Monday, January 29, 2018

Put America first by putting Americans first. End global taxation and compliance bloat

Put America first by putting Americans first. End global taxation and compliance bloat
Joining us today from is tax attorney John Richardson as we discuss why every American is entitled to a better tax system than our current mess, a subduction where confusion crashes into consequences. Repeal FATCA and Stop Imposing Direct Taxation on the residents of other countries! – Americans deserve a first class tax system, a system that allows American citizens to compete with the rest of the world! John Richardson counsels US citizens in Canada and abroad, and can give us some insight into how U.S. “citizenship” AKA “place of birth taxation” HURTS American citizens living in other countries and ultimately HURTS America! Here is the outline of what we discussed: FATCA/CBT repeal – How are FATCA and CBT related? Why should each of them be repealed? Which of FATCA or CBTR is the greater harm? We need to change the ideas on the best way to get this accomplished America deserves a modern tax system – a tax system that allows America and American citizens to effectively compete in a global world. America shouldn’t have a tax system that prevents U.S. citizens living outside the United States from competing for the United States in those countries Why are we working so hard to repeal FATCA? Why are we working so hard to repeal CBT: the U.S. practice of exporting the Internal Revenue Code to other countries and imposing it on people who live in other countries? Who is this really hurting? How much is FATCA and other disclosure programs actually bringing in, compared to costs of resources? (auditors don’t even want to touch foreign returns) What is the result the IRS is hoping to get? What is Congress hoping to achieve by imposing direct taxation on people who are “tax residents” of other countries Why is repealing FATCA important to homeland Americans? Why should Homeland Americans be concerned about this at all? “The world is your oyster, unless you’re American” but you don’t realize until it’s too late How does our tax system impose our value system on other countries? How does U.S. tax compliance for Americans who are residents in other countries really work? How does it make it impossible for those affected by it to live normal financial lives? Saving for retirement, pensions, have business partners, have marriage partners who are NOT U.S. citizens? Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 IRS Medic

Monday, January 22, 2018

Understanding how the IRS 20% Qualified Business Income (QBI) deduction works

Understanding how the IRS 20% Qualified Business Income (QBI) deduction works The 2017 Tax Cuts and Jobs Act (otherwise known as the 2017 tax reform) includes a fantastic tax benefit for many entrepreneurs, self-employed individuals, and investors by allowing them to deduct 20% of their business income. The problem is that the rules are incredibly complicated. In this article, we will explain the basics of how it works and under which circumstances you may want to consult with a tax advisor so that you can best take advantage of this new tax break. A very basic example of how QBI works For this hypothetical, let's assume a taxpayer makes $300,000 in profit as a self-employed civil engineer, and he files jointly. This engineer is able to deduct 20% of his profit, in this case $60,000 from his tax return. So even before any other deductions or the standard deduction, he is taxed on not $300,000, but $300,000 less 60,000 for a taxable income of $240,000. Based on the revised tax brackets, the marginal tax rate at play in this example is 32%, meaning the QBI for this engineer is worth $60,000 x .32 = $19,000. QBI has saved this taxpayer $19,000 in taxes. A taxpayer with larger QBI stands to gain even more. For example, $10,000,000 in profit would qualify for a $2,000,000 deduction. At a top tax rate of 37%, this translates into a $740,000 tax savings. Do I need to convert to or be an S-corporation to take advantage of QBI? No. This is confusing because the original break proposed by Congress was a lowered pass-through (S-corp) taxation rate of 25%. However, this did not make it into the final bill. Instead, partnerships, sole proprietors, trusts, and S-corps owners can all take advantage of the 20% QBI. What is a Specified Service Trade or Business? A Specified Service Trade or Business (SSTB) is not able to take advantage of QBI in the same way a taxpayer whose business income is NOT an SSTB can. An SSTB is any trade or business activity involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletic, financial services, brokerage services, or any trade or business is the reputation or skill of one or more of its employees. Also included are any trades or businesses involving investing and investment management, trading or dealing in securities, partnership . Engineers and architects were specifically exempted. I am in a “Specified Service Trade.” Can I use the QBI at all? Yes, as long as your adjusted gross income falls below a certain threshold. The magic number is $315,000 for married filing jointly, $207,500 for head of household, or $157,500 for single filers. If your AGI is at or below these figures, you can claim the QBI regardless if you are listed in a specific trade or service. If your AGI is above these figures, it may make sense to consider some tax planning or strategies so that you can legally take advantage of QBI. What is the top effective tax rate if I have unlimited QBI income? The top effective tax rate for investors and business owner with QBI approaches 29.8%. This is a big improvement over the previously highest top tax rate of 39.6% and the new top tax rate of 37%. Where do things get complicated with QBI? If you aren’t already confused, the QBI deduction quickly gets even more complicated. Here are situations where the use of the deduction may be significantly impaired, or require additional planning or strategies: Where income increases and you have an SSTB even though you have non-SSTB income. Where you have multiple trades and businesses and some have losses. Where one spouse has SSTB income and the other spouse does not, but total income is high. Where income increases yet W-2 wages paid are low and/or the business is not capital intensive. What should you do to maximize the use of QBI? For our clients, especially those with worldwide income and other ventures, we are always looking for and implementing ways to maximize tax benefits through various structuring. It is important to understand that this new tax reform is ripe with loopholes that we and other practitioners continue to uncover. Some of these loopholes we believe are intentional. To learn about what we can provide to you, we invite you to contact us for a complimentary strategy session. We believe the more control our clients have, the better place the world is. It is our mission to help US taxpayers around the world make their IRS problems and tax bills a bit more manageable. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 IRS Medic

