Why IRS Form 5471 preparation has become even MORE difficult

Why IRS Form 5471 preparation has become even MORE difficult

Previous video on Downward Attribution: https://youtu.be/dIwYRSo3mHw The Tax Cuts and Jobs act of 2017, otherwise known as tax reform, created many changes to the taxation and reporting of foreign stock ownership. And not for the better. Nowhere is this better demonstrated than on IRS Form 5471, a form with the easy to remember title of “Information Return of U.S. Persons With Respect to Certain Foreign Corporations."  In this video we will discuss some of the worst changes we’ve seen for tax years 2018 and moving forward. Here’s the big message: More people are now required to file a Form 5471, and Form 5471 has never been as complicated.  So let’s get into some of the big changes.  First off, there used to be a requirement that you had to own a stock for 30 days or more to trigger the status as a  US shareholder. Now the trigger is if you own the stock for any moment within a year. Even a second.  Second, there are now increased filing requirements because of new rules that attribute more stock ownership than actually exists - both individuals and entities can be affected. Tax reform repealed Section 958(b)(4)  - and perhaps this was an accident - I really think it was. But the effect has been to require more taxpayers to file a Form 5471 than ever before with a concept called downward attribution - a topic I discussed at length in a previous video - you’ll find the link in the description below.   While there is new program the IRS announced that offers some attribution relief, you need to check to see if it applies in your situation. Follow the links to irsmedic.com if this is something you need help with. Form 5471 now has new schedules and new definitions of certain categories - and don’t forget the attribution rules can differ category to category. Additionally Form 5471 isn’t just for information only anymore - in some cases you now use it to calculate a tax liability.  Another change - you  probably are not done with just a Form 5471. Also look to see if forms 965, 965-A 965 B, 8990, 8991, 8902, 8993 are needed.  And don’t forget about Form 926 - which has been around for a while - but it too has a  $10,000 penalty if not filed or if it is something that the IRS deems is substantially incomplete.   And lastly, Category 1 is back. If you look at the the general wording, it makes it seem like you only have to file if you have a transition tax due. But this is not true. Category 1 is related to the transition tax but again, even if you don’t have any transition tax due, you still could  a Category 1 filer.  Overall, Form 5471 preparation has gotten so complicated many very talented tax professionals have given up and are now outsourcing this work to firms like ours. They simply don’t feel comfortable - with good reason. And also, we are hearing from our clients and other tax professionals alike that many large accounting firms that used to prepare Form 5471 don’t want to be bothered - the work has gotten too difficult for them.  So does this situation seem impossible? Well there is hope. Understand that the IRS does not have the staff to examine every Form 5471 filed. This is some of the most difficult tax work around and there’s simply not enough people in the world who are up to the challenge - inside or outside the IRS. But what the IRS can do, is find easy to spot mistakes - so that’s exactly what they do. They find the low hanging fruit where they can assess those $10,000 penalties nearly automatically. The IRS doesn’t want to have to dig too deep. So the key with Form 5471 is to make sure that what you file can escape that first round of scrutiny with no problems - let the IRS focus on someone who took shortcuts, and not you or your client, right?  So what are your questions about Form 5471? What are your trouble spots? What do you want to know? Please leave your concerns below. We read every comment.  Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/hlKiO0nAFEg IRS Medic

IRS Schedule 1: The new shell game that may only confuse you.

IRS Schedule 1: The new shell game that may only confuse you.

Look how much simpler your tax return is now! Why there's even blank space on the first page of your return! Yes! Wow. Isn't this great news? Or this could be a fairly transparent shell game where the information that used to be on page 1 on your 1040 is simply now on the another page - now known as IRS Schedule 1. Per https://ift.tt/2Qf93iq "Have additional income, such as capital gains, unemployment compensation, prize or award money, gambling winnings. Have any deductions to claim, such as student loan interest deduction, self-employment tax, educator expenses." Be sure to suscribe as we go over more the the complexities that Tax Reform (Tax Cuts and Jobs Act of 2017) created. Parent & Parent LLP 144 South Main Street Wallingord, CT 06492 (230) 269-6699 ino@irsmedic.com https://youtu.be/K6yJMb6aKvM IRS Medic

Streamlined Disclosure v. IRS Relief Procedures for Certain Citizens? Which is better?

