Monthly Archives: July 2021

According to Law360, ample proof exists that a woman willfully failed to report her multimillion-dollar Swiss bank accounts to the Internal Revenue Service, justifying a $4.1 million penalty against her, the U.S. government told a New York federal court, in U.S. v. Marika Katholos, case number 1:17-cv-00531.

Marika Maraghkis Katholos disregarded tax form instructions, failed to seek professional advice and set up the bank accounts to skirt federal law requiring her to file a report of a foreign bank account, the government said Friday. Her actions justify the higher penalty ascribed for willful failure to file, the government said, moving for summary judgment.

Katholos set up two UBS bank accounts in Switzerland in 2003 and 2005 and took steps to conceal them, the government said. On bank forms, Katholos checked boxes indicating she was not a U.S. or dual citizen, according to the U.S. government. She arranged to identify the accounts by number, not name, and agreed for the bank to hold her correspondence instead of mailing it to her, the government said.

She then formed a foundation in Liechtenstein and transferred the account funds into it, according to the government. Katholos said the account was set up for her father, whom she consulted. Despite this, she presented no evidence that the bank or foundation needed her father's signature or verbal approval to act on the account, the government said.

She was the first beneficial owner, had signature authority, directed bank officials as to investing the assets and on several occasions transferred money out of them, the government said. Katholos tried hiding the accounts by using copies of her siblings' passports without their knowledge when creating them, and she never informed them about the accounts, the motion said.

These actions establish a pattern of concealment and or reckless indifference toward FBAR obligations, the U.S. government said. That is sufficient for the court to grant summary judgment as to her willfulness, it said.

The government also asked the court to dismiss the affirmative defenses Katholos raised. She claimed that the maximum FBAR penalty is $100,000, but failed to mention Congress in 2004 increased it for willful failure to half the amount in a bank account, the U.S. government said. The IRS may not have updated its regulations to reflect this, but numerous courts have held that they have been superseded by the 2004 action, according to the government.

Katholos also claimed that the IRS did not follow the Internal Revenue Manual when penalizing her, exceeded the statute of limitations and violated the Eighth Amendment restrictions on excessive fines. Katholos does not identify specific violations of the manual, voluntarily signed an agreement extending the statute and contradicts legal precedent upholding the constitutionality of FBAR penalties, the government argued.

Last month the U.S. opposed a motion by Katholos to dismiss the case on the grounds that the U.S. Tax Court had already ruled that she owed no taxes on her 2007 and 2008 returns. The issues in the Tax Court case are distinct from those in the FBAR case, the government said, objecting to a witness for Katholos on the grounds that the testimony would be inadmissible.

Do You Have Undeclared Offshore Income?

 

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 contact us at:

www.TaxAid.com or www.OVDPLaw.com 

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

Read more at: Tax Times blog

Treasury Secretary Janet Yellen announced on July 1, 2021 that a group of 130 nations has agreed to a global minimum tax on corporations, part of a broader agreement to overhaul international tax rules.

If widely enacted, the GMT would effectively end the practice of global corporations seeking out low-tax jurisdictions like Ireland and the British Virgin Islands to move their headquarters to, even though their customers, operations and executives are located elsewhere.

“For decades, the United States has participated in a self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response. The result was a global race to the bottom: Who could lower their corporate rate further and faster? No nation has won this race,” said Yellen in a statement on the accord.  

“Today’s Agreement By 130 Countries Representing More Than 90 Percent Of Global GDP Is A Clear Sign: The Race To The Bottom Is One Step Closer To Coming To An End,”
Yellen Said.

Nine countries did not sign; this group included the low-tax European Union members Ireland, Estonia, and Hungary as well as Peru, Barbados, Saint Vincent and the Grenadines, Sri Lanka, Nigeria, and Kenya.

India, China, and Turkey, which had been holding out at some point in the negotiations, joined in the agreement.

The world's financial leaders will endorse on July 9-10 a deal setting a global minimum corporate tax and call for technical work to be finished so they can approve the framework for implementation in October, their draft communique showed. The plan is for the new rules to be implemented by 2023, a statement from countries that backed the agreement said.

The deal also reportedly includes a framework to eliminate digital services taxes, which targeted the biggest American tech companies.

In Their Place, Officials Agreed To A New Tax Plan That Would Be Linked To The Places Where Multinationals
Are Actually Doing Business, Rather Than
Where They Are Headquartered.

Much of the groundwork for adopting a GMT has already been laid by the Organization for Economic Cooperation and Development, which released a blueprint last fall outlining a two-pillar approach to international taxation.

The OECD Inclusive Framework on Base Erosion and Profit Shifting, known as BEPS, is the product of negotiations with 137 member countries and jurisdictions.

Yellen’s Announcement Did Not Include The Actual Rate At Which The GMT Would Be Set, But The Biden Administration Has Pushed For At Least 15%.

G-20 finance ministers and central bank governors are scheduled to meet in Venice, Italy, later this month, and the international tax plan is expected to be high on the agenda. The G20 finance ministers did meet on July 10, 2021 and they endorsed the key components of the two-pillar proposals to address today's tax challenges. The revised version of Pillar One, which deals with the re-allocation of taxing rights, will affect the world's largest and most profitable companies (global turnover in excess of EUR 20 billion and a profit margin of at least 10%). Pillar Two, which introduces a global minimum effective tax rate of at least 15%, will apply to all MNEs with a global turnover of at least EUR 750 million.

While the G20 endorsement of the revised proposals was expected, the formal seal of approval from the G20 finance ministers is an important milestone for the two-pillar solution, giving the proposals further impetus. endorsed the key components of the two-pillar proposals to address today's tax challenges. 

