IRS announces new 2018 OVDP procedures - BIG UPDATE

IRS announces new 2018 OVDP procedures - BIG UPDATE

Contact: info@irsmedic.com Links: Article w/ text version of memorandum - https://ift.tt/2AzqxMS Upcoming CLE with Strafford - https://ift.tt/2TYEpZT On November 20, 2018, the IRS announced new Offshore Voluntary Disclosure procedures, ending months of speculation on what would happen without an official OVDP in place. Thanks to Jack Townsend for posting this notice on his Federal Tax Crime blog. https://youtu.be/HK5FscoYtao IRS Medic

Why are accounting and financial analysis so confusing?

Why are accounting and financial analysis so confusing?

Financial Statement Analysis and Accountancy 101: In this video we explain why you might not be such a dummy about understanding the basics and the more complicated items . Are you frustrated by accounting and financial statements? If you are given a balance sheet, do you just want to run and hide? Are you intimidated by P&Ls, accruals, amortization, double-entry bookkeeping? Good news. I'm not going to get too deep into any of that. But rather, I want to share with you my own frustrations with accounting and financial statements so that you can completely dispel the notion that understanding accounting and conducting your own financial analysis is somehow above your abilities. 1. There are no black and white answers. Accounting is supposed to reflect reality. Yet reality is an awfully complicated sort of thing, isn’t it? And also, sometimes people want to show you a particular kind of story. For instance, can you ethically manipulate your books to show a high value so that you can obtain optimum financing? The answer is yes. It’s done all the time. And conversely, could you show lower profits, hence a lower value, to reduce your taxes? Yes, and this too, is done all the time. In fact, both things are done so routinely, no one even mentions it. Yet there exists this idea that “numbers are the numbers” and “numbers don’t lie.” What complete nonsense. Numbers can be the most effective lies! The dirty secret about accounting is that everything is cooked. But as long as you understand the underlying assumptions and the purpose of the books, and how they were “cooked” the books can still be both honest and helpful. 2. If you are more confused after speaking with either your attorney or accountant or CFO something is wrong. If you are able to start or run your own company, a good attorney, accountant, or CFO should be able to explain any concept to you in simple language. 3. Trust your gut. No one should ever be more interested in your business than you. You probably know the right answer, you are just unable to express it in accounting terms. But just because you can’t express it, doesn’t mean that you’re not right. 4. If you can measure something you can improve it. This is a critical function of accounting. This is why it is so important to understand the underlying assumptions that are “cooked” into the books — then you can make meaningful comparisons to see how you are improving and what still needs improving. Bottom line: Your books should work for you, not the other way around. But sometimes a business owner needs help getting their books to work for them. For us, we’ve seen very little difference between a great accountant and a great lawyer and a great CFO. As a tax and business attorney, I actually speak the same language as our accountants and ou clients' CFOs. All of us work in concert to characterize and qualify things in order to better represent a narrative that suits our clients needs the best. So what do you find confusing about accounting? We’d love to see if there is actually a question we can’t answer in 100 words or less. So please, if you have a question, leave them in the comments below. We love a challenge. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/IGm9GoFEEhk IRS Medic

Why does the IRS audit taxpayers? This insider information that might really help you

Why does the IRS audit taxpayers? This insider information that might really help you

