Monthly Archives: May 2018

According to Law360, Internal Revenue Code Section 965 as enacted by the Tax Cuts and Jobs Act imposes a one-time transition tax on the deferred earnings and profits of certain foreign corporations owned by U.S. persons. This provision was enacted as a result of the United States transitioning to a quasi-territorial tax system.

As a way of lessening the impact of this acceleration of income tax on previously untaxed foreign earnings, Congress allowed the Section 965 tax liability to be deferred and paid over an eight-year period with the first installment due on April 17, 2018.

However, in regulatory guidance issued just three days before that due date, the Internal Revenue Service announced that it would apply a taxpayer’s overpayment of regular tax to the overall unsatisfied installment liability. The IRS updated the FAQs to address overpayments made by a taxpayer and In FAQ 13, the IRS declared that any estimated tax payments made for the 2017 tax year that exceeded the regular tax liability would be used to satisfy the unpaid transition tax deferred under Section 965(h). Further, FAQ 14 reflected that any excess of regular tax for the 2017 tax year and the first installment paid by the taxpayer would not be refunded to the taxpayer or credited to the 2018 tax year. Rather, the excess would be applied to the unsatisfied liability under Section 965.
This IRS position, which is inconsistent with the plain language of Section 965 and congressional intent, creates problems for both individual and corporate taxpayers.

The American Institute of Certified Public Accountants sent a letter to the commissioner of the IRS requesting that the IRS reconsider FAQ 13 and 14, so that taxpayers can apply an overpayment from the 2017 tax year to the 2018 or receive a refund.

It is possible the IRS may change its position or withdraw FAQ 13 and 14. Absent such action, a taxpayer can assert that the IRS has exceeded its authority in administering the collection of the Section 965 tax in a situation where a taxpayer has elected to pay it in installments.

A challenge to this IRS position could be made by filing a protest that an overpayment from the 2017 tax year should be applied to the 2018 or be refunded, as opposed to being used to offset the unsatisfied Section 965 liability. Presuming the IRS refused to do so, the taxpayer could challenge this decision in U.S. Tax Court, since at that point the Section 965 tax has already been collected, using the U.S. District Court or U.S. Court of Federal Claims to seek a refund of the overpayment may also be an option.

Have a International Tax Problem?

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation Contact Us at:

www.TaxAid.com or www.OVDPLaw.com or

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

 

For those taxpayers who made a voluntary disclosure and payment within the last two years the issue becomes, can they file for refund under this precedent, since OVDP provided that in no case will the penalties in the OVDP program be higher than the penalties provided under law?

Have Undeclared Income from an Offshore Account?

 

 

Want to Know Make Sure You Are Not Over Penalized 
If You Do Not Enter The OVDP Program?
 
 

 

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation Contact Us at:

www.TaxAid.com or www.OVDPLaw.com or

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

On February 7, 2017 we posted IRS Has 13 New Compliance Campaigns for LB&I Taxpayers where we discussed our previous posted on October 9, 2015 LB&I Agents Lose Autonomy To Centralized Office That Will Be Using Data to Identify Compliance Risks For Audit! that discussed the fact that Tax practitioners will face new questions from examination teams as the IRS selects compliance risks based on data.   

This is in conformity with the Large Business and International Division's (LB&I) move from individual audits of multinationals to broader considerations involving risk assessment, which was included in January 2017 announcement regarding the new audit strategy for its LB&I division known as "campaigns," essentially, shifting its strategy toward issue-based examinations based on compliance issues that LB&I determines present greater levels of compliance risk and thereby improving return selection. IRS initially selected 13 compliance issues when it rolled out this strategy.

The six campaigns selected for this rollout are:

• 1. Interest Capitalization for Self-Constructed Assets

• 2. F3520/3520-A Non-Compliance/Assessed Penalties  

• 3. Forms 1042/1042-S Compliance

Taxpayers who make payments of certain U.S.-source income to foreign persons must comply with the related withholding, deposit, and reporting requirements. This campaign addresses Withholding Agents who make such payments but do not meet all their compliance duties. The Internal Revenue Service will address noncompliance and errors through a variety of treatment streams, including examination.

 
• 4. Nonresident Alien Tax Treaty Exemptions

• 5. Nonresident Alien Schedule A and Other Deductions

• 6. NRA Tax Credits

This campaign is intended to increase compliance in nonresident alien individual (NRA) tax credits. NRAs who either have no qualifying earned income, do not provide substantiation/proper documentation, or do not have qualifying dependents may erroneously claim certain dependent related tax credits. In addition, some NRA taxpayers may also claim education credits (which are only available to U.S. persons) by improperly filing Form 1040 tax returns. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.

International Tax Audit by IRS LB&I ?
 

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

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

 


According to National Bureau of Economic Research (NBER) there is over ARS220 billion in offshore accounts, the equivalent of almost 40 percent of Argentina’s GDP. The country ranks 5th globally for offshore account deposits, behind Russia, Saudi Arabia, Venezuela and the UAE.

Drawing on newly published macroeconomic statistics, the National Bureau of Economic Research  estimates the amount of household wealth owned by each country in offshore tax havens.

The equivalent of 10% of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity, from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies.

NBER used these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP.

0.01% wealth share substantially, even in countries, such as Norway or Denmark, that do not
use tax havens extensively. Offshore wealth has a larger effect on inequality in the U.K., Spain,
and France, where, by our estimates, 30%–40% of all the wealth of the 0.01% richest households
is held abroad.

It has dramatic implications in Russia, where the majority of wealth at the top is held outside of the country. In the United States, offshore wealth also increases inequality, but the effect is more muted than in Europe, because U.S. top wealth shares are already very high even disregarding tax havens. In all cases, taking offshore wealth into account increases the rise in inequality seen in tax data markedly. This result highlights the importance of looking beyond tax data to study wealth accumulation among the very rich in a globalized world.

These results highlight the importance of looking beyond tax and survey data to study wealth accumulation among the very rich in a globalized world.