Monthly Archives: July 2022

On  April 26, 2022, we posted Should I Stay or Should I Go? - Expatriations Are Up In 1st Quarter of 2022, where we discussed that the number of people who expatriated from the U.S. rose during the first quarter of 2022 compared with the previous quarter, the Internal Revenue Service said in a notice released on July 25, 2022.

Now the number of people expatriated from the U.S. more than doubled during the second quarter of 2022 compared to the previous quarter, the Internal Revenue Service said in a notice released Wednesday.

From 571 In The First Quarter Of 2022, The IRS
Said In A List Of Those Choosing To Expatriate.

The list includes those losing U.S. citizenship under Internal Revenue Code Section 877(a)  and Section 877A , the notice said.

It also includes long-term residents who are treated as losing citizenship under IRC Section 877(e)(2), the agency said.

According to CNBC the top reason why Americans abroad want to dump their U.S. citizenship include:

• Nearly 1 in 4 American expatriates say they are “seriously considering” or “planning” to ditch their U.S. citizenship, a survey from Greenback Expat Tax Services finds.  
• About 9 million U.S. citizens are living abroad, the U.S. Department of State estimates.
• More than 4 in 10 who would renounce citizenship say it’s due to the burden of filing U.S. taxes, the Greenback poll shows.

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

According to Law360, Sen. Joe Manchin said on Wednesday, July 27, 2002, that he had reached an agreement with Majority Leader Chuck Schumer on legislation that would impose a 15% corporate minimum tax as part of a larger package to address tax, energy and health care costs.

Manchin, a Democrat from West Virginia, and Schumer, a Democrat from New York, announced the agreement to add the package, known as the Inflation Reduction Act of 2022, to the fiscal year 2022 budget reconciliation bill, which could be passed with a simple majority. The package includes key parts of President Joe Biden's stalled domestic agenda such as investing in renewable energy and lowering the cost of health insurance and prescription drugs.

The measure would bring in roughly $739 billion in new revenues, including: 

• $313 billion from establishing a corporate minimum tax, 
• $124 billion from increased tax enforcement efforts by the Internal Revenue Service, 
• $14 billion from changing the tax treatment of carried interest and 
• $288 billion from reducing the cost the federal government pays for prescription drugs, according to a summary provided by Schumer's office.

Corporations would generally be eligible to claim net operating losses and tax credits against the AMT, and would be eligible to claim a tax credit against the regular corporate tax for AMT paid in prior years, to the extent the regular tax liability in any year exceeds 15% of the corporation's adjusted financial statement income.

The funding also would lower health care premiums by $64 billion and provide the IRS with an additional $80 billion to pay for the enforcement efforts. Approximately $15 million of the IRS funding would be used to study the creation of a free electronic filing program for low- and moderate-income taxpayers.     

Manchin and Schumer said the text of the legislation would be submitted for Senate parliamentarian review Wednesday and that the Senate would consider it next week. Manchin's support is vital since Democrats will need all 50 of their members in the Senate to pass the bill if no Republicans support it.

"It is common sense that a domestic corporate minimum tax of 15% be applied only to billion-dollar companies or larger, ensuring that America's largest businesses are no longer able to operate for free in our economy," he said.

Roy Blunt, R-Mo., chair of the Senate Republican Policy Committee, said he probably wouldn't support the Manchin-Schumer legislation, which he hadn't seen yet.

"I don't think raising taxes is the right thing to do right now or putting more money into the economy," Blunt told Law360.

The agreement with Schumer follows comments Manchin made during a West Virginia radio interview July 15 that he wouldn't support the tax proposals in Biden's economic plan and that a significant increase in inflation led to his decision. Manchin said his support for a slimmed-down version of the Build Back Better Act, the budget reconciliation bill the House passed in November, had depended on a consumer price index report that showed a 9.1% increase in June over the prior year.

Manchin has featured prominently in the debate on the Build Back Better Act. In December, he opposed the measure. Manchin said he was concerned about its effect on inflation and the national debt, said he couldn't support the proposal, and pointed to other concerns like the pandemic as issues Congress should focus on.

Read more at: Tax Times blog

In Ott, (DC MI 2/26/2020, 125 AFTR 2d ¶2020-492, a district court has held that a taxpayer who failed to file an FBAR did so willfully. It came to this conclusion because, among other reasons, the taxpayer signed his tax return under penalty of perjury, told the foreign bank not to send correspondence to his address, and failed to consult with a tax expert regarding whether to report the foreign account.

Mr. Ott, a US person, had a Canadian bank account with more than $10,000 in it during 2007. And he failed to file an FBAR that year.

Many years prior, a friend had told him that he did not need to report foreign bank accounts or income. Besides that, Ott claimed to have no tax or financial expertise.