Does this seem like a silly question? Well it's not. Because slowly but surely, the IRS audit process has changed over the last 10 years and it is critical you understand why, if you or your business is the one who is the subject of an IRS examination. In this video, tax attorney Anthony Parent speaks about both the public statements the IRS has made, along with his law firm's clinical experience helping thousands of taxpayers deal with an overbearing IRS. While so many articles are written by tax lawyers, accountants, CPAs and other tax professionals about the IRS Audit Red Flags, Attorney Parent explains the reasons why these articles are obsolete. Believe it or not, the IRS used to audit, or in IRS-speak “examine,” every single taxpayer. The reason is that when the income tax was first enacted in 1913, it only applied to those who were truly wealthy. No income tax was due until your income exceeded an inflation adjusted $500,000. And the top tax rate of 6% did not come into play until your income was at the equivalent of $12 million. Because the income tax affected so few people, the IRS had the resources to audit every single return. This changed of course. When Congress blatantly and openly broke the central promise of income tax by applying the tax to nearly everyone — not just the truly wealthy as promised. This drastic change created a flood of new taxpayers that the IRS audit team could not keep up with. So the IRS began to audit only a portion of taxpayers year after year. The purpose of these audits was to primarily ensure compliance. Believe it or not, assessing additional revenue was not the main goal of the examination division. Again, it was compliance compliance compliance. So anyone could be subject to an audit. The IRS really wanted to spread the misery around, and it did. Along with multibillion dollar corporations the IRS would also routinely audit the plumber down the street. But things changed politically. The IRS is one of the least-liked organizations in the world. And many politicians don’t want to be seen as supporting the IRS. Yet, they don’t want that revenue the income tax brings in to dry up. So what’s the play for someone who needs to look like they are on the taxpayers side, but are still completely in love with that revenue the IRS brings in? Well it’s simple. Cut the IRS’s budget. In fact, the IRS’s budget has been cut so much, in the last ten years, the IRS lost its most experienced agents and officers. Yet they haven’t been replaced. Yet, Congress insists the IRS do more with less. And because ensuring compliance isn’t really a goal that has a data points that one can rest their conclusions upon, the new focus for the IRS examination divisions has become something that is more measurable — that is, increased assessments. So this is the sea change. The IRS is no longer interested in compliance for compliance sake, but rather wants examinations where there will be a good chance of assessing additional taxes and for them, massive penalties. So what types of cases involve the prospect of huge additional assessments? The focused targets we see are: Domestic cases where the IRS suspects something egregious; Cases involving foreign income and assets. The IRS wants domestic audits where they suspect a slam dunk that could trigger massive civil fraud penalties along with a huge tax assessment. And also, the IRS also wants more international audits. The reason? Cases involving international income and assets are a huge penalty wonderland for the IRS. There exists a litany of penalties that can trip up any decent, honest, intelligent person. Penalties of over $10,000 for not reporting the existence of a foreign bank account on what is known as an FBAR form, and penalties of $10,000 for not reporting the ownership of a foreign bank account on a slightly different form, a Form 8938 Along with: A $10,000 for not reporting interest in a foreign business on Form 5471 A $10,000 for not reporting a Foreign pension on Form 3520-A A $10,000 penalty for not reporting distributions from a foreign pension on a Form 3520. A $10,000 penalty for not reporting a transfer to a foreign business on Form 926. Multiple penalties for multiple years can really add up into the hundreds of thousands of dollars. Oh and by the way, this list is far from exhaustive. And willful FBAR penalties can even be higher How to win your audit? It is critical you get the highest level of legal representation possible if you are worried that a revenue-hungry examiner is looking at you as a mere target to aggregate into a press release. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https;//www.irsmedic.com https://youtu.be/FxVRnJnegMQ IRS Medic

IRS OVDP ended September 28, 2018. What are your options now?

IRS OVDP ended September 28, 2018. What are your options now?

