 
• There are other banks in the world (Hong Kong, Singapore, all of Asia) and other areas (besides Switzerland) in the world than just Europe and people who are maybe hiding money in other places ought to take advantage of that disclosure program, because we're coming.

1. The IRS does not have sustainable staffing on its present and prospective budgets.  President Trump recently called for a $239 million cut to the IRS budget in 2018.  The proposed spending cut is similar to a reduction proposed in the House last year and represents about 2% of the budget.  This alone is not enough but taken in conjunction with recent historical budget cuts and/or lack of increased budgets the IRS staffing has decreased 30% over the last couple of years. 
2. The average OVDP takes roughly 2 years to complete from submission to receipt of the closing form 906.  There are multiple administrative, examination, technicians, and managers involved in this process, especially if there is an opt-out.  The amount of time, energy, and resources that the IRS must allocate to this area cannot be sustained.  This is akin to the status of normal IRS audit or examination. In that area, the IRS has been very created and resorted to automated matching and computer generated notices as a substitute to the lack of workforce.
3. The Foreign Account Tax Compliance Act (FATCA) and Intergovernmental Agreements (IGAs) have produced a treasure trove of information that has been exchanged between foreign countries and the US. 

4. The ICIJ Panama Papers which leaked offshore holdings from 1977 to 2015 and revealed 11.5 million records including the holdings of 140 politicians, 214,088 offshore entities, and 33 persons/companies blacklisted by the US government.   

5. IRS Data Mining of the > 100,000 disclosures in the previous and current OVDP programs that the IRS can use the information it receives to conduct new audits. The data mining can be used to:

For those that receive automated notices with FBAR, 8938, and/or other international informational related penalties, they should also consider their options as there are many successful defenses to the assessment of these penalties (See our blog post US Taxpayers Are Receiving Automated $10,000 Penalty Assessments For Late Filed Form 5471's & 5472's - We Can Help)

Whatever your circumstances regarding your unreported offshore income, you should immediately seek a firm that has extensive experience in successfully resolving these types of issues for taxpayers and also has the experience of successfully litigating these types of issues with the IRS.

Do You Still Have Undeclared Income from

Offshore Banks or Financial Advisors?

 

 

 

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.com or www.OVDPLaw.com or

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

 

 

 

 



Sources:

Tax Analysts 

The Wolf Group
 
Golding & Golding
 

In 2016, there was a clear upward trend in the fight against tax evasion globally. The April 2016 release of the Panama Papers caused an international shake-up that resulted in multiple global tax evasion investigations and regulatory reviews including in the British Virgin Islands, Singapore, Hong Kong, France, Spain, Germany, Australia, Austria, Sweden and the Netherlands.

The JITSIC brings together 37 of the world's national tax administrations that have committed to more effective and efficient ways to deal with tax avoidance. It offers a platform to enable its members to actively collaborate within the legal framework of effective bilateral and multilateral conventions and tax information exchange agreements, sharing their experience, resources and expertise to tackle the issues they face in common. 
 

 

We previously posted 145 Offshore Banks & Now Financial Advisors Are Turning Over Your Names To The IRS - What Are Your Waiting For?  where we discussed  that the IRS keeps updating its list of foreign banks which are turning over the names of their US Account Holders, who are now subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP). 

  

Within the OVDP, people who

Pre-Cleared

Before the various Effective  Dates

are generally Safe From the
Higher 50% Penalty.

 

As additional banks are added to the list, only those American taxpayers that request pre-clearance before their bank is listed, will get the 27 1/2% OVDP penalty. The 50% penalty now applies to all taxpayers with accounts at financial institutions or with facilitators which are named, are cooperating or are identified in a court filing such as a John Doe summons.

 

Although the 50% penalty is high, willful civil violations can result in tax, penalties and interest totaling 325% of the highest balance in the account for the  most recent six years period. Recent guidance suggests that the IRS could be more lenient in the future, but the IRS’s definition of leniency can still make the OVDP a very good deal that provides certainty.  

 

Do You Still Have Undeclared Income from

Offshore Banks or Financial Advisors?

 

 

 

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.com or www.OVDPLaw.com or

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

 

The Tax Court has held that, where a partner omits a partnership item from his individual tax return, and the partnership itself was subject to a TEFRA audit, the Court has jurisdiction to determine that partner's resulting negligence penalty.

The Tax Court's jurisdiction generally is limited to the review of deficiencies asserted by IRS (and not paid when the 90-day letter is issued). (Code Sec. 6512(a)). 

The following rules apply to TEFRA (i.e., the Tax Equity and Fiscal Responsibility Act of 1982) unified audit and litigation procedures. These procedures generally apply to partnership tax years that begin before January 1, 2018.

Whether a tax item of a partnership or a partner is a “partnership item” or a “non-partnership item” governs whether it is addressed in partnership-level proceedings or partner-level proceedings.
 
A partnership item is “any item required to be taken into account for the partnership's tax year under any provision of subtitle A to the extent the regs provide that, for purposes of this subtitle, such item is more appropriately determined at the partnership level than at the partner level.” (Code Sec. 6231(a)(3)) Non-partnership items are defined in the negative to be “an item which is (or is treated as) not a partnership item.” (Code Sec. 6231(a)(4))

Affected items are further divided into two subcategories: computational affected items and factual affected items.

• A computational affected item is one that can be determined mathematically, such as the medical expense deduction just described. (Code Sec. 6231(a)(6)) 
• A factual affected item is an affected item that requires further factual determinations at the partner level. (Hambrose Leasing 1984-5 Ltd. P'ship, (1992) 99 TC 298)

Whether an affected item is factual or computational generally determines what procedures apply to the assessment of tax relating to that item.

• Computational affected items are not subject to deficiency procedures. (Code Sec. 6230(a)(1)) Following a TEFRA proceeding, IRS may assess tax attributable to those items, along with the tax attributable to partnership items, by way of computational adjustment. (Code Sec. 6231(a)(6))
• In contrast, affected items that require partner-level factual determinations are subject to deficiency procedures. (Code Sec. 6230(a)(2)(A)(i)).

The taxpayers were Mr. and Mrs. Malone who filed a joint return. Mr. Malone was a partner in MBJ, a partnership. The partnership reported gain from installment sales of partnership assets.

The Malones did not report the gain on their joint return and didn't file a Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request, or otherwise notify IRS that they were taking a position inconsistent with that reported by MBJ.

IRS issued a notice of deficiency with respect to the unpaid taxes and the penalty for negligence.

The only issue before the Court was whether it had jurisdiction to determine the applicability of the negligence penalty. More specifically, the Court considered whether the deficiency procedures apply to a Code Sec. 6662(a) accuracy-related penalty for negligence imposed solely because of a partner's inconsistent reporting of partnership items.

Tax Court had jurisdiction with respect to negligence penalty. The Court held that, because there were no adjustments to partnership items, deficiency procedures applied to the penalty.