Thursday, August 17, 2017

Using the IRS streamlined OVDP for Form 5471 Amnesty

Using the IRS streamlined OVDP for Form 5471 Amnesty The lesser known Form 5471 penalties, and how to decrease your risk of falling victim to these penalties   It’s a form that US owners of certain foreign corporations need to file. 1. Failure to file can result in a $10,000 penalty -- per occurrence.  2. The statute of limitations on assessment is much longer than people realize.   This is something the IRS is actively going after: In a recent case, the IRS assessed twelve(!) Form 5471 penalties against consultant who did business under a Canadian corporation. This resulted in a $120,000 tax penalty. A tax penalty that Canada actually helped the IRS collect.   The Streamlined Program It was created not just for FBAR amnesty, but it was also created Form 5471 amnesty.   Qualifications: 1. "Did you know that you had a Form 5471 filing requirement?"   2. Your subjective intent is the critical issue. 3. Don’t make assumptions about your situation 4. Every one of our offshore clients made some sort of mistake. 5. Yet, many mistakes are not large enough to make someone ineligible for the Streamlined program.   If you don't qualify for the Streamlined Program, the Full Offshore Disclosure Program is still available. We just prefer the Streamlined program because in terms of time and cost, it is much, much less onerous for our clients. The benefits of Streamlined OVDP for missing or incorrect Form 5471s  1. Only three years of Form 5471s are required 2. No penalty for filers who live outside the US. 3. A 5% penalty on stock value for those living in the US. There are many way to legitimately claim a low valuation of your controlled foreign corporation. 4. A much quicker process than full OVDP. 5. You'll learn how to properly file Form 5471s going forward. 6. Any other missing forms can all too be included in a Streamlined Disclosure. For example: missing Forms 8938, 8865, 3520, 3520A (foreign pensions), and 8621 Parent & Parent LLP 60 East 42nd Street SUITE 4600 New York, NY 10165 (212) 256-1335 IRS Medic

Wednesday, August 16, 2017

Canada collects $120,000 in Form 5471 penalties for the IRS

Canada collects $120,000 in Form 5471 penalties for the IRS
Mr. Dewees, was a U.S. citizen living in Canada, where he operated a consulting business. In 2009, Dewees learned that he had failed to comply with the FBAR requirements, and, thereafter, successfully applied to participate in the OVDP. IRS assessed a penalty of over $185,000 for not filing the FBARs. Dewees refused to pay the assessed penalty and withdrew from the OVDP. Because the business was incorporated abroad, Dewees was required to file a form 5471. Not filling the form carries a $10,000 penalty. And the statute of assessment is not 6 years. In September 2011, IRS notified Dewees that it had assessed a different penalty of $120,000 against him for failing to file Form 5471 from ’97 to 2008. Dewees requested an abatement of this penalty for reasonable cause, which was denied. Mr. Dewees was in Canada. Then pursuant to the U.S.-Canada tax treaty (the Treaty), the Canadian tax authority held Dewees’ Canadian tax refund in abeyance until the IRS penalty was paid in full. How did Canada do this? IRM (11-13-2015) Mutual Collection Assistance Requests (MCAR) The United States has five bilateral tax treaties that contain broad provisions for mutual assistance in collection, also known as "MCAR" . Canada – All taxes including both individual and business Denmark – Income taxes France – Income taxes & estate taxes The Netherlands – Income taxes Sweden – Income taxes Note: On January 24, 2013, the United States and Japan signed a new Protocol to tad japan to the list. Once the new Protocol to the income tax treaty between the United States and Japan has been ratified, this section will be updated. Note FBAR penalties aren’t tax penalties so MCAR non-issue. Offshore penalty can be collected by MCAR. Takeaways: IRS only knew to assess 5471 penalties because taxpayer came clean. Pretty nasty. Expecting justice from Federal court is like corn expecting justice from chickens. If you made a disclosure look to make sue you have all your 5471s done, and properly done. Missing Form 5471s we see: 1. 5471s dormant corps 2. holding companies for asset protection 3. self-employment Other Delinquent Information Reporting Forms 8865, 5472, 3520, 3520A, 8938, 920 also carry $10,00 per year penalty. Think about these before opting out. You can win on FBARs but lose on 5471s. IRS Medic