Ott opened an account in Canada because his sister lived there and he had all the bank's correspondence sent to his sister's address. He deposited over $1 million. His sister rarely forwarded bank statements or other correspondence to Ott.

For 2007, Ott hired a CPA, Mr. Weide, to prepare his tax return. It is not clear from the record whether Weide asked Ott if he had a foreign account. When Weide was using tax preparation software to prepare the return, he did not answer the question "Does the taxpayer have a foreign account?", and the software defaulted to "No." Ott's stated income on the return for the year was $20,000. Ott signed the return under penalty of perjury.

Ott never asked Weide about whether he needed to report the Canadian account.

The IRS imposed a penalty on Ott for willfully failing to file the FBAR. The IRS contended that Ott had constructive knowledge of his reporting requirements by signing his tax returns, which included a reference to the FBAR within the Schedule B form. The IRS also argued that Ott putting his sister's Canadian address on the accounts was an act of concealment. Finally, the IRS contended that the foreign account balances were so much more than Ott's annual income, all demonstrating that he recklessly and, therefore, willfully failed to file FBARs for the years in question.

Ott asserted that his signature on his tax returns, along with the absence of any deliberate acts of concealment, did not amount to a willful failure to file the FBARs, and that he was at most negligent.

The district court agreed with the IRS that Ott willfully failed to file his FBARs.

The court said the following facts indicated that Ott acted willfully and/or recklessly:

• Ott signed a return each year, under penalty of perjury—regardless of whether he actually read the return, certifying that he did not have an interest in foreign accounts. Accordingly, constructive knowledge of the requirement to file the FBAR was imputed to Ott.
• Ott consistently stated that he was not a tax expert with any financial or legal training in tax accounting. Nevertheless, he chose to rely solely on advice he received decades ago concerning foreign investments. Ott argued that his mistaken reliance on incorrect advice proved that he was at most negligent, not willful. The evidence presented in this case, however, supported an inference of reckless conduct. Ott's failure to discuss his foreign investments with his long-time accountant Weide, for example, indicated a conscious effort to avoid learning about reporting requirements.
• Using an address that matched the country of the foreign bank accounts suggested that Ott sought to avoid the detection of his account ownership. Further, sending everything to his sister allowed Ott to avoid seeing any statements concerning reporting responsibilities, including the language: "These transactions are to be reported on your annual return of income." The court found that this failure to review any of the mail sent to his sister from the brokerages constituted an act of concealment and was reckless.
• Ott acted recklessly and, therefore, willfully because he kept continuous contact with his broker regarding the foreign accounts, regularly checked the account balance online, and the account balance was significantly disproportionate to Ott's claimed income.

Have an FBAR Penalty Problem?  

 

 

 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

Read more at: Tax Times blog

Case in point is U.S. v. George Gaynor Jr., case number 2:21-cv-00382, in the U.S. District Court for the Middle District of Florida, where Lavern Gaynor, whose grandfather was a founder of Texaco Inc., now a subsidiary of Chevron Corp., filed amended tax returns and foreign bank account forms in 2012 and 2013 to disclose her overseas assets, she did so in a so-called quiet disclosure, according to the government's complaint. 

Lavern Gaynor died April 12, 2021, according to the complaint and the FBAR penalties were initially assessed for 2009, 2010 and 2011 by the IRS in May 2019. 

The Amount At Issue As Of The Beginning Of June
Had Increased To $20.9 Million As Result Of
Accrued Interest, According To The Current Filing.

The government sued the estate in May 2021, contending that Gaynor moved her assets from one Swiss bank to another in order to avoid her tax reporting obligations. She also didn't tell her accountant about the bank accounts and attempted to quietly disclose the accounts later without alerting the IRS to her noncompliance, the government said.

The estate filed a counterclaim in July 2021, arguing that the FBAR penalties assessed against Gaynor for 2009, 2010 and 2011 should have been abated upon her death in April 2021 under federal common law. Furthermore, the initial $18.4 million penalty and interest constitutes an excessive fine under the Eighth Amendment, according to the estate's filing.

Moreover, the estate is entitled to a $3,000 refund for amounts it paid against the FBAR liabilities because Gaynor never owed the penalties, the estate argued.

Now U.S. government counsel got the green light from a Florida federal court Monday to negotiate and recommend a settlement in a case seeking more than $20.9 million in foreign bank account penalties and interest from a Texaco heiress' estate.

Bottom line is fix your pre-undeclared foreign income matters while you're still alive, so your heirs won't be stuck with this problem!

The IRS provides many alternative avenues to address your previously undisclosed foreign income. Don't wait until it's too late!

 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

Read more at: Tax Times blog