Tax Reform, Form 5471 & foreign-owned US subsidaries -- navigating the mess

Tax Reform, Form 5471 & foreign-owned US subsidaries -- navigating the mess

https://ift.tt/2LJaB2m Tax reform made it so that 100% non-US owned US subsidiaries now have to file a Form 5471 for any non-US subsidiaries that there foreign parent owns. This sentence is no doubt, incredibly confusing. This video may help you understand how much of a dramatic change this is and creates huge burdens on foreign companies doing business in the US. In 1960, Congress passed the first law that required corporations and individuals to self-report extensively on their US controlled foreign corporations. The purpose was to reduce the ability of US taxpayers from “playing games.” The law made it so that the IRS can look at everything a US taxpayer- controlled corporation is doing overseas, to make sure their overall worldwide income was properly assessed and taxed. Self-reporting is completed on an IRS Form 5471. IRS Form 5471 is quite intense. And unfortunately the same burdens apply if you are a large multinational corporation or if your foreign corporations are not quite as large and closely held. With complicated instructions, the Form requires you to know which category of filer you are to determine which schedules you need to file. The IRS requires you to convert the accounting method you use overseas over to GAAP. The US is the only country in the world that uses GAAP and all Form 5471 filed with the IRS must comport to GAAP or else..the penalties. The penalties for not filing or filing a substantially incomplete Form 5471 start at $10,000 per year and can reach $50,000. Additionally, if a Form 5471 is not filed, the statute of limitations on the Form 5471 is indefinite. So who has to file a Form 5471? If you are a US shareholder in US controlled foreign corporation you have a Form 5471 requirement and must attach it to your return. But also, tax reform made is so non-US means US! Tax Reformed changed what it means to be a US controlled foreign corporation. For every other similar subsidiary around the world. the US foreign owned subisdary probably has a Form 5471 requirement. Causing further concern is the IRS has made Form 5471 penalties a pretty significant part of it enforcement regime. These penalties are easy to assess and can boost up assessments, making the IRS audit divisions look good to Congress and the Treasury Inspector General. So how did this happen? Downward attribution is what the term is used to justify turning a non-US controlled corporation into a US controlled corporation. If you are confused great! It means you are paying attention. Because downward attribution makes about as much sense as “wet roads causing rain.” Downward attribution is a way get something to mean exactly what it doesn’t mean. So why? First I don’t think anyone who voted for this knew what they were voting on. This rule came into place because a section of tax code was removed by tax reform, not added. The justification for this rule is the same argument from my first example. A US subsidiary could be playing games with transfer pricing, allocating income and expenses to lower US subsidiaries tax bill. Therefore, the argument goes, a Form 5471 is required so that IRS could track both or all sides of every transaction with every related party to the subsidiary. But I wonder. Does this onerous compliance regime actually help the US? Here’s the thing. International tax compliance is so difficult the IRS does not have the staff to actually administer it effectively. Two main reasons. One it takes a long time. A very long time. Second, it actually takes a pretty special person to be able to understand the complexities. Whether you are talking about a tax professional representing you or IRS employee tasked to examine you, one both sides, it takes elite talent to properly work an Form 5471 case. The fact is tax reform made international tax compliance far more complicated. If you or your company needs help in navigating not just the old minefields, but these fresh new minefields, don’t hesitate to contact us to see how we can help you get your compliance worries behind you. So what do you think? Do you think it is a good idea the the US government puts such a burden on international business? Do you think there’s a benefit that outweighs the cost? I love to know what you think and if want you would like in the next tax reform package. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/dIwYRSo3mHw IRS Medic

FATCA Repeal Update: The action to take right now!

FATCA Repeal Update: The action to take right now!