IRS ends OVDP — what to do if you missed the deadline The IRS ended its Offshore Voluntary Disclosure Program or OVDP for short, on September 28, 2018. So what does this mean for taxpayers who have not made a disclosure? What should they do now? Are there any options left? In this video, I’ll explain exactly what paths remain open for those worried about FBAR penalties, the myriad foreign reporting penalties, and criminal prosecution. First thing: Good news, most people don’t need the full OVDP Since June of 2014 when relaxed streamlined disclosure rules were announced, thousands of taxpayers from every corner of the globe have called into our office quite sure they must use the standard OVDP and pay that 27.5% or 50% penalty that the program calls for. But after we talk to most people, we find that the streamlined program is more far appropriate for them. The benefit of the Streamlined program is there is a 0% or 5% penalty and only three year look back for unpaid taxes. So not only is the tax and penalty bill lower, but so to your attorney and tax preparation bill. It’s why we really like the Streamlined program. Which by the way, is still open. The problem is that taxpayers have a difficult time assessing their risk profile. What we find is that the people who should be scared to death of a criminal prosecution often aren’t. Meanwhile taxpayers who are convinced they will be going to prison tomorrow actually have a small risk of prosecution. What program is best for you is really something you need to talk to an experienced tax disclosure attorney about. Additionally, many taxpayers don’t even need a Streamlined disclosure. So many of them are able to just file delinquent forms to solve their problem. Second thing: A voluntary disclosure program MUST ALWAYS EXIST and there is nothing the IRS can do about it. Congress actually mandates that the IRS always have a voluntary disclosure program. So you might be confused. How can the IRS end the OVDP if this is true? The reason is that that the OVDP is a specific type of Voluntary Disclosure. Voluntary Disclosures existed long before 2009, which marked the first Offshore Voluntary Disclosure Initiative and these disclosures were primarily used to protect against unreported domestic income. For instance let’s suppose a taxpayer owns a regional US pizza chain and intentionally did not report sales that were paid in cash. And now he is worried that someone may whistle blow and he could be subject to a tax evasion indictment. Well that person, even though they have no foreign income or assets to report could still get in the standard Voluntary Disclosure program. So for domestic tax evasion, you would use the plain old Voluntary Disclosure program. If international tax evasion was involved, you were forced to use the OVDP. So now with the OVDP gone, the only type of Voluntary Disclosure is left is the plain old non-specific Voluntary Disclosure. You still might be a little confused so let me try to explain more. The OVDP was a combination that offers (1) the standard voluntary disclosure protections from criminal prosecution, along (2) w a pre-determined offshore penalty scheme of either 27.5.% or 50% of asset base. So really the only thing that ended September 28th is this second item. There is no longer that pre-determined offshore penalty scheme. However, you can still get protections from criminal prosecution by getting into the plain old Voluntary Disclosure program. So its wonderful that you can still get protections from criminal prosecution. But what about protections from massive FBAR and foreign informational return penalties? Unfortunately, with the OVDP penalty scheme now gone, each taxpayer making a that plain old Voluntary Disclosure will likely be subject to an IRS examination. The IRS examination is where FBAR and Foreign informational return penalties may or may not be assessed depending on how well your facts and circumstances are developed. The goods news is that the standard of review for such an audit is very much akin to the OVDP opt-out standard, which has delivered some remarkable success for many of our clients. Their OVDP opt-out penalties were much lower than the standard OVDP penalty that they though they would have to pay. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/g9oI7lCbEMg IRS Medic

Should you be nice to the IRS?

Should you be nice to the IRS?

