Friday, June 15, 2018

Are cryptocurrencies currency or property? The US Treasury can't decide.

Are cryptocurrencies currency or property? The US Treasury can't decide.
Are cryptocurrencies property or currency? It’s a great question – I wish that I was able to give you clear guidance on what the United States government considers it to be. But, I can’t – and I’m a Tax Attorney. It’s not that I don’t know what the rules are. I know the rules better than most. But, I am hit with an immediate conflict that i want to share with you. That’s legal term – virtual currency. I’m throwing that term out to you for a reason. That’s a term that FinCEN (Financial Crimes Enforcement network, a division of the US Treasury) calls cryptos. Why? So that it can apply the rules of the Bank Secrecy Act to cryptocurrency. If it were to be property, the argument would that the BSA could not apply and FinCEN would be powerless to regulate. Now, consider this -- the Bank Secrecy Act was written by Congress in 1970 – requiring financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Bitcoin was created in 2008. So, FinCEN is using 48-year-old legislation to regulate a modern technology – to regulate cryptocurrency exchanges like banks. Even though cryptos are not banks. Not at all. Now The IRS – another division within the United States Treasury – has announced that it considers virtual currency as property. So for purposes of regulating transactions under the BSA, the government considers cryptocurrency to be currency. But, on the other hand crypto currency is to be viewed as property for federal tax purposes and applies tax principles applicable to property transactions. In other words, the IRS wants to be sure is doesn’t miss out on crypto gains it could tax and FinCEN wants to regulate cryptos, hence we are left with conflicting rules. The way that the regulation is currently imposed has caused cryptocurrency to lose the utility that it was originally intended to have. I don’t want to get into whether this is a good or bad thing. But, because most of the exchanges are in compliance with the Bank Secrecy Act – the original utility of anonymity has been destroyed. Maybe you’re ok with that – maybe you’re not. But, it’s irrefutable that the tax policy is designed to discourage the use of virtual currency from being used as it as originally intended – as currency. In order to be in compliance, the cryptocurrency user has to report every transaction he makes. In other words, the cryptocurrency user can’t walk into a cool hipster coffee shop and use cryptocurrency to buy a cup of coffee without having to calculate the capital gain or loss on the transaction. Now, this at first may seem like a minor inconvenience. But, in order to do this accurately the user needs to be able to specify the particular units of bitcoin to be used in the transaction – not exactly as practical as handing cash over the counter to the barista. It’s no wonder that certain studies report that 59% of Americans don’t report appropriate cryptocurrency-based capital gains to the IRS. I have a feeling that figure is much much higher. As of right now, in 2018, the government is applying a limited regulatory structure to cryptocurrency. Nonetheless, the government is applying an antiquated regulatory structure to cryptocurrency. It’s to be expected. The folks working within the United States Treasury are dealing with a new technology neither the BSA or the Income tax ever contemplated. Of course they are not going to be about to come up with a cohesive rule. In their defense, even the most astute regulators didn’t expect the rapid increase in the valuation of cryptocurrencies. Nor did they expect Wall Street to express such interest in investing and speculating on cryptocurrencies. So now it’s the duty of the people in the communities surrounding cryptocurrency to make their opinions known about what to do about the regulatory puzzle surrounding cryptocurrency. For regulatory purposes, should cryptocurrency be viewed as currency or property? Now confusing matters is that all currency is technically property but not all property is currency. But how should a regulatory framework be designed for cryptocurrency? Should government have any involvement at all? What should we do about the current conflicting interpretations by FinCEN and the IRS? Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/sBj4Hqy0XQE IRS Medic

Tuesday, June 5, 2018

Can you cheat the FBAR? What happens if you don't file?