Act by August 8, 2018 https://ift.tt/2mJo3oL Join Anthony E. Parent, Esq., Keith Redmond, John Richardson and Suzanne Herman for a very important message about a second repeal FATCA hearing and how you can help make this happen! ATTENTION AMERICANS OVERSEAS! There is a SERIOUS bi-partisan push for an updated FATCA hearing to address the sharing of personal financial data and the lock-out of Americans overseas from foreign financial institutions (i.e. their local banks). As a result of Suzanne Iclef Herman's hard work and tenacity in establishing and cultivating a relationship with her Congressman and his staff, we have succeeded in building bi-partisan momentum in an updated FATCA hearing. Suzanne requested to Congressman Posey’s office that I get involved in order to have as many Americans overseas as possible contact their respective Congressmen/Congresswomen. The attached letter has been sent to Members of Congress (MOC) in a bi-partisan effort to have the House Ways & Means Committee hold another FATCA hearing. In conjunction with the request, MOCs have been sent a letter (in the same aforementioned attachment) which each MOC can send to House Ways & Means Committee showing their support for another hearing. Americans overseas are asked to write their Congressmen/Congresswomen to sign the letter. Go to https://ift.tt/2mJo3oL to fidn the exact steps you need to take to help with the repeal of the FATCA Parent & Parent LLP 114 South Main St Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/Kvk0Cqt5ZM0 IRS Medic

Are IRS passport revocations & denials at all Constitutional?

Are IRS passport revocations & denials at all Constitutional?

https://ift.tt/2LDV5RO Is it constitutional for the IRS to revoke your passport? The government can now deny or revoke your passport for unpaid taxes. Does this sound at all Constitutional to you? If your passport can be taken away for unpaid taxes, what’s next? Will the government take away your voting rights? You right to own a firearm? In this video I am going to talk about a truly horrendous law that should concern everyone and what you should do if you are worried about losing your passport to unpaid taxes. The FAST Act of 2015 allows the IRS to direct the US state department to deny or revoke your US passport. When I first saw this, I couldn’t believe it passed. On the practical aspect, I know that the IRS and the State Department have enough work to do, and that this law will just burden them even more. But on an intellectual and moral level, this law just bugs me every which way. Why? Because while l know a US passport is technically the property of the US government, the US Supreme Court has ruled that the right to travel, even across borders is a fundamental right. A fundamental right. Meaning the right to travel is up there with freedom of speech, freedom of association, freedom of conscious. Fundamental. Rights do not get anymore important than fundamental. Now this is not to say the government can’t restrict or inhibit fundamental rights. The government can. It does all the time. But in order to do so, the government must provide due process which includes the right to be notified and the right to an impartial hearing. One of the problems with the passport revocation law is that the only notice comes though mail. And what’s worse, is the IRS admits that it has a difficult time getting mail to US persons overseas - all who likely have a US passport. Do you think a letter that you may or may not receive is proper notice before revoking a fundamental right? In additional, when impacting a fundamental right, the Supreme Court says legislation must pass the “Strict Scrutiny” standard of review. The highest level of review. To pass strict scrutiny, the legislation must further a compelling governmental interest, and also must have been narrowly tailored to achieve that interest. And this is where Congress loses me. I get that collecting revenue and ensuring compliance with tax laws is a compelling state interest. But how is taking away someone’s passport narrowly tailored to ensuring compliance with tax laws? There just can’t be some attenuated or indirect connection between the law and the desired outcome. But rather, the law must be narrowly tailored. Or to put it another way, how would be infringing on the fundamental right to travel be any different than other denial of other fundamental rights? It gets more obnoxious when you realize that the IRS was already the most powerful collection agency in the world. The IRS can levy, garnish, and file liens all without a court order! Why aren’t these narrowly tailored tools good enough? It is because the IRS isn’t using them to the fullest extent? Actually that is true. The IRS is so short staffed it can’t do the normal collections they used to do 10 years ago. So instead of funding the IRS to the appropriate level, Congress pulls this crap. Creating headaches for taxpayers, the IRS, the state department and my prediction, there will be no meaningful increase in revenues. Now would a constitutional argument prevail? The strongest argument I see is the lack of procedural due process. You simply should not be able to invalidate a fundamental right by mail, especially when you know mail is quite unreliable. And that impartial hearing in front of a judge is missing too. With IRS passport revocations, the only hearing you are entitled to, if you are not too late, is in front on an IRS Appeals Officer. And while I think this law should not pass strict scrutiny, the fact is the federal government is greedy for revenue and will bend over backwards to validate anything called a revenue bill — even if it fails to raise revenue. However, to win on a claim I would estimate about $150-300,000 in lawyer fees and the case might take years to resolve. In the meantime, the government takes your passport. That’s why I suggest if you have back taxes and you are worried about losing your passport contact us about our passport protection services. Our mantra is that every situation can be made better. So why not have one less thing to worry about. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/LiTa3HWqeIY IRS Medic

