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Certain Tax-Favored Foreign Trusts Now Exempt From Information Reporting!

March 3, 2020

The IRS has issued Rev Proc 2020-17, 2020-12 IRB, that exempts from information reporting requirements certain tax-favored foreign trusts that are established and operated exclusively or almost exclusively to provide pension or retirement benefits, or to provide medical, disability, or educational benefits. The procedure also provides guidance on how to request abatement, or a refund, of penalties for failure to comply with these information reporting requirements. 

The Rev Proc provide that an “eligible individual’s” transactions with, or ownership of, an “applicable tax-favored foreign trust” is exempt from IRC Sec. 6048 information reporting. Thus, the penalties under IRC Sec. 6677 do not apply to eligible individuals who fail to report transactions with, or ownership of, these trusts under IRC Sec 6048.

For purposes of this revenue procedure:

  1. An applicable tax-favored foreign trust means a tax-favored foreign retirement trust or a tax-favored foreign non-retirement savings trust.

  2. An eligible individual means an individual who is, or at any time was, a U.S. citizen or resident and who is compliant (or comes into compliance) with all requirements for filing a U.S. federal income tax return (or returns) covering the period such individual was a U.S. citizen or resident, and to the extent required under U.S. tax law, has reported as income any contributions to, earnings of, or distributions from, an applicable tax-favored foreign trust on the applicable return (including on an amended return).

  3. A tax-favored foreign retirement trust means a foreign trust for U.S. tax purposes that is created, organized, or otherwise established under the laws of a foreign jurisdiction (the trust’s jurisdiction) as a trust, plan, fund, scheme, or other arrangement (collectively, a trust) to operate exclusively or almost exclusively to provide, or to earn income for the provision of, pension or retirement benefits and ancillary or incidental benefits, and that meets certain requirements established by the laws of the trust’s jurisdiction. 

  4. A tax-favored foreign non-retirement savings trust means a foreign trust for U.S. tax purposes that is created, organized, or otherwise established under the laws of a foreign jurisdiction (the trust’s jurisdiction) as a trust to operate exclusively or almost exclusively to provide, or to earn income for the provision of, medical, disability, or educational benefits, and that meets certain requirements established by the laws of the trust’s jurisdiction.

Procedures for Requesting Abatement or Refund of IRC Sec. 6677 Penalties.

Since the IRC Sec. 6677 penalties no longer apply to eligible individuals who fail to report applicable tax-favored foreign trusts, the IRS has provided such individuals who have been assessed or paid IRC Sec. 6677 penalties within the IRC Sec. 6511(a) limitations period, with procedures for requesting abatement of penalties assessed or refund of penalties paid.

An eligible individual who wishes to request abatement or refund of penalties may do so by filing Form 843, Claim for Refund and Request for Abatement within the  IRC Sec. 6511(a) limitations period.

Eligible individuals should complete Form 843 and write the statement “Relief pursuant to Revenue Procedure 2020-7” on Line 7 of the form.

In addition, Line 7 should include an explanation of how the individual meets the definition of “eligible individual” in Sec. 5.02 and how the foreign trust meets the definition of “applicable foreign trust” in Sec. 5.03 or Sec. 5.04.

A Form 843 requesting relief under this procedure should be mailed to Internal Revenue Service, Ogden, UT 84201-0027.

Effective Date. 
This procedure is effective on March 16, 2020 and applies to all prior open tax years, subject to the limitations period in IRC Sec. 6511.
 
Have International Tax Reporting Problems?
 


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

TAS Updates Passport Certification Program Guidance

February 26, 2020

In a memorandum to Tax Advocate Service (TAS) employees TAS-13-1119-0016 11/19/2019, TAS has updated its advocacy guidance now that the IRS has stopped its temporary program under which it wasn't certifying taxpayers for passport revocation etc., if the taxpayer had delinquent tax debt but also had an open Taxpayer Advocate Service (TAS) case.