Streamlined Disclosure v. IRS Relief Procedures for Certain Citizens? Which is better?

Previous Videos: 2019 Streamlined Disclosure Updates: https://youtu.be/s_QxqiNZHTk The 2019 Relief Procedures for Certain Former Citizens: https://youtu.be/aZW508BNZWk What is a Covered Expat?: https://youtu.be/-8BUfwCcK6o In this video we discuss tow hyptheticals that can help you understand if either the Streamlined Disclosure program or the new IRS Relief Procedures for Certain Citizens are programs you may wish to consider. In hypothetical one Pierre woke up to learn that his bank account in France is going to be frozen - he was identified as US person. In fast Pierre was born in New York when his parents attended Columbia University. But he’s never been back to the US since he was 2 years old. His French is perfect ,but his English - not so much. Pierre lives a modest life and just wants this IRS FACTA issue to go away. He qualified for the Streamlined disclosure program and if he uses it, he will have no penalties and instead of owing taxes - his two children are earning him a tax credit of now $2000 per child - $4000 refund. So what should he do? Streamlined or Relief Procedures? Will he get the refund? Hypothetical two: Kyle does speak English well. He left the US in 1999 when he was 18 and now runs a few successful businesses overseas. He believes he filed returns in high school, but isn’t sure. His net worth is hard to calculate. He think he can sell his businesses, if the right buyers comes along for $10,000,000. Yet - on paper he isn’t really sure what is is worth. He make around $400,00 USD annually but has lost the same amount in other years. if you added up all his income from all his various business interests around the globe. He really has no intention returning to the US aside from visiting his family. He isn’t sure if he would owe any tax to the US - he is taxed heavily where he lives and believes the foreign tax credits should negate any tax liability. He is married and his wife sees no point to being a US person. And wonders why he’s hasn’t renounced yet? For help follow the link to https://ift.tt/1RfwK1f Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/Pz3OHREqcAA IRS Medic

2019 IRS Relief Procedures for Certain Former Citizens explained

2019 IRS Relief Procedures for Certain Former Citizens explained

Previous video on 2019 Streamlined Submission updates: https://youtu.be/s_QxqiNZHTk Next video: [not uploaded yet] What is a covered expatriate: https://youtu.be/-8BUfwCcK6o Link to IRS.gov: https://ift.tt/2NhGcrL The Internal Revenue Service announced new procedures that will enable certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for potential back taxes owed along with foreign reporting penalties such as Form 5471, 8839 and the FBAR form. Requirements: The Relief Procedures for Certain Former Citizens apply only to individuals who have not filed U.S. tax returns as U.S. citizens or residents, owe a limited amount of back taxes to the United States and have net assets of less than $2 million. Only taxpayers whose past compliance failures were non-willful can take advantage of these new procedures. Many in this group may have lived outside the United States most of their lives and may have not been aware that they had U.S. tax obligations. Eligible individuals wishing to use these relief procedures are required to file outstanding U.S. tax returns, including all required schedules and information returns, for the five years preceding and their year of expatriation. Provided that the taxpayer's tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes. The purpose of these procedures is to provide relief for certain former citizens. Individuals who qualify for these procedures will not be assessed penalties and interest. The IRS is offering these procedures without a specific termination date. The IRS will announce a closing date prior to ending the procedures. Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible so long as they satisfy the other criteria of the procedures. Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irrevocable decisions. Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime. Taxpayers interested in these procedures should read all the materials carefully, including the FAQs, and consider consulting legal counsel before making any decisions. For more help follow the link to https://ift.tt/1RfwK1f Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/aZW508BNZWk IRS Medic