Can you use wash sales to offset cryptocurrency gains? Probably

Can you use wash sales to offset cryptocurrency gains? Probably

If you invest in stocks, securities or cryptocurrencies such a Bitcoin and Ethereum, this is an important video to watch. Many have made mistakes for not understanding what a wash sale is and when it is prohibited by the IRS. You might not know this term. So I will explain what is use using a real stock. Let say you bought 1000 shares Starbucks (SBUX) @$60 per share on December 13 2017 for $60,000. On July 1, 2018, you see that the stock has dropped to $48 per share. Meaning you had a loss of $12,000. You have some other stocks that have done well, so you are looking for a way to lower your taxes. You think to yourself — hey you know what would be a good idea? Can you use your SBUX stock to realize a loss and then immediately buy it back to maintain my position? Sounds like a solid plan, right? Sounds like it should work. Can you think of any problems? Well this is where having some knowledge of the tax code would really help. This is what is technically known as a “wash sale” Wash sales are prohibited by Section 1091 of the Internal Revenue Code. Section 1091 states that your need a 30-day lag between selling and buying back otherwise, the loss that occurred will not be deductible. Now because it is a 30 day lag on both ends, you actually have to wait 61 days before buying a stock back in order to be able to claim your loss. Otherwise you will lose again. Once on the decrease in the value in stock and again, when the IRS won’t give you credit for the loss you actually suffered. So can you use wash sales to utilize cryptocurrency losses? Cryptocurrencies are bit volatile and because of this, many US taxpayers have large gains. But sometimes they are sitting on huge losses as well. The question is can you sell off the cryptos that have lost value to apply those losses against gains in order to lower your tax bill? And also, can you then immediately buy those cryptos back to maintain your market position? The answer is probably yes, section 1091 does NOT apply to cryptocurrencies. Will the IRS change its mind? Probably. There’s money to be had. Of course, the IRS can always change this rule. Section 1091 does allow the IRS to expand the “stock or securities” that trigger the wash sale rule. If the IRS passes a regulation clarifying that Bitcoin and other cryptocurrencies do fall under the jurisdiction of Section 1091, wash sales may be disallowed. It’s safe to assume that the IRS will eventually take the step to disallow wash sales of virtual currency. Personal property v. intangible property Yet, its conceivable that the tax treatment for cryptocurrency can get worse. For example, one unfavorable outcomes would be that the IRS could make the decision to treat cryptocurrency as personal-use property as opposed to intangible property. Capital losses from the sale of personal–use property, such as your home or car, are not deductible. See IRS Publication 523. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/tWP772YAiY4 IRS Medic

FATCA Failure: The Top 10 reasons why the Foreign Account Tax Compliance Act is just awful.

FATCA Failure: The Top 10 reasons why the Foreign Account Tax Compliance Act is just awful.