Can you cheat the FBAR? What happens if you don't file?
Here are some things you really should know before you decide NOT to file an FBAR. The FBAR is the Report of Foreign Bank Accounts. FBAR is also known as FinCEN Form 114. A person or entity is required to file an FBAR if they have a financial interest in or signature authority over at least one type of foreign financial account that exceeds an aggregate value of $10,000 at any time during the year. FBAR reporting is not limited to foreign bank accounts. Pensions, life insurance policies, and accounts that earn no money have to be reported. The FBAR form is a complicated form and is viewed by some as an invasion of privacy. Some clients ask whether they can get away with not filing an FBAR form. I advise those clients that FBAR penalties are steep and willful non-compliance is illegal. Therefore, to avoid legal consequences, I advise filing an FBAR form. There are six things to be aware of before not filing an FBAR. If you ever filed an FBAR, you are now in the FinCEN database. Once you are in a database, you can be tracked. People who don’t comply with the reporting obligation and don’t risk consequences are people who don’t get caught. The IRS only needs to catch you once. IRS tax examiners will ask a person about FBARs. If a person doesn’t answer honestly, he will face civil and criminal penalties. However, answering honestly will have consequences too. Failing to learn about foreign account reporting requirements can be evidence of “willful blindness.” See Internal Revenue Manual, 4.26.16.4.5.3, Paragraph 6. The DOJ also investigates people for criminal charges related to FBAR non-compliance. Criminal penalties for FBAR violations are frightening, including a fine of $250,000 and 5 years of imprisonment. If the FBAR violation occurs while violating another law the penalties are increased to $500,000 in fines and/or 10 years of imprisonment. People who have grievances against you are often very willing to offer testimony to the government. If you are not going to file an FBAR form, be confident that the people aware of your reporting obligation won’t offer testimony to the government. Income and assets can be attached to pay outstanding FBAR penalties. If you have no income or assets that can be attached, you may be able to avoid collection. However, in some jurisdictions, the IRS may be able to seize part of your spouse’s assets to pay your bill.   The statute of limitations for FBAR penalties is 6 years. However, after six years, the IRS may still be able to penalize you for other unfiled foreign reporting forms like Form 5471 or Form 8938. These penalties can be assessed for multiple years, and unlike FBARs, there is no statute of limitations on these types of penalties. A person’s best option is to file an FBAR correctly and get into a proper offshore disclosure plan. However, there are three things to consider that may take the sting away from this compliance regime:   The FBAR intel is low value to the government. By filing an FBAR, you’re merely bogging down government bureaucracy. There is no such thing as an FBAR initiated audit. No one looks at an FBAR unless a tax audit is initiated. Don’t think that filing an FBAR is a red flag to get you audited. If you are going to “come clean” with the IRS do it right or don’t do it at all. Lying to the IRS will make things worse. https://ift.tt/2kQWHfk Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/11rv3eh9f0k IRS Medic