https://ift.tt/1RfwK1f Tax lawyer Anthony Parent of Parent & Parent LLP helps answer this question. The IRS is a scary, dense organization. The IRS has powers you wouldn’t believe, yet communicates in a way that is often indecipherable. Yet it is critical you understand what the IRS is saying — as if you get something wrong, the IRS can levy bank accounts, garnish any payments to you, file a tax lien —- all without a court order. So with these constraints, it is at all possible to be nice to the IRS? Would you be better off being mean and nasty to them? You might think that by chewing out the IRS, you can get them to back off and be reasonable. You might think that by finding the biggest pit bull of an attorney, that will put the IRS in its place. Well does it? I think I can answer this question by answering a different question: Are there any strategic advantages to being nice to the IRS? Let me illustrate the difference. Over 10 years ago, I was at an IRS conference sitting next to a CPA whose had an office down the street from ours. He was bragging to me about how awesome he was. He might have been hitting the wine a little hard too. We were both sitting at the same table. He was showing me letters and emails he sent to IRS agents. So he proceeded to tell me the he enjoyed working overtime to humiliate and annoy all the revenue agents and officers he ran into. He really seemed to be impressed by himself. He was a force to be reckoned with, don’t you know? Afterwards, I asked some of my friends in the IRS what they thought of this CPA. The consensus was something like “Yeah we know he’s a jerk. Too bad his clients don’t know he is ineffective.” Here’s the thing. We tend to be nice. Some of it was bound to happen. My first partner, my father, David G. Parent, worked in state and municipal agencies for decades — he was a government bureaucrat. And myself, I applied for a job as a revenue officer in 1997. So my dad and I never looked at IRS employees “as others.” We thought, you know they could be us? So intuitively, we were also nice to the IRS. We treated them as we want to be treated. And what has this niceness done? As much as I rail on the unfairness, inappropriateness, and the injustice of the US income tax, it would be completely dishonest for me to say that IRS employees are bad. In fact, some of them have been the greatest friends to us imaginable. Below are four quotes from IRS employees who were speaking to us about various cases. While we did not necessarily get the exact thing we were looking for, we did get the overall relief our clients were seeking. “Anthony I can't let your client win on the statute of limitations issue as local counsel won’t sign off on it. But what I will do is put your client into a hardship status where in 5 months they can win on the statute of limitations issue.” This saved my clients thousands in legal fees and a complete disaster at home. If we were nasty, would this IRS appeals officer hand us this unconventional win? “Anthony, if you just get me proof your client is trying to sell their vacant property I’ll push this through. I don’t care what my manager says. I’ll take the heat.” this was a quote from a revenue officer stuck his neck out to help us save our clients’ home and business. If we were jerks, would he have stuck his neck out? “Sorry, your client filed their tax court petition a day late. I can’t do anything about that. But here, why not go to the taxpayer advocate? I bet your client has a better chance getting that employee classification they with them rather than with the tax court anyway.” This was a quote from an IRS attorney. And he was right. We ultimately won and our client saved $480,000. “We were investigating your client for tax evasion and FBAR violations. But seeing how he’s hired your firm, as long as you follow your compliance plan, we will move on to someone else.” This is a quote from a Department of Justice attorney. He saved our client from a criminal indictment and millions in taxes and penalties, restitution, along with the brutal humiliation of an indictment. In all four cases, we got help from the people that were supposed to be against us. I think a reason why is that these IRS and Department of Justice employees saw our clients as real people. Government employees, while perhaps biased, are not inherently bad at all. Their goodness can seep out despite the government’s best wishes. The thing is you have to give them room to do so — niceness helps create that space. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/RTbZlPGCe7U IRS Medic

Warning to Green Card Holders/Permanent Residents - top US tax questions answered

Warning to Green Card Holders/Permanent Residents - top US tax questions answered

