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

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

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

The path towards FATCA Repeal: Sec 965 transistion tax & TTFI

The path towards FATCA Repeal: Sec 965 transistion tax & TTFI

Set-backs be danged. This is not over, in fact, we are closer than ever to ending FATCA (Foreign Account Tax Compliance Act) and the global tax reporting nightmare for US persons living overseas. In this video, tax attorney Anthony Parent leads a discussion of the repeal of FATCA, the impacts of IRC Sec 965 "transition tax" & the hoped for Territorial Taxation for Individuals (TTFI). The US Supreme Court refused to hear the merits of the "Rand Paul" FATCA case (aka Mark Crawford et. al. v Commissioner), yet the repeal FATCA team is not done, not by a long shot. A new plaintiff is being sought -- one who has been assessed an FBAR penalty or Form 8938 penalty and lives in the 8th District court of appeals: Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota & South Dakota. Additionally, a legislative remedy is still being sought to repeal or otherwise make FATCA superfluous. The transition tax, which was part of tax reform, was a bit of a mistake --- and it appears as if the Republicans who voted for tax reform recognize this. This mistake is being used as a lever to open up Congress' eyes to the disastrous consequences of Citizenship Based Taxation. And in the words of one of our guests, John Richardson, Esq. of Citizenship Solutions (https://ift.tt/1pShFnD), the biggest victim of FATCA and global taxation is the overworked IRS itself. Also joining is Solomon Yue, of Republicans Overseas (https://ift.tt/2ExXBoC), one of the men responsible for getting a repeal FATCA plank inserted into the Republican national platform, and Kathleen Mistry of AARO (Association of Americans Resident Overseas) (www.aaro.org) and Mistry Enterprises LLC. Kathleen is the stateside representative of AARO and with her business she works to help bring international businesses together and has seen first-hand the damage of FATCA and universal tax jurisdiction of the IRS has done to the US economy. Lastly, our very familiar guest, Keith Redmond, a tireless advocate for all US persons living overseas. Those who know themselves to be US persons, and also those Accidental Americans who were born in the US, are subject to US taxing jurisdiction, but do not identify and have little connection with the US, aside from being born stateside. For those interested in helping us repeal FATCA and work to a fairer tax system, we invite you to contact your Representative and Senators and let them know the damage that is being caused. Visit www.aaro.org to determine who your representative is if you live overseas. Also, feel free to join Keith Redmond's American Expatriates 2.0 Facebook to get connected with like-minded individuals who want to see this taxation nightmare end. (https://ift.tt/2Jxz1Ib) Be sure to follow Grover Norquist of Americans for Tax Reform (https://www.atr.org) who is also helping to lead this effort. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/8Ss3r0IP9nY IRS Medic