Thursday, May 3, 2018

IRS Tax Relief Programs 2018: Top questions answered

IRS Tax Relief Programs 2018: Top questions answered
Do you have a question on IRS Tax Relief I didn't answer? Put in the comment below and subscribe! I'll answer the best ones in an upcoming video. https://ift.tt/2jsz1gT The most helpful way to think about IRS tax relief services for outstanding back taxes is two ways. 1. You can not afford to pay or 2. You truly don't owe the taxes. Other types of amnesties involve limiting criminal exposure, unfiled returns, and punishment mitigation. And there is the IRS First Time Penalty Relief program that is guaranteed as a matter of right. You merely need to request it. Sometimes it simply requires a call, others instances the petition must be in writing. Additionally, the IRS is very interested in assessing large penalties for those that have unreported overseas accounts or assets, such as inheritances from aboard and pensions located abroad. The penalties can get out of control fast - starting at $10,000 per year and the capability to reach so high they could actually completely ruin somebody. And another type of tax relief is a general tax relief for when taxpayers are in a declared disaster area because of a hurricane, earthquake or some sort of natural or even man-made disaster. These amnesties normally push back dues dates to everyone in the affected region to eliminate potential penalties, yet it will negate ones requirement to cover the inherent taxes. If however, your capacity to pay was greatly decreased by natural disaster situations, or perhaps say something like a terrorist attack, this fact should be properly incorporated into a claim you can't manage to cover the tax invoice in full. Is there any tax relief available for taxpayers with psychological illness? We frequently get calls from family and friends of a taxpayer who has both tax issues and mental health issues. The largest difficulty in these cases is eliminating the fear. Cases with mentally ill clients are difficult and need more patience, but are incredibly rewarding when we can solve at least one of our clients' problems. Is IRS tax relief that a scam? There are a whole lot of tax relief firms around who advertise heavily with TV and radio advertisements, and the internet. A number are, in fact, scams and not legitimate. The tax resolution business is filled with people asserting that are "top rated tax relief firms" and "the very best tax difficulty attorneys." A number of these people making these claims aren't attorneys that's fine, a non-lawyer can assist you, but lying is dishonorable. Yet they are not called on it, closing their doors when the complaints become too big and then reopening under another name. Many these company pay for bogus testimonials or use other services to suppress negative reviews. Even the IRS doesn't govern these firms to some meaningful level, the Federal Trade Commission will be more competitive, but there is only so much they could do. The very best advice would be to exercise due diligence on who you hire, if anyone, to help you get this issue behind you. The fantastic thing is there are a lot of quite good tax relief specialists out there. A lot of these are my friends. A few are CPAs. Some are actual real tax relief lawyers. We're tax lawyers so the instances best suited for people are where: 1. There is a fear of criminal vulnerability 2. The stakes are rather significant 3. Businesses are involved 4. The problems are incredibly complicated (particularly when overseas assets or income is included), 5. Or it is a case where the client prefers to have the security of their attorney-client privilege. Can IRS tax relief differ from state to state? Absolutely. The IRS accounts for the various differences in the price of living. Yet, the differences sometimes are not enough. The reason is the IRS will require an average of a geographical area that might not be really be realistic. For instance, from the hyper-wealthy Fairfield county in Connecticut, the biggest city is Bridgeport, which can be quite cheap to live in, although a bit distressed in appearance in security. Additionally, the IRS Office of Appeals is different from region to region. The quality and standard of Appeals Officers differ greatly. It is crucial to know this going in, as there might be a way to change venue. Additionally, some states are what are known as community property states. At a community property state, the IRS could reach into half of the the assets of their non-liable spouse. This can cause quite a complicated scenario for us, particularly in the event of outstanding payroll tax liabilities. Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin Alaska is an opt-in community property state. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 https://ift.tt/1RfwK1f https://youtu.be/U-G9KXeOg5E IRS Medic

Wednesday, May 2, 2018

Al Capone’s complete BULLSH!T tax evasion conviction: A look inside

Al Capone’s complete BULLSH!T tax evasion conviction: A look inside
The truth behind Al Capone’s tax evasion conviction should outrage anyone with a functioning brain. As a tax attorney and one-time criminal defense attorney, there are few bigger outrages than Al Capone’s tax evasion conviction. “You see this is why we need the income tax! To put people like Al Capone behind prison where he belongs. The other laws can’t catch him, but the good old income tax, sure helped us out of jam here. YET THE ONLY REASON AL CAPONE BECAME A SUPER GANGSTER WAS BECAUSE OF THE INCOME TAX! the Alpha and omega of Al Capone the Gangster is the 16th Amendment! There are a lot of myths out there. And I am going to show you why they just don’t stand up to scrutiny. Other laws did stop him Al Capone was put behind bars. Yeah he got pinched for a weapons charge. Served 9 months. Kind of touchable Al Capone attempted to pay his taxes but the Treasury refused to deal with him. The set him up for a conviction. Unfortunately this still happens to this day. 3. The amount of income Al Capone claim he made was enough to support his lifestyle. Further, Al Capone was a professional gambler, he owned race tracks and had substantial losses. 4. Al Capone was the scape goat for progressive malfeasance Progressives pressured the federal government that horrific poisons be added to industrial alcohol that was being re-distilled to make fairly safe for consumption. But these additional poisons were so powerful, the re-distilling process did not work (unknown to anyone) and people were becoming blind after 3 drinks and dead after that. It is estimated that 10,000 people were murdered by drinking alcohol that was intentionally poisoned. Sorry, this death count far exceeds Al Capone. So who went to prison for this? No one. Progressives like Wayne Wheeler of the The (pretty racist) Anti-Saloon league was ecstatic about this program. when informed it was killing people, he responded: “If America can be made sober and temperate in 50 years a good job will have been done.” You see if wasn’t an out of control federal gov’t that was the problem. It was the arrogance and hubris of progressive ideology. And just plain evil. To quote C.S. Lewis: “Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.” For me, I would rather be ruled by Al Capone than by progressives. At least Al Capone knows his terrible things are kind of bad. A progressive on the other hands, think their bad things are good. The Revenue Act of 1862 and 1863 were prior to the 16th Amendment but were held to be constitutional. Why? A personal income tax is a wartime measure. The thing is, the modern income tax is a wartime measure. So who are we fighting? And if our objective was to defend freedom and liberty it sure as shit seems like we lost that battle a long time ago. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/_m1IAmRKmWA IRS Medic

