Showing posts from 2014

Offshore Enforcement to Remain Top Priority in 2015

Practitioners and students of tax crimes know that most of the commonly charged tax crimes have an element of willfulness which the Supreme Court interpreted in Cheek to mean a voluntary intentional violation of a known legal duty.

The reality however, is that some tax crimes do not have an explicit requirement of willfulness but have an equivalent element that substantially overlaps willfulness. E.g., Section 7212(a)'s requirement that the defendant act corruptly and even the defraud conspiracy in 18 USC 371. See John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough,  - Hous. Bus. & Tax. L.J. 255, 277-314 (2009), here.

As tax professionals, it is critical that we keep as close to the IRS as possible to understand how they view and interpret certain situations.  In this effort, here's an extract copied directly from the very popular Federal Tax Crimes blog -

A recent Tax Notes Today article reports on the Criminal Fraud and Tax Controversy Con…

What you need to know about the Singapore-US FATCA agreement


FBARs and Form 8938

Back in March 2014, I first wrote about FBARs
But my recent interaction with clients suggests that I need to revisit the topic.

Each U.S. citizen and permanent resident must report worldwide income to the IRS even when paying taxes elsewhere. Moreover, you must file an annual FBAR (now called FinCEN Form 114) disclosing your foreign bank accounts if their aggregate value exceeds $10,000 at any point during the year. The penalties for either failure are big, potentially even criminal. FBAR penalties are even worse than tax evasion.

According to the FBAR instructions, U.S. persons include U.S. citizens and U.S. residents. Similarly, the FBAR regulations state that a U.S. person is a citizen of the United States or a resident of the United States, meaning “an individual who is a resident alien under 26 USC 7701(b) and the regulations thereunder.”
In the minds of so many people, FBARs are tied to FATCA.  Nothing …

IRS Goes Undercover and the Movement against Corp Tax Avoidance

When it comes up in conversation, I keep telling people one thing – forget FATCA, we are in the midst of a movement that is much bigger than just one law. The drive for international transparency and substance seems unstoppable at this point. It is not just happening at the individual level, it is happening at the level of MNCs as well

Individuals -

In March this year I wrote about an acquaintance of mine who was arrested for tax fraud and money laundering

One of the things that jumped out at me is the extent to which undercover operatives are being used by the Federal government in general, and the IRS in particular. According to a November 15th article in the New York Times, at the Internal Revenue Service, dozens of undercover agents chase suspected tax evaders worldwide, by posing as tax preparers, accountants, drug dealers or yacht buyers and more, court records show. Interestingly, undercover agents at the I.R.S., a…

Taxpayers Need to be Careful in Evaluating Tax Advisers Based Solely on PRICE


Be Careful in Your Choice of Tax Advisors

On September 12th, the Treasury Inspector General for Tax Administration (TIGTA) released itsannual reporton IRScompliance trends.  Individual income tax return examinations conducted by the US Internal Revenue Service decreased in 2013 for the third year in a row, falling to USD1.4 million or one for every 104 tax returns.  Just over 80 per cent were done by correspondence, with only one of every 541 returns being examined in a face-to-face interview.  This is to be expected given the ongoing staff and budget cuts but that’s not an opportunity to take them for granted. 

The IRS are still pretty good at their jobs. 
Every week, I hear from tax payers who often do not like what I have to say.  Some are considering products or structures that appears too good to be true.  My view remains the same – if something appears too good to be true, it typically is.  Be very careful.  Not that I am rushing to judgment but Gary Stern is the latest professional to become ensnared in the coils of t…

IRS Information Letter on Treatment of "Green Card" Holders (Noncitizen Lawful Residents) - Release Date: 9/26/2014

The IRS has released this Information Letter 2014-0033, with information about the U.S. tax regime for "green card" holders. 

The background is that non-citizen residents of the U.S. are subject to U.S. tax.  Key excerpts are:
An alien individual is classified as a resident of the United States with respect to any calendar year if he or she (i) is a lawful permanent resident of the United States at any time during such calendar year (commonly referred to as the “green card test”), (ii) meets the substantial presence test in section 7701(b)(3), or (iii) makes the first-year election provided in section 7701(b)(4). Code § 7701(b)(1)(A). An individual who is neither a citizen of the United States nor a resident of the United States within the meaning of section 7701(b)(1)(A) is classified as a nonresident alien. Code § 7701(b)(1)(B). 
Section 7701(b)(6) provides that an individual is a lawful permanent resident of the United States if he or she has the status of having been lawf…

American Expats and the Net Investment Income Tax

So a few clients have been asking about the Net Investment Income Tax (NIIT). The purpose of the NIIT is to ensure that individuals with high income levels earned from non-wage sources contribute to the expanded health care program in a similar manner as individuals subject to withholding tax on their wages. In other words, the NIIT is designed to cover the cost for expanded Medicare coverage. My first response was back on April 5th -

Now questions are around whether American Expats are actually liable for this tax? The issue is whether the NIIT is a Medicare tax, subject to exemption under a social security totalization agreements (SSTAs), or an income tax, against which foreign tax credits can be applied. The US has SSTAs with 24 countries. The purpose of SSTAs is to avoid double taxation of income with respect to Social Security and Medicare taxes. Thus, a US citizen living abroad in a country that h…

When FATCA Meets FIRPTA: Some Preliminary Comments

In view of the frenzy in the profession over compliance with the new FATCA rules, it seems appropriate to take an overview of how FATCA applies to a major source of inbound investment by foreign individuals – "FIRPTA" investments in U.S. real property. This commentary considers the extent to which FATCA might apply to the most common structures that are used. What is most striking, however, is that the FATCA rules provide for explicit exceptions for a substantial portion of FIRPTA - related income.
It is assumed in this commentary that the investment in U.S. real property is made by an individual who is a nonresident alien (NRA) for U.S. income tax purposes, and a "nonresident not a citizen of the United States" (i.e., a non-U.S.-domiciled alien) for U.S. estate and gift tax purposes. The following structures are examined in this commentary: (1) direct investment in U.S. real property by the NRA; (2) investment through a directly owned "United States real prope…