Yearly Archives: 2021

According to Law360, A tax preparer owes around $103,000 in Fraud Penalties, as the Ninth Circuit ruled on October 8, 2021, that the U.S. Tax Court was justified in finding he underpaid his marijuana business's taxes, hid income and failed to cooperate with the IRS. 

The Ninth Circuit affirmed in Raymond and Ruby Chico v. Comm., case number 20-71017, in the U.S. Court of Appeals for the Ninth Circuit, the lower court's decision finding that Raymond Chico owes fraud penalties under Internal Revenue Code Section 6663  for 2010 through 2012 for underreporting income from his marijuana cigarette container company, Doobtubes, and other ventures. 

The Tax Court wasn't wrong to find there was convincing evidence that Chico committed fraud, including his presenting of scant documentation supporting his tax reporting for those years and is failure to cooperate with an Internal Revenue Service investigation.

"The Tax Court did not clearly err in finding clear and convincing evidence of fraud based on the six badges of fraud present in the record," the opinion said. 

The U.S. Tax Court found in September 2019 that Raymond Chico had failed to report Doobtubes' gross receipts for the three tax years by around $180,000 and that Chico wasn't entitled to business deductions he originally claimed on tax returns. He also failed to report constructive dividends from the marijuana dispensary and failed to report income from a rental property, according to the opinion.

The lower court also held him liable for the fraud penalties, and indicated in an order in January 2020 that that liability totaled around $103,000.

Chico told the Ninth Circuit in December 2020 that there's not enough evidence indicating he fraudulently underreported his income and that he initially relied on an attorney who failed to cooperate with the IRS in its audit and was later disbarred from practicing law in California.

The U.S. rejected those arguments, saying in its own filing in February 2021 there was more than enough evidence indicating he committed fraud. This evidence includes that he understated income, kept inadequate records and failed to file business tax returns, according to the government.

In its opinion, the Ninth Circuit said: 

1. The Tax Court wasn't mistaken in finding that the evidence justified the imposition of tax fraud penalties against Chico. and
2. The Tax Court wasn't wrong to find that Chico's status as a certified tax return preparer, further strengthened the finding that he committed fraud, the appeals court said. (ya think?)

Have an IRS Tax Problem?

     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)

Read more at: Tax Times blog

According to Law360, the world of international tax reporting has grown more complicated. In addition to the general globalization in business, the 2017 Tax Cuts and Jobs Act made significant changes to the international tax landscape.

The TCJA introduced the base erosion and anti-abuse tax, global intangible low-taxed income, foreign derived intangible income, and the participation exemption regime. These new international tax rules, coupled with an already complicated U.S. tax system, make tax compliance a daunting task for even the most sophisticated companies and investors.

Navigating this landscape has become particularly complicated for investors in pass-through entities that rely on Schedule K-1, used to report a partner's share of income, deductions credits and other items, to comply with their U.S. income tax reporting requirements. The way international tax items were reported on Schedule K-1 historically lacked structure — often leaving investors to sort through lengthy footnotes that were inconsistent in presentation from one investment to the next.

In response to this problem, the Internal Revenue Service released Schedule K-2, for reporting a partner's international distributive share items, and Schedule K-3, for reporting a partner's share of international income, deductions, credits, etc., on June 3 and June 4, along with corresponding forms related to Form 1120-S.

The schedules are designed to provide greater clarity for pass-through investors on how to compute their U.S. income tax liability with respect to items of international tax relevance — generally foreign activities or foreign partners.

Schedules K-2 and K-3, along with accompanying instructions, will affect taxpayers filing Form 1065, which is used to report partners' share of income and other items; Form 1120-S, which reports U.S. income tax for an S corporation; and Form 8865, which is used to report the income of foreign partnerships for the 2021 tax year.

The recent release of the final forms and instructions provides valuable insight into the future of reporting for international tax matters for pass-through entities. The compliance season for 2021 returns is fast approaching. Taxpayers should take advantage of the availability of the final forms and accompanying instructions — albeit some may be in draft form — as an opportunity to assess their ability to comply with the additional reporting they entail.

Taxpayers should also make any needed changes to their tax compliance processes and systems to best enable themselves to comply with the additional reporting.

Go to Law360 for more on an overview of the new reporting requirements and discusses how to prepare for what is poised to be one of the most significant changes to the partnership compliance function in decades.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

for a FREE Tax HELP 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

According to Law360, an American living in Switzerland owes the U.S. government more than $300,000 in penalties and interest for his non-willful failure to report 28 foreign bank accounts, the U.S. told a Virginia federal court.

The American, Albert Cambata, did not file the proper notification, known as a Report of Foreign Bank and Financial Accounts, from 2010 to 2012, the U.S. government said in a complaint filed in case is U.S. v. Albert K. Cambata, case number 5:21-cv-00065, in the U.S. District Court for the Western District of Virginia on October 6, 2021.

Cambata had accounts in multiple foreign banks, the government said, including UBS, HSBC and Bank Julius Baer & Co. LTD. 

 Do You Have Undeclared Offshore Income?

 

Want to Know Which
Voluntary Disclosure 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

According to Law360, Ireland endorsed a plan for landmark international tax reform on October 7, 2021 after successfully lobbying rich nations to alter terms backed by most of the world, constraining ambitions to potentially raise a 15% minimum corporate tax rate in the near future.

Ireland's Assent To The Agreement As A Member The Organization For Economic Cooperation And Development
Means The Country Has Pledged To Raise Its Corporate Income Tax Rate From 12.5% To 15% For Companies
With Annual Revenue Over €750 Million ($866 Million).

"The government has now approved my recommendation that Ireland join the international consensus, which, in turn, will secure certain strategic priorities for Ireland," Paschal Donohoe, the country's finance minister, said Thursday in a news conference.

While some countries wanted a higher minimum tax rate than 15%, Ireland's position "moderated those ambitions and views in the context of the broader agreement," he said.

Donohoe confirmed he had been lobbying the OECD since July for that change. A final draft of the agreement is due on October 8, 2021. 

Do You Have Undeclared Income
from a Tax Haven?

Read more at: Tax Times blog