Monday, April 30, 2018

Taxation of Foreign Investment in the US and IRS Form 5472

Taxation of Foreign Investment in the US and IRS Form 5472
Don't let the complicated US tax code stop you from investing in the US. The IRS is something to be concerned about, but it can be managed. The Recently passed Tax Reform Bill with a 21% corporate "C" tax rate and Qualified Business Deduction for pass-though taxpayers is generating considerable interest from non-US persons who are looking on a sure investment in the US. https://ift.tt/2rc9Z8T But numerous tax trap exists for those unfamiliar and somewhat familiar with the US tax code, the most complicated in the world. The decision to have income treated a FDAP (Fixed, Determinable, Annual or Periodic income. FDAP income applies to foreign persons earning income in the U.S; such persons will be subject to 30% withholding tax, or a lower rate if there is a tax treaty between the United States and the country of residency) or effectively connected is just one decision that needs to be made with care. Additionally, exercising due diligence to make sure that if an IRS Form 5472 is required that due to 25% foreign ownership of a corporation, or new in 2017, a domestic US LLC, with related party transaction is key. As the penalties for not filing a proper form 5472 are now increased to $25,000 from $10,000. The penalties can be assessed for multiple years. The IRS is on the look out for improper Form 5472 or missing Form 5472 and audits abound. Many corporations with 5472 requirement are choosing to entire into a voluntary disclosure program to eliminate or reduce outstanding Forms 5472. If you are looking for a US advisor to helpp you with your US investments, contact the international tax firm of Parent & Parent LLP. Our tax firm of attorneys, Certified Public Accountants and Enrolled Agent have one goal in mind -- to make the impact of the US taxing regime as least-punitive as possible. International Tax Planning can help you avoid some of the big problems that will absolutely cripple some foreign investors in the US. There are things you must do to eliminate the little-known US estate tax on foreign persons. There are complex attribution rules that can wipe out years of profits. Parent & Parent LLP 60 EAST 42ND STREET, SUITE 4600 New York, NY 10165 (212) 256-1335 https://youtu.be/knZ255s4Veo IRS Medic