IRC § 7345 - Revocation or Denial of Passport authorizes (but does not require) the IRS to certify a taxpayer's seriously delinquent tax debt to the State Department for the purposes of passport denial, limitation, or revocation. A seriously delinquent tax debt is an assessed individual tax liability exceeding $50,000 (adjusted for inflation) for which either a notice of federal tax lien has been filed or a levy has been made. IRS must also send a decertification to the Department of State where the certification was in error or where there is no longer a seriously delinquent tax debt. (IRC § 7345(b))
The Internal Revenue Manual provides details as to how the IRS certifies and decertifies a taxpayer. (IRM 13.1.24)  

A Decertification Protects The Taxpayer's Passport From Being Denied, Limited, Or Revoked Merely Because of
a Seriously Delinquent Tax Debt.


The IRM also details how the TAS can open a case to help a taxpayer resolve a tax issue. (IRM 13.1.7.2(1) (2/4/2015))

The National Taxpayer Advocate (NTA) has long advocated excluding certain taxpayers with TAS cases from passport certification.
On July 25, 2019, IRS announced that all open TAS cases with a certified taxpayer would be systemically decertified. New TAS taxpayers would also be systemically decertified. The IRS said that this decision was temporary and that new guidance would be issued once the IRS Commissioner makes a final decision on this issue. 
But in October 2019, the IRS found that excluding cases from certification solely on the basis that the taxpayer is seeking assistance from TAS could allow a "won't pay" taxpayer to circumvent the intent of the legislation to obtain or renew a passport. 

Following the review of relevant considerations regarding these procedures, the IRS determined that a blanket, systemic exception for anyone with an open TAS case is overly broad and could undermine the effectiveness of IRC § 7345 to collect a seriously delinquent tax debt. 
Now that taxpayers working with TAS will no longer be automatically protected from certification, TAS will work with the IRS to identify and resolve the seriously delinquent tax debts of these taxpayers.  
 
Taxpayers Who Have Already Taken Significant Steps
To Resolve Their Debt

Can Still Resolve Their Passport Issues By Contacting
 TAS, Who Can Request Manual Decertification.
The memo tells TAS employees to elevate a case to the employee's Local Taxpayer Advocate (LTA) if the case meets all the following criteria. The taxpayer has 1) Imminent foreign travel plans, lives abroad, or has another compelling need for the passport 2)A significant risk of being certified before TAS will be able to help resolve the taxpayer's debt; and 3) Taken demonstrable recent steps to get into compliance with the IRS that nevertheless fall short of the statutory and discretionary exclusions.  
Then IRM 13.1.24.8.5.3, Decertify the Debt with the Department of State, is superseded and replaced with the following: 

  1. Once the taxpayer meets a criterion for decertification under IRM 5.19.1.5.19.9, Reversal of Certification, review IRM 13.1.24.8.8 to determine if the account will require manual decertification. If so, send an OAR to the SB/SE Passport Office seeking manual decertification.
  2. If the taxpayer has an imminent need for a passport as defined in IRM 5.19.1.5.19.9.1, Expedited Decertification, gather the supporting documentation described. If the IRS function that resolved the debt did not complete and sign page one of Form 14794, Expedited Passport Decertification, prepare the form for LTA signature on page one.
  3. Send an expedited OAR to *SBSE Passport Group mailbox, requesting that the taxpayer be decertified within one business day. Include the signed Form 14794 and the required documentation. If the OAR is not complied with timely, or if you disagree with the response, immediately elevate the case to your LTA for issuance of a TAO.

    4.  

    If You Face This Problem, You Should Consult with Experienced Tax Attorneys, As There Are Several Ways Taxpayers Can Avoid Having the IRS Request That the State Department Revoke Your Passport. 
  Want To Keep Your US Passport?
 
 
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

New EU Blacklist Adds Cayman Islands, Panama & Others

February 25, 2020

According to taxlinked the latest iteration of the European Union’s blacklist of non-cooperative tax jurisdictions was released earlier this week with several new additions including:
  • The Cayman Islands,
  • Panama,
  • Seychelles and Palau 
  • Fiji,
  • Oman,
  • Samoa,
  • Trinidad and Tobago,
  • Vanuatu and
  • the US territories including:
    • American Samoa,
    • Guam, and the
    • US Virgin Islands
as jurisdictions blacklisted by the EU for failing to do enough against tax avoidance and evasion.

According to the EU, the Cayman Islands, a UK territory, has been added for failing to set “appropriate measures” against these types of abuse and allowing companies to establish shell companies with minimal presence in situ. The Cayman Islands had previously been listed in the EU’s grey list but was demoted once it failed to implement the economic substance rules required by Europe.