The revised version of Pillar One, which deals with the re-allocation of taxing rights, will affect the world's largest and most profitable companies (global turnover in excess of EUR 20 billion and a profit margin of at least 10%). Pillar Two, which introduces a global minimum effective tax rate of at least 15%, will apply to all MNEs with a global turnover of at least EUR 750 million.

The GMT agreement represents a key part of what President Joe Biden has called “a foreign policy for the middle class.”

The strategy, devised in part by Biden’s national security adviser Jake Sullivan, emphasizes how foreign policy and domestic policy can be integrated into a new middle ground between the traditional conservative and liberal approaches to global affairs.

“Foreign policy for the middle class” aims to ensure that globalization, trade, human rights and military might are all harnessed for the benefit of working Americans, not solely for billionaires and multinational corporations, but not for abstract ideological reasons either.

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Sources

CNBC

Yahoo

Read more at: Tax Times blog

The Treasury Department published the 660 names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency “Expatriated” during the 4th quarter of 2020, bringing the total number of published expatriates in 2020 to 6,707. 

The latest U.S. Department of the Treasury Report reflects that a record 6,707 individuals expatriated during 2020. 

Why are some Americans Individuals expatriating?

• Trump Did Not Win the Election.
• The Democrat's Now Control the House & the Senate.
• Obama-Care with its associated additional 3.8% Obama Care Tax make you feel like leaving the country?

• You're so sick of liberal Democrats trying to socialize the United States by taxing wealthy people?

• Or maybe you're a naturalized U.S. citizen or permanent resident who has prospered here, but would now like to move back the old country for retirement or to start a new  venture?

Whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off. 

The increase in expatriation also has caught the attention of the Treasury Inspector General for Tax Administration (TIGTA), which, in a recent report, emphasized that the Internal Revenue Service (IRS) should have controls in place to better enforce U.S. tax and reporting provisions relating to expatriates.

On May 8, 2017, we posted Is it Time to Expatriate? Your Neighbors Are. where we discussed that the 2016 list of US expatriates’ shows an increase in the number of Americans who are renouncing their US citizenship or turning in their green card. 

The graph above is based solely on IRS data and shows the number of published expatriates per year since 1998.

The connection between the list of expatriates and the IRS implies a link to tax policy. 

The U.S. is one of a very small number of countries that tax based on nationality, not residency, leaving Americans living abroad to face double taxation. 

The escalation of offshore penalties over the last 20 years is likely contributing to the increased incidence of expatriation.

In view of the significant uptick in expatriation activity, Marini & Associates has publish 3 Posts titled So Trump Did Not Win the Election - Is It Time to Expatriate? reviewing the essential elements of expatriation from a tax perspective.

Should I Stay or Should I Go?

Need Advise on Expatriation?

 

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

Read more at: Tax Times blog

• So Trump Did Not Win the Election.
• The Democrat's Now Control the House & the Senate.
• ObamaCare with its associated additional 3.8% Obama Care Tax make you feel like leaving the country?

• You're so sick of liberal Democrats trying to socialize the United States by taxing wealthy people?

• Or maybe you're a naturalized U.S. citizen or permanent resident who has prospered here, but would now like to move back the old country for retirement or to start a new venture?

Whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off. 

For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.

In 1994 a Forbes cover story described how such wealthy Americans as Campbell Soup heir John (Ippy) Dorrance III, the late Carnival founder Ted Arison and Dart Container heir Kenneth Dart had given up their U.S. citizenship and avoided U.S. income or estate tax. Perhaps the most clever was Dart, who managed to come back "home" as the Belize ambassador to the U.S., manning a newly opened Belize embassy in Sarasota, Fla., right where he had previously lived! Since that time, Congress has repeatedly tightened the screws on tax-motivated expatriation.

1. Uncle Sam taxes income worldwide.
The U.S. is unusual in that it asserts the right to tax the worldwide income (and at death assets) of its citizens and those who have become permanent residents. It doesn't matter where you live, where the income is earned, or where else you might pay tax. Yes, you may receive foreign tax credits on your U.S. Form 1040 for taxes you pay elsewhere and those credits will offset some (but typically not all) of the financial burden of paying tax in multiple jurisdictions. But the key point is that if you are a U.S. citizen or a permanent U.S. resident, no matter where you move, Uncle Sam will assert a claim on your wealth. So being a U.S. citizen can be expensive. 

2. Expatriating means really leaving. 
To even think about putting himself beyond the reach of the Internal Revenue Service, a citizen must give up U.S. citizenship and (in the case of citizens subject to Internal Revenue Code Section 877) severely limit the time spendy in the U.S. to not more than 30 days a year. Under that section, a person who attempts to renounce U.S. citizenship but then spends more than 30 days a year in the U.S. will be treated as a U.S. citizen or resident for that year. You may think no one has ever done this, but many have. Permanent U.S. residents (holding green cards) also pay U.S. tax on their worldwide income. They may find it easier to take the expatriation plunge, particularly if family or business opportunities beckon in their country of origin.

3. The old 10-year window is closed. 
Back in 1966 Congress enacted the Foreign Investors Tax Act of 1966, signed into law by Lyndon B. Johnson. Essentially expatriates were subject to U.S. tax on their U.S.-source income at normal U.S. tax rates for a full 10 years following their expatriation. Significantly, though, a person could avoid this tax entirely if he did not have as one of his principal purposes the avoidance of U.S. federal income, estate or gift taxes. Of course few people would admit they had a principal purpose of tax evasion, and the government had a hard time proving it. Suffice it to say that there were lots of people (with good lawyers) marrying foreigners, returning to the country of their birth, etc. The system didn't work very well, and little tax was collected. 

 

Need Advise on Expatriation? 
 

 

Contact the Tax Lawyers of
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