Monday, April 23, 2018

Is the IRS totally overwhelmed? IRS Letter 5935 & Form 15023 -- perhaps yes

Is the IRS totally overwhelmed? IRS Letter 5935 & Form 15023 -- perhaps yes
An illustration of the overwhelmed IRS Letter 5935 & Form 15023 For years we have been claiming the US tax code is the most complicated thing in the history of history. And tasked with administrating the law is the IRS. Yet, the IRS often finds itself stumbling over its own data and routinely gets things wrong. Things that it seems the IRS should be getting wrong. And recently new evidence supporting the proposition that the IRS is overwhelmed is discovered. IRS letter Form 5935 with accompanying Form 15023. In this article, we will illustrate the problem the IRS has tracking offshore voluntary disclosures, and perhaps more importantly, stopping bigger problems taxpayers can can cause themselves by not understanding the IRS is the one who may have made a mistake. Some background on the IRS Pre-clearance form for Offshore Voluntary Disclosures Submitting a Voluntary disclosure can be onerous work. But when a client wants to come clean, they want to come clean as soon as possible and not wait the months, even years it can take to get a proper voluntary disclosure completed. Thankfully and to its credit, the IRS developed a pre-clearance form. The pre-clearance form allowed us within minutes of a client hiring us, to alert the IRS that this client would be coming forward. For the vast majority of cases, a pre-clearance would come back without a hitch. But for two of our clients, their pre-clearance came back with a phone call from a Department of Justice attorney who was investigating them. Once we informed them of the nature of the case an that they were making disclosures, the criminal investigations were stopped. We all breathed a sigh of relief. Additionally, what we were doing was submitting pre-clearance requests even when we were pretty sure the client would be making a Streamlined Disclosure, not a full Standard Offshore Voluntary Disclosure Program (OVDP). The difference between the two is a Streamlined includes 3 years of tax returns and at most a 5% penalty, and the Standard OVDP could be 27.5% or as high as a 50% penalty. We continued to make pre-clearances for our streamlined cases, because one of the one we got a call back on was actually someone who intended the The IRS then changed their guidance to encourage us and others not to make a pre-clearance for Streamlined Disclosures. The IRS announced they would investigate all of those who made a pre-clearance but failed to make a proper disclosure. We had no worries, as in every case a Streamlined submission or Standard OVDP was made. But then the letter was sent Our assumption was that the IRS would be able to investigate its own database to see a submission was made. This assumption proved to be wrong — I believe it comes from a decision on how to code a Streamlined Submission. Instead the IRS has been sending out Letter 5935 and Form 15023 to taxpayers who have made proper disclosures! Our response to Letter 5935 and Form 15023 We selected option three to explain the IRS that our client is fully in compliance. We are very nice about it. Again, the people who sent these letters are burdened by systems that are not telling them the things they need to know. There is no sense in taking this personal. Other responses If you have a Streamlined Submission ready to go, you can select option one. Option two seems very dangerous unless you have already spoken with an experienced Offshore Disclosure law firm. And option four make sense if you need some time to talk with someone to help you out. The outlook The IRS is not getting simpler. Be on the lookout for more errors. While the Taxpayer First Act of 2018 is working its way through Congress promises a better computer system, this has been tried many times before and has failed. While tax reform did lower taxes, it created more complexity. The root cause of all of these headaches is that we have a tax system with a primary goal that isn’t to raise revenue, but rather, to encourage the outcomes that elected (and some unelected) officials in Washington, DC desire. These are not my words, but the words of Cordell Hull, the father of the modern income tax. Maybe some day we will get smart enough to see through this folly. But until then, keeps your eyes open to the possibility that the IRS might get something really wrong. Parent & Parent LLP 144 South Main Street Wallingford, CT 06493 (203) 269-6699 info@irsmedic.com https://youtu.be/iJ2CPsjTEhI IRS Medic

Thursday, April 19, 2018

The Taxpayer First Act of 2018 - The good, the bad, and the meaningless

The Taxpayer First Act of 2018 - The good, the bad, and the meaningless
A new bill, The Taxpayer First Act of 2018 has bipartisan support and it is making its way through Congress. In this video, tax attorney Anthony Parent gives his reaction to the summary presented by the Subcommittee on Oversight of the House Ways and Means. While there are some helpful items in the bill -- in particular, more formal independence of the IRS office of appeals and the availability of the IRS Office of Appeals in more cases (pre-notice of federal tax lien filing, hopefully ), a crack down on structuring seizures of cash under the guise of the Bank Secrecy Act of 1970, and required notice of third party contact (the IRS can be very sneaky in an audit situation) Yet, a lot of the rest of the bill might do little to help taxpayers. - An insistence on calling taxpayer “customers;” - A waiver of an Offer in Compromise fee for the destitute who probably lack the resources to actually submit a viable Form 656 OIC; - A formal declaration of stated Innocent Spouse/Equitable relief policy; - A formalized grant structure for VITA (Volunteer Income Tax Assistance) Program, - A generalized idea of "better" "customer" service - A formal notification process for when the IRS shut downs (already overworked) service centers (that can't really help taxpayers all that much and often leave them with bad information) - A rule allowing IRS employees to refer low income taxpayers to Low Income Tax Clinics (you mean they couldn't before???!!) - Then a whole bunch of vague identity theft protections without once mentioning that the #1 cause of ID theft is illegal immigrants stealing Social Security numbers. - A promise to modernize the IRS's IT (this will likely be yet another waste of money; the IRS has been attempting to modernize since the LBJ administration with little luck as there are too many competing goals - The ability to pay the IRS by credit card or debit card directly (but taxpayers will still be charged a user fee -- likely around 2%) The bill will likely pass, and we do anticipate it being an overall help, but it can not cure the fatal conceit of the personal income tax that was specifically designed to strip power from individuals and shift most of it in Washington, DC. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/1BbWhP4maRU IRS Medic