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Cloud Computing: U.S. Tax Compliance Complexity

July 26, 2012

In today’s technology-driven economy, many multinational enterprises are beginning to take advantage of cloud-computing technology in their global infrastructure and market facing-activities. What is cloud computing? Various definitions of clouding computing exist, perhaps the most concise is the one provided by the research firm Gartner, Inc., which calls it “a style of computing where massively scalable and elastic IT-related capabilities are provided ‘as a service’ using Internet technologies to multiple external customers.”

Despite its rapid acceptance by the business community, little guidance has been issued on how U.S. federal income tax principles may be applied to businesses operating “in the cloud.” In addition to creating difficulties in evaluating potential tax issues, the lack of guidance may impede a corporate taxpayer’s ability to determine its appropriate U.S. federal income tax return positions and reporting obligations. This challenge may be even more difficult for U.S. multinationals with foreign subsidiaries that enter into cloud computing transactions cross-border.

Source

Tax Executive Institute

Read more at: Tax Times blog

European and US Governments Publish Full Implementation of FATCA Agreement

July 26, 2012

The governments of the UK, France, Germany, Italy, Spain, and the US have published the full text of their reciprocal agreement to implement the US Foreign Accounts Tax Compliance Act. The agreement requires financial institutions in the five European countries to report client information to their respective tax authorities, who will then automatically forward the data to the US Internal Revenue Service.

HM Treasury

HM Treasury (Text of agreement, PDF)

Read more at: Tax Times blog

Willful Evasion – Widow's Tax Liabilities Excepted From Bankruptcy Discharge

July 25, 2012

The widow of a personal injury lawyer is responsible for $2.7 million in liabilities for the years 1996 through 2001, as the couple filed joint income tax returns but did not pay the balance of their tax liabilities when filing the returns, the U.S. Court of Appeals for the Fifth Circuit held July 24 (United States v.Coney, 5th Cir., No. 11-30387, 7/24/12).
Judge Emilio Garza said the district court did not err when it concluded that the tax liabilities of Barbara Susan Coney and Curtis John Coney Jr. for the years at issue were excepted from the bankruptcy court's discharge order under Bankruptcy Code Section 523(a)(1)(C) - Willful Evasion.

Garza said that although the Fifth Circuit had not previously explicitly addressed the issue of willfully attempting to evade or defeat the payment or collection of taxes, he agreed with other circuits that the exception in Section 523(a)(1)(C) contains both a conduct requirement and a mental state requirement and both Barbara and Curtis “willfully attempted” to evade or defeat the payment or collection of taxes for the relevant tax years.

If you have Tax and/or Tax Audit Problems, contact the Tax Lawyers at 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

Reporting of PFIC Assets Not Required on Both Forms 8621 and 8938

July 25, 2012

Taxpayers who report their passive foreign investment company assets on the Form 8621 do not have to separately detail them as specified foreign financial assets on the Form 8938, an Internal Revenue Service official said July 24.

The development comes as taxpayers are focusing on the requirement to report those specified assets under new tax code Section 6038D. That code section was put in place by the Foreign Account Tax Compliance Act (FATCA), with reporting requirements going into effect in 2012.

Barbara Rasch, an attorney-adviser in Branch 2 in the IRS Office of Associate Chief Counsel (International), said IRS is actively working to revise the Form 8621, which taxpayers use to report their passive foreign investment company assets under tax code Section 1298. She noted that as taxpayers fill out the Form 8938, taxpayers need only indicate that they have reported their PFIC assets separately on the Form 8621, instead of detailing them on both forms.

Speaking at an international tax conference sponsored by the Practising Law Institute, Rasch also said IRS is actively working on guidance on PFIC reporting requirements under tax code Section 1298(f).

If you have any PFIC or Form 8938 questions, contact the Tax Lawyers at 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

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