TIGTA's report shows $380 million was spent for the IRS to (partially) implement the Foreign Account Tax Compliance Act (FATCA) meanwhile the revenue that FATCA was claimed to bring in never happened. In this video, we discuss the tope 10 reason why FATCA is one of the worst laws ever to pass, as it costs the government more money to implement, meanwhile making lives for Americans painful, if not impossible. The TIGTA Report: https://ift.tt/2zrxUJ1 The Top Ten Reasons why FATCA is a failure It was passed on an accounting lie. This PAYGO lie. PAYGO stands for “pay as you go budgeting” and it is supposed to keep spending bills deficit neutral. In this case, the HIRE Act of 2010 was a spending bill, so offsets needed to be found. The claims was FATCA would find about an extra billion dollars or so per year in revenue. And so how as that works out? According to professor William Byrnes and Robert Munro at Texas A&M, the revenue is not there. What you’ll see is a red herring from the government. The claim that thanks to FATCA, $10 billion in penalties collection as part of the OVDI, OVDP and streamlined programs. These were one-time payments only. But for the most part those are attributable to enforcement of the Bank Secrecy Act’s FBAR requirements, not FATCA. So why the revenue is not there, the costs certainly are. This brings us to Number 2. TIGTA puts the cost at $380 million so far. And there’s lot more work the IRS has to do to get FATCA fully implemented. 3. Risky. The government cannot provide any reliable assurance that the private financial information obtained on millions of U.S. and non-U.S. persons can be in any meaningful sense be considered secure. Imagine a data breach here. Lots of sensitive information there. What if say Turkey or Iran was looking for info on dissidents? What if they got info on someone whereabouts because of FATCA. What if that person was assassinated? 4. The cowardice of nations. Every one seems to talk tough about standing up the the US. So why couldn’t they find some courage to tell the US to get lost with FATCA? kind of sad the US bullied other countries, kind of sad that all these countries acquiesced to the bullying. They may have done so thinking that they’d get something in return. But they haven’t FATCA has been one-way sharing of information too the US. 5. Compliance vultures. This law benefits no one except those in the FATCA compliance industry. And for them, FATCA has gold. It’s been good for billions of dollars per year. 6. What was left of the 4th amendment was shredded. There exists no right to privacy. The IRS is entitled to your financial information even when there is no income to report. 7. The tribalism and dysfunction of our political system. One party passed FATCA. Another party wants to repeal it. You would figure those harmed by FATCA would be on the side of the party that wants to repeal it. But I have seen too much tribalism at play. Trashing people who you want to help you is kind of …stupid. Also, by telegraphing you will vote for the party that passed FATCA NO MATTER WHAT well…you just indicated to them that they can ignore you without any fear of consequences. If you can’t vote for for the party that wants to repeal FATCA, fine. But you don’t have to say that out loud. Make the people that doesn’t want to repeal FATCA second guess themselves. Make them think you could switch parties and never come back. 8. Triplicative reporting. So you could have a bank account that needs to be reported on an FBAR form. And a Foreign Financial Institution may be reporting this account the the US. Yet you still have to report this account again on a Form 8938 or face a possible $10,000 penalty, even though the account may actually make no income of which taxes could be due. With the Bank Secrecy Act and FATCA, three times the government learns of a foreign account. And as we learned form TIGTA report, the IRS is flooded with so much data, FATCA can’t be fully implemented. 9. The drain on IRS resources. FATCA imposed more burdens on an already understaffed IRS. This meant the IRS had to pull resources away from other areas. There is a reason why when you call the IRS for help hold times are long. There is a reason why a lien release that used to take 5 days now can take 5 weeks. There is a reason why claims for refunds take much longer. 10. Forced expatriation of US persons. This is the worst. A US citizen should have the most opportunity in the world. FATCA made that impossible. In order to continue to live their lives overseas, many Americans from retirees to US armed services veterans have had to give up their US citizenship to survive. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/5BqO9cbyr-E IRS Medic

The terror behind IRS Private Debt Collections: Who is really to blame?