Once you possess a Green Card, you are now taxed on your worldwide income just like any US citizen would be. Additionally, other reporting requirements may exist. For instance if you have overseas bank accounts in excess of $10,000 you likely have an FBAR or what is also know as a FinCEN Form 114 requirement or you could face up to a 50% penalty on account value. Additionally, there exists a litany of foreign reporting forms, like Form 8938, Form 5471 for example that Green Card holders have an obligation to file at a rate much higher than the public at large. Failure to file the forms starts a $10,000 per year and can get as high as $50,000 per year. Again, these are risks that can all be managed. They just take some thought and effort. https://ift.tt/2OQ5tro What is the income tax rate for US Green Card holders? The income tax scheme for US Green Card holders is the same as it is for an American citizens. Taxation is exactly the same. There are no increased or decreased tax rates for Green Card holders. But as we show, their issues tend to be more complicated and the income tax tends to be more onerous because of the types of overseas and foreign investments Green Card holders often possess. What are the tax filing requirements for US Green Card holders? US Green Card holders have the same filing requirements as US citizens. Green Card holders overseas, like US citizens abroad, have an extended time to file taxes, usually June 15th which can be extended to October 15th, and then there is a permissive extension until December 15th. What is a US Green Card holder responsible for when filing? For all tax filings, taxpayers are ultimately responsible for everything they sign even if they can’t understand what they are signing. Additionally, even if they could fully understand English, that is slight guarantee that they know what they are signing as the IRS tax code is so expansive it is unknowable any one person. Are there any tax benefits to being a US Green Card holder? Only if you think that being taxed as a US citizen is a benefit. Can you deduct the cost of your obtaining your Green Card on your tax return? Some may advise against deducting the legal fees relating to the acquisition of your Green Card, but it is not an entirely unreasonable position. What are the tax consequences of allowing a US Green Card to expire? The Green Card is evidence of your Permanent Residence status, but it is not the thing that actually grants Permanent Residence status.  Just because your Green Card expired does not mean you are a no longer subject to US taxation. Yes, this is true even if you are overseas and not eligible for re-entry. It is possible for the IRS to tax you even though the federal government won’t let you back into the United States Your obligation to file and pay U.S. taxes as a long term green card holder persists until there is a judicial or administrative order, or alternatively, until you file Form I-407. A lapsed green card on its own does not terminate your IRS tax obligations. What are the tax consequences when surrendering a US Green Card? Have you had a Green Card for 8 or fewer years of the last 15? If so, then great. You can surrender a Green Card without triggering any exit or departure tax. If however you have been in the US for more than 8 of the last 15 years, and your assets exceed $2 million you may want to engage with our firm to legally lower this exit tax. What is the departure, expatriation, or exit tax for US Green Card holders? For those who have been in the US long enough and have the assets to trigger an exit tax, IRS Form 8854 is used. If I leave the United States without surrendering my Green Card, and without paying or filing the exit tax return, what can the IRS really do to me? Enforcing the US tax code against people who are not in the US and do not have property in the US or any reason to return to the US is incredibly difficult, but not impossible. Some countries have joint agreements to cooperate with the IRS. Many people have gone this route, and truth be told, have gotten away with it. The problem is if another opportunity arises that makes US presence necessary. For instance, many ex-Green Card Holders will return to the US on a investor visa if their children go to school in the US or start a family within a US.  Leaving a loose end like an improper exit tax, or none at all, could very much complicate or completely frustrate a return to the United States. If I try to enter the US with a green card or a passport from another country, will I have a problem if I am in tax non-compliance? You very well could have a problem. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/gNOb3_wYNW0 IRS Medic

PFICs and IRS Form 8621 Assessments: Tech Talk

PFICs and IRS Form 8621 Assessments: Tech Talk

Congratulations to tax attorneys Robert S. Schwartz & Elizabeth C. Petite on a great win! The Tax Court's recent decision in Roberto Toso and Marcela Salman v. Commissioner US Tax Court, Dkt. 8324-15 151 TC ___ No. 4, September 4, 2018 sheds some light on two aspects of reporting foreign income from Passive Foreign Investment Companies to the IRS. The first item is that the IRS got hoisted by its own process. PFIC income does not necessarily change AGI, but rather Form 8621 calculates income and then imposes the highest marginal rate to create a tax due, then this tax due goes on a tax return AFTER adjusted gross income is calculated, along with interest.. Meaning, not all unreported PFIC income is subject to the substantial understatement rule that can open a tax return for an additional 3 years of audit. Also, the Tax Court ruled, in a believed-case of first impression, that the HIRE Act only applies to foreign informational returns that were open when the HIRE Act was signed into law. Meaning, if a foreign information return assessment statute ASED) was closed in 2010, the HIRE Act does not open it. However, post-2010, any unfiled foreign informational return (Form 8938, Form 5471, Form 5472, Form 8865, Form 8858, Form 926, Form 3520, Form 3520-A) can keep an assessment open indefinitely. Yet, a proper disclosure can close those open years, even if there was unreported income. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/0qawBZUpn5Q IRS Medic