Yearly Archives: 2022

 2020 was a record year for Americans giving up their citizenship:

• A record 6,705 Americans gave up their citizenship in 2020
• A 260% increase from 2019 when 2,577 Americans gave up their citizenship
• Renunciations triple despite U.S. consulates being closed for large parts of the year due to COVID-19
• This is the highest year on record; the previous record was 5,411 cases in 2016

There are an estimated 9 million U.S. Americans living overseas. Every three months the U.S. Government publishes the names of all Americans under the IRS rules (section 6039g), who give up their citizenship. 

This number possibly would have been higher if U.S. Embassies worldwide had not been closed for large parts of the year due to COVID-19 regulations. If this trend continues 2021 renunciation numbers will be record-breaking.

Surprisingly enough, it's not only politics that drive renunciations but also a law called Foreign Account Tax Compliance Act (FATCA). This law forces banks outside the U.S. to report all American account holders under threat of astronomical fines. Banks now want to rid themselves of U.S. clients as they pose a liability. Many Americans living outside the U.S. are therefore forced to renounce and provide a Certificate of Loss of Nationality (CLN) to keep their banking services.

U.S. citizens that renounce must pay a $2,350 government fee and appear in person at the U.S. Embassy in their country of residence. In addition, a complete tax return must be filed and exit tax might be owed. Despite these obligations, there has been a growing trend of U.S. citizens renouncing.

"The onerous and costly tax reporting obligations also play a big role. People with a U.S. citizenship or Greencard must file their taxes regardless of where they live in the world every year. They also need to report every single bank account (FBAR), even if they are only authorized to sign, which feels intrusive for many."

Ironically, the U.S. stimulus checks of $1,200 + $600 are also being used towards the cost of renouncing, a difficult, irreversible decision with a profound impact on an individual's life, especially in these difficult, special times.

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

Sources

PRNewswire

HKLaw

Read more at: Tax Times blog

Procedurally Taxing had a good analysis of a recent district court opinion which addresses the inability to establish reasonable cause for a late filing penalty even if a longtime preparer promised but failed to e-file an extension of time to file a 1040.  

The case, Oosterwijk v United States, brings in interesting reasonable cause issues and highlights the limits of the IRS First Time Penalty Abatement policy.

In 2017, taxpayers Erik and Aspasia Oosterwijk sold for many millions of dollars a Baltimore based wholesale meat business that they had run for decades. When it came time to file their 2017 tax return on Tuesday April 17, 2018 (Monday April 16, 2018 was Emancipation Day in DC), the taxpayers expected their longtime preparer to e-file an extension and instruct IRS to apply a payment of about $1.8 million in taxes.  The taxpayers made sure they transferred money to their checking account, and kept looking to see when the tax payment would hit the account.

By April 25, when the money was still not debited from their account, the taxpayers emailed their longtime CPA tax return preparer, who told them to wait until April 30, and if the money were still in their checking account at that date he would follow up with the IRS.

On April 29 the now concerned taxpayers emailed their CPA again saying that the money was still in their account. The preparer checked his records and ealized that that he failed to e-file the extension and had not given instructions to IRS to debit the payment.

As a threshold matter, why didn’t the taxpayers avoid having to file a suit just request administrative relief under the IRS’s First Time Abatement policy? To add insult to injury the Oosterwijks were not eligible, because their decades long history of tax compliance was tainted by a $7 late payment penalty from the 2014 tax year and the first time abatement for delinquency penalties requires a clean past three years of tax compliance.

With that out of the way the opinion first addressed a variance issue because the formal refund claim addressed reasonable cause relating to the mistaken belief that the extension was filed and did not mention the advice the CPA gave about limiting penalty accrual by filing a 4868 after the due date of the return. The opinion concluded that the claim and communications with IRS were sufficient to put IRS on notice about the full extent of the reasonable cause argument. (as an aside the opinion also seems to mix up the SOL issues in 6511 and 6532).

That gets to the merits of the reasonable cause defense. The taxpayers argued that the FTF penalties should be completely excused because they had reasonable cause for filing late, specifically that their accountant failed to e-file their extension request and their personal e-filing access was limited.

The Oosterwijk opinion cites to the opinion in Boyle, and also to Justice Brennan’s concurring opinion, where he “stressed that the ‘ordinary business care and prudence’ standard applies only to the “ordinary person.” That is, the standard exempts individuals with disabilities or infirmities that render them physically or mentally incapable of knowing, remembering, and complying with a filing deadline.”

The Oosterwijks argued that “Boyle does not apply to electronic filing, because a taxpayer cannot personally confirm that an accountant has e-filed as promised.”

The Oosterwijks essentially argued that the placement of a third party (the preparer) “between the taxpayer and the IRS, and the Oosterwijks’ inability either to e-file on their own or to confirm the e-filing’s transmission put the filing beyond their control according to Justice Brennan’s concurrence.”

The opinion disagreed, noting that the taxpayers were free to paper file an extension (and in fact did so).

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

On September 1, 2021 we posted IRS CONTINUES to Criminally Prosecutes Employers For Failure To Pay Withheld Payroll Taxes - As Promised! where we discussed that we posted The IRS is Now Criminally Prosecuting Employers For Failure To Pay Withheld Payroll Taxes! where we discussed that the IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes and unlisted several other criminal prosecutions for failing to pay to the IRS withheld payroll taxes. On November 5, 2021 we posted Another Criminal Prosecution for Failure to Pay Payroll Taxes, where we discussed that a West Virginia woman pleaded guilty on November 4, 2021 to willfully failing to pay over to the IRS employment taxes withheld from employees’ wages.

Now according to the DoJ, a federal grand jury in Oakland, California, returned an indictment on February 3, 2022 charging a California businessman with failing to pay over employment taxes to the IRS.

According to the indictment, Larry Kudsk, of Berkeley, operated two construction businesses, M. Gutierrez Inc. and Larry Kudsk Construction Inc. For both companies, Kudsk allegedly was responsible for filing quarterly employment tax returns and collecting and paying to the IRS payroll taxes withheld from employees’ wages. Kudsk allegedly did not timely file employment tax returns, and did not pay withholdings to the IRS, for the last three quarters of 2015 for M. Gutierrez Inc., and for all four quarters of 2016 for Kudsk Construction Inc. In total, Kudsk allegedly caused a tax loss to the IRS of more than $250,000.

Kudsk is scheduled to make his initial court appearance on Feb. 11 before the U.S. District Court for the Northern District of California. 

If convicted, Kudsk faces a maximum of 5 (five) years in prison for each of the seven counts of failing to pay over employment taxes. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

  Thinking of Borrowing From Your Company's
Payroll Tax Withholdings?

You Better Thank Again, if You Like Your Freedom!

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, a Florida woman can't get relief from joint liabilities with her ex-husband for income taxes from 2011 through 2014, the U.S. Tax Court said on February 3,2022 in Ana Margarita Fiengo and Pascual E. Fiengo Sr. v. Commissioner, docket number 1250-20, in the U.S. Tax Court.

Ana Margarita Fiengo can't be considered for two forms of innocent spouse relief from her joint liabilities because the liabilities are related to underpayments, not understatements or deficiencies, and she doesn't qualify for the remaining form because of her knowledge of the underpayments, the U.S. Tax Court said.

The Tax Court said Fiengo handled the finances for herself and her ex-husband, paid bills, and held check writing authority over accounts both personal and for a business they owned together. It thus concluded that she knew about the underpayment.

Have IRS Tax Problems?

     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