The terror behind IRS Private Debt Collections: Who is really to blame?

The answer? It NOT the IRS that is to blame It is Congress. We try to be fair to the IRS, and in this case, the IRS got it right. They were the ones who we more fair and humane. It is Congress that rather monstrously passed this dumb dumb dumb idea. Private debt collection is something the IRS once experimented with, but it quickly realized it was a bad idea. Between 2006 and 2009, with Congressional approval, the IRS tried on their own using private debt collectors to try to collect taxes on cases that were too small to send to revenue officers or otherwise weren’t getting worked. The IRS ended this experiment realizing there was no free money. The program created more headaches than it was worth. As the IRS learned that there was a reason why these cases were uncollectable. The people they went after were dead broke. So the IRS abandoned the idea of using third party private debt collections forever and would stick to their normal collection processes that do have some important protections available for those who are financially struggling. Legislative accounting fraud is enabled by something called PAYGO budgeting. PAYGO budgeting, which stands for “pay-as-you-go,” it is a budget rule which requires new proposed spending to be offset by tax increases or cuts in mandatory spending. What this means is that if Congress wants to spend $100 on a new spending program, it has to find $100 in cuts or in additional revenues. The purpose is to keep the budget deficit low. Yet the budget deficit continues to grow. So what’s going on? The answer is that while the spending is sure to happen, the offsets, the cuts or increases in revenue rarely occur. Yet, just because those offsets never happen, the spending is not undone. No rather, nothing is done at all. it is all swept under the rug. So how does PAYGO apply in this case? Let me explain. So in 2015, there was a new proposal — this was the FAST Act, a new spending bill. And so Congress was looking around for some offsets. So someone had the idea that if only past due IRS debts were sent to private collection, it would rain free money. About a billion dollars of unpaid taxes where there just for the taking. Free money! This claim was completely accepted as true, again even though, again, the IRS tried a limited private collection program and it completely failed. Again, it failed so bad the IRS stopped doing it. Yet the program actually cost $13 million. The IRS spent $20 million dollars so far to administer the program, but it only brought in $7 million in revenue. That is, the deficit increased by $13 million. So instead of not offsetting the spending like PAYGO demands, it actually increased the deficit. But what is even worse is when you ask yourself where did that $7 million they did collect come from? These taxpayers were deemed to be the lowest priority of IRS collections. How did these seriously strapped individuals come up with $7 million. Well the Taxpayer Advocate Service did some great research. And it found that these taxpayers, if using IRS guidelines would have been placed in a hardship status. A hardship status is where the IRS deems you to be currently not collectible. So they leave you alone, although they will intercept any refunds that you may be entitled to. Under the IRS guidelines these people would not be subject to levies or the threat of levies. Yet many of these people have been sent out for private collections! So in an effort to make themselves appear as fiscal hawks, Congress mandated that private collection agencies extract money from the most vulnerable Americans, making these suffering people more vulnerable. Look I know my firm and a lot of the other good ones would be able to get tax relief for anyone facing a financial hardship. But so many people simply don’t have the resources to pay us even if we charged half our fees. It’s only the lucky ones who have friends or family to borrow from or get a gift from that get the top representation. There are legal clinics and they are great, but there’s simply not enough of them, and they are typically bound to the school year as most of them are run out of law schools. Yet here we are, Congress authorized private debt collectors to extract money from Americans who not just below the poverty line, which for a married couple is about $16,000 per year. But, according to the Taxpayer Advocate, many of the people the government collected from made less than 2 1/2 times of the poverty line. We are talking about is people who have $5000 per year to live on. Let me know what you think and what kind of solutions you would impose. I will merely offer my observation — tar and feathers always seem to work. We just got to make sure we get the right people. And in this case, it is NOT the IRS. Parent & Parent LLP 114 South Main Street Wallingford, CT 06492 (203) 269-6699 https://youtu.be/qXESF_j5BKE IRS Medic