Understanding IRS offshore disclosures with OVDP lawyer Anthony E. Parent

Understanding IRS offshore disclosures with OVDP lawyer Anthony E. Parent Between the scare tactics of the IRS and some tax practitioners, and the lackadaisical attitude of others lies the truth of the IRS offshore Disclosure programs, which OVDP attorney Anthony Parent says are more aptly named FBAR amnesty programs If you are thinking of making an IRS voluntary disclosure or concerned you need to, this video is a must-watch. Don’t make a disclosure if you don’t need to, and if you are going to make a disclosure, do it right, or don’t do it at all. In this video, IRS Offshore Voluntary Disclosure Program (OVDP) lawyer Anthony E. Parent discusses the complete evolution and history of the IRS offshore disclosure programs from the Pre-2009 Offshore Voluntary Disclosure Initiative (OVDI) practice, the 2009 OVDI, the 2011 OVDI, the 2012 OVDP, the 2014 Streamlined OVDPs. Learn how offshore disclosure evolved from a program designed for criminals to a program that is now designed to punish non-criminals. Despite the rough landscape, you can still make an optimum move to mitigate your risks. Or should you decide to do nothing, you can at least appreciate what the risks of doing nothing are. Parent & Parent LLP 60 EAST 42ND STREET, SUITE 4600 New York, NY 10165 (212) 256-1335 IRS Medic

Tuesday, August 15, 2017

Common US tax issues for UK filers

Common US tax issues for UK filers The U.S.-U.K. tax treaty is one of the most beneficial treaties. But…because the US taxes based on citizenship, not residence, there are many tax traps lurking for UK citizens living in the US, and US persons living in the UK. The United States and United Kingdom have different tax years This can complicate things.  The calendar year must be used to calculate US taxes; not the UK tax year. Duplicative work is required The typical issues: The Foreign Earned Income Exclusion Foreign Tax Credits Treaty Information FBARs, FATCA, etc UK specific tax issues US person living in the United Kingdom UK person living in the United States Reporting requirements for private pensions, qualified life insurance policies, Individual Savings Accounts, treaty benefits and totalization benefits.. Non-UK financial accounts: Understanding other countries treaties that might be involved is critical. Our US-UK clients tend to be extremely mobile, creating additional tax complications. Parent & Parent LLP 60 East 42nd Street SUITE 4600 New York, NY 10165 (212)256-1335 IRS Medic

Common problems of Indians with US tax requirements

Common problems of Indians with US tax requirements Issues we see for US persons living in India, and Indian people living in the US. We often talk about FBARs, FATCA, Form 8938, but there are many more issues specific to each country The US-Indian Treaty provides little benefit The "Savings Clause" part of the treaty negates the double-taxation prohibition Anything earned in India is subject to US taxation. The foreign income exclusion applies if you are domiciled in India, and you may be entitled to a foreign tax credit for any taxes paid in India.   The NRE/NRO trap Indians not living in India can only have NRE/NRO accounts. The benefit is that these accounts are tax-free in India. If an Indian is also a US person, a NRE/NRO is taxable.  This trap has caused many Indians to fail to disclose their worldwide income Many have had to enter into some sort of offshore disclosure program.   Other issues we see: Treatment of fixed deposits with a term over one year Treatment of Indian life insurance, Indian Mutual Funds, EPFs, PPFs, NRE, NRO accounts, and pension funds HSBC India is on the foreign facilitators list. DEMAT Accounts involved complicated accounting, along with FBAR reporting. Parent & Parent LLP 144 S Main Street Wallingford, CT 06492 (203) 269-6699 IRS Medic

Friday, August 11, 2017

When a full IRS offshore disclosure was a mistake.

When a full IRS offshore disclosure was a mistake.
Do you now regret entering into the full/standard IRS Offshore Voluntary Disclosure Program (OVDP)? In the video, tax attorney Anthony E. Parent goes over the four possible option his team sees: 1. Remain in the OVDP and pay the 27.5% or 50% offshore penalty 2. Opt-out of the standard offshore penalty regime and keep criminal protections. 3. Do nothing. Be removed. Get audited under opt-out standards but lose criminal protections. 4. File streamlined disclosure anyway and waste time and effort. For more visit: Parent & Parent LLP 60 East 42nd Street SUITE 4600 New York, NY 10165 (212) 256-1335 IRS Medic

Thursday, August 10, 2017

What to do when you received a Certified mail slip from the IRS

What to do when you received a Certified mail slip from the IRS
If the postman leaves you a pink certified mail slip from the IRS, you always could go down to the post office, wait in line, claim your certified letter form the IRS, take it home, attempt to understand it, attempt to understand all of the issues you may have, attempt to formulate the best possible strategy, and then implement that strategy. Or you could just purchase our Total Tax Diagnosis service for $750 IRS Medic