Following The Addition Of The Cayman Islands To The EU Blacklist, EU Officials Warned The UK That It Would Not Tolerate Tax Abuse From Its Territories.
Jude Scott, Cayman Finance’s CEO, said in a statement, “The Cayman Islands has had a track record of meeting evolving global standards and that is expected to continue.”
“Just as approximately 30 other jurisdictions were removed after a taking the necessary actions, we look forward to the same happening with regard to the Cayman Islands. In the meantime, clients can continue to expect the usual high professional standards from their Cayman service providers that they have always received,” he added.

In addition to these new blacklisted countries, the following jurisdictions were removed from the EU’s grey list after successfully implementing the necessary regulatory changes to prevent tax abuse: Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts & Nevis, and Vietnam.

Who's next to be put on this blacklist ... the US?
 
 
 

Have an International Tax Problem?
 
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

The IRS Is Coming to Your Home or Office To Discuss Paying Your Delinquent Taxes!

February 25, 2020

On February 11, 2020, we posted IRS To Begin Un-Announced Visits to Delinquent Taxpayers! 

Where we discussed that the IRS has announced, in Fact Sheet 2019-15, that it will begin visiting taxpayers who have ongoing tax compliance issues.
 
The IRS will focus its efforts in areas where there have been a limited number of revenue officers available due to declining IRS resources.
 
The First Face-To-Face Contact From A Revenue Officer
Will Almost Always Be Unannounced!
During the visit, the revenue officer will interview the taxpayer to gather financial information and tell the taxpayer what he or she needs to do to become and remain compliant with the tax laws. 

Now in Information Release 2020-34 and Fact Sheet 2020-2, IRS has announced that it is increasing the use of data analytics, research and new compliance strategies, including personal visits, to reach taxpayers and tax return preparers who have not filed federal tax returns.

Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers (ROs) across the country will increase face-to-face visits with high-income taxpayers who haven't filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and paying obligations and bringing these taxpayers into compliance.

 

IRS advises taxpayers that have delinquent filing or payment obligations that they should consult a competent tax advisor before waiting to be contacted by an RO.

IRS notes that high-income taxpayers who will receive these visits have typically received numerous letters from IRS over an extended period of time, so they generally realize they have a tax issue.
Here's what to look for when a legitimate IRS RO makes a face-to-face visit:
  • While most RO visits to a taxpayer are unannounced, ROs will always provide two forms of official credentials, both include a serial number and photo of the IRS employee. Taxpayers have the right to see each of these credentials.
  • A legitimate RO will explain the liability to the taxpayer, along with the consequences of failing to comply with the law. The IRS employee will not make threats or demand an unusual form of payment for a nonexistent liability.
  • Visits by ROs generally occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur.
  • The RO will request payment and will provide a range of payment options, including paying by check made payable to the U.S. Treasury.
IRS also announced that it is using the following new ways to leverage existing processes and systems: 
  • Increasing the identification and case creation for individual and business non-filers. New cases will be assigned to IRS employees for appropriate resolution. 
  • Automated Substitute for Return program (ASFR). This affects individual taxpayers who have not filed tax returns, but whose available income information shared with IRS indicates a significant income tax liability. As part of the ASFR program, IRS sends notices to these taxpayers alerting them to the potential liability.
  • Automated 6020(b) process. Promotes employment tax filing compliance by identifying business taxpayers with employment tax requirements who have not filed for a specific period.
  • Delinquent Return Refund Hold program (DRRH). Systemically holds an individual taxpayer's income tax refund when their account has at least one unfiled tax return within the five years surrounding that return. 
IRS Reminds Taxpayers That It Has A Number Of Options Available Under The Law When A Taxpayer Refuses To Pay, Ranging From A Series of "Civil Enforcement"
Actions And, When Appropriate,
Pursuing Criminal Cases Against Taxpayers.
IRS says that its compliance personnel are also now working more closely with IRS criminal investigators on priority compliance issues, including high-income cases. 

Have an IRS Tax Problem? 
 
Prefer That the IRS Not Show up at
Your Home or Office?

 
 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


 

 

Posted by Ronald A. Marini, Esq
 

Read more at: Tax Times blog

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