Tuesday, January 9, 2018

How Captive Insurance works and how it can really help your business

How Captive Insurance works and how it can really help your business Tax Reform did not undo the benefits of Captive Insurance companies. Learn how this great tax shelter also gives great asset protection too. Many promoters learned that business owners are incredibly agitated about litigation and will offer what they claim are lock solid asset protection plans that MUST BE OBTAINED OR ELSE. Solicitations I’ve seen are: offshore trusts complicated US holdings structure including Wyoming and Nevada corporations over-compartmentalization of assets that leads to inefficient allocation. The problem with many of these plans is that they can create more risk than they solve. First, tax compliance and accounting cost go way up. And worse, if an offshore entity is involved the tax compliance costs are even higher. Yet ever worse, the penalties for getting even technical things wrong are met with a fury unmatched by any domestic tax issues. What the sense of creating an asset protection plan that could potentially protect you from a business or person, but puts you directly in harms way of a much much more powerful organization. The IRS? The second issue is that these complicated asset protection plans have real formalities that must be followed or a court could completely ignore the structure. This is called piercing the corporate veil. If you have a trust or structure but treat all the income assets as you piggy bank, and fail to follow corporate requirements like having meetings, all your complicated work can be completely undone. A bad asset protection plan, and which there are plenty of, can create more harm than good. It can offer no true protection yet wildly increases compliance costs and compliance risks. That's why before jumping in and engagin in something incredibly complicated, a business owner should really look closely at Captive Insurance first. It offer assets protection and allows all premiums as a deduction to the operating company, but is NOT income to the Captive Insurance Company. This is a one-sided equation that can really help you reach your goals and stay there! Contact us to discuss of a Captive Insurance should be part of your overall strategy. Parent & Parent LLP 144 S Main Street Wallingford CT 06492 (203) 269-6699 IRS Medic

Thursday, December 14, 2017

Tax traps for new US persons and those thinking of expatriation

Tax traps for new US persons and those thinking of expatriation
We are joined today by guest Keith Redmond, an American overseas global advocate to talk about updates on the Repeal FATCA movement, Territorial Taxation for Individuals, and some tax traps for people who are, or are thinking about becoming a US person. Of concern in the current tax reform package - a one time 14% excise tax on deferred income for Controlled Foreign Corporations. The purpose of this excise tax is to end deferral that some large companies can take advantage of...but...people that live and work overseas that have their own corporation could get hit with this tax. This tax could ruin the smaller guys. While we are glad that people are paying to tax reform and disputing what they think are "unfair" suggestions, there is a glaring terrible tax law already in place that we think people should be outraged about. If someone comes to US with substantial assets and becomes a US person, they are taxed from date of acquisition of their assets, not the date they become a US person. And if they expatriate after that, even if the assets declined in value, they will pay the exit tax even if their assets lost money while they were a US person. Potentially, someone could inherit a property overseas while they were not a US person, do nothing with it, but have to pay an exit tax based on the entire increase in its value even though they were only a US person for a short time. We think the basis should be when you become a US person. So what’s the fix? Sell before you become a US person, they buy right back after. Get tax advice before becoming a US person…get tax advice before expatriating. Parent & Parent LLP 60 EAST 42ND STREET, SUITE 4600 New York, NY 10165 (212) 256-1335 IRS Medic

Tuesday, December 12, 2017

What are IRS Form 5471 penalty triggers? How can you avoid them?

What are IRS Form 5471 penalty triggers? How can you avoid them?
Additional "substantially incomplete" triggers found here: In this video international tax expert and managing partner of Parent & Parent LLP Attorney Anthony E. Parent discusses common Form 5471 penalty triggers and why if you own a 10% or more interest in a controlled-foreign corporate you need to be extremely careful when filing a Form 5471. The IRS does not hide the fact that it intends to assess harsh penalty for 5471s that are technically wrong. Do not make the mistake and thick you have a run-of-the-mill tax problem . Form 5471 can require the utmost skill and care when filing or you can face up to a $60,000 penalty for any Form 5471 IRS deems is not in substantial compliance. International Tax Law Firm of Parent & Parent LLP 60 EAST 42ND STREET SUITE 4600 New York, NY 10165 (212) 256-1335 IRS Medic

Friday, November 10, 2017

IRS international tax audit updates

IRS international tax audit updates The IRS has announced four new audit campaigns on international filers: 1. Those who file the Foreign Tax Credit 2. Those who file the foreign income exclusion 3. Those who used a proxy to hide ownership of Swiss bank Accounts. 4. Controlled foreign corporations who make loans back to the US-based parent code (sec 956). Tax Attorney Anthony Parent and host Claudine Gindel discuss how these audits will works the true target of the audits and what to do if you are concerned about your FBAR audits or international reporting forms (5471, 8821, 8865, 8938, 3520-A, 3520, etc) or criminal exposure. Parent & Parent LLP 144 S. Main Street Wallingford, CT 06942 (203) 269-6699 IRS Medic

Monday, November 6, 2017

The pros and cons of the 2017 Tax Reform package

The pros and cons of the 2017 Tax Reform package H.R. 1, "the Tax Cuts and Jobs Act" which is the first draft of the 2017 Tax Reform bill fulfills some of the promises made by Republicans. However, it has got some weak points. In this video Claudine and Tax Attorney Anthony will analyze the major benefits and the drawbacks of the 2017 tax reform package. Parent & Parent LLP 60 EAST 42ND STREET SUITE 4600 New York, NY 10165 (212) 256-1335 IRS Medic