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Recent Posts by Ronald Marini

Ten Facts About Tax Expatriation – Part !I

On November 6, 2019 we posted Ten Facts About Tax Expatriation - Part I, where we discussed that whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off.

For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.
We also discussed in Ten Facts About Tax Expatriation - Part I:

1. Uncle Sam taxes income worldwide.

 
2. Expatriating means really leaving.

3. The old 10-year window is closed.

Herein will discuss 7 more, of the 10 things you need to know about Expatriation:
(set forth below and in one subsequent blog posts)
 
 

4. Big changes came in 1996.
Thirty years later, in 1996, after the Forbes story on "The New Refugees" created a stir, Congress tried again. As part of the Health Insurance Portability and Accountability Act of 1996 (otherwise known as HIPAA), Congress added a presumption of tax avoidance if an expatriate's five-year average net income tax exceeded $100,000, or if the expatriate's net worth was $500,000 or more (both adjusted each year for inflation). But people could--and with the help of skilled lawyers did--rebut the presumption, and the IRS still had to show tax avoidance in most cases.

5. Tax avoidance is now irrelevant.
In 2004 (in the American Jobs Creation Act), Congress threw out the tax avoidance motive test altogether, imposing 10 years of U.S. tax on U.S. source gross income and gains on a net basis if you left the country for any reason. However, Congress increased the threshold for determining who was subject to this expatriation tax. An individual was only subject to the expatriation tax if he had an average net annual income tax for the five years preceding expatriation of $124,000, or if he had a net worth of $2 million or more on the date of expatriation. (If you expatriated on or after June 17, 2008, under the new Section 877A, there is a higher net worth threshold--currently $145,000 of annual net income tax for 2010.)

In some cases, even if you're below these thresholds, you'll get taxed. For example, expatriates must certify their past U.S. tax compliance by filing an IRS Form 8854. Any expatriate who fails to certify compliance with U.S. federal income tax laws for the five taxable years preceding expatriating is subject to the expatriate income tax even if he didn't meet the income tax liability or net worth tests.
Plus, later U.S. visits can be expensive if you expatriated before June 17, 2008 (and Internal Revenue Code Section 877 applies). In that case if an expatriate comes back to the U.S. for more than 30 days in any year during the 10 years following expatriation, that person is considered a resident of the U.S. for that whole tax year. That means the person would again be subject to U.S. tax on his worldwide income, not just his U.S.-source income. Ouch!

This 30-day rule does, however, have an exception for any days (up to a 30-day limit) that the individual performed personal services in the U.S. for an employer (who is not related). This exception only applies if that individual either had certain ties with other countries or was physically present in the U.S. for 30 days or less for each year in the 10-year period on the date of expatriation or termination of residency.

6. There are special rules for long-term residents.
It's easy to define who is or is not a U.S. citizen, but the term "long-term resident" isn't quite so clear. A long-term resident is a non-U.S. citizen who is a lawful permanent resident of the U.S. in at least eight years during the 15-year period before that person's residency ends. A "lawful permanent resident" means a green card holder. However, a person is not treated as a lawful permanent resident for purposes of this eight-year test in a year in which that person is treated as a resident of a foreign country under a tax treaty, and does not waive the treaty benefits applicable to the residents of that country. Caution: holding a green card for even one day during a year will taint the whole year.

7. There's an exit tax for expatriations on or after June 17, 2008.
The Heroes Earnings Assistance and Relief Tax Act of 2008 (generally known as the Heroes Act) changed the method of taxation for those who became expatriates on or after June 17, 2008, adding even more complexity and usually higher U.S. taxes. If you are a U.S. citizen or long-term resident who expatriates on or after June 17, 2008, you will be deemed (for tax purposes) to have sold all of your worldwide property for its fair market value the day before you leave the U.S.! All that gain is subject to U.S. tax at the capital gains rate. Plus, all your gain is taken into account without regard to any ameliorative tax provisions in the Internal Revenue Code.
Put differently, you get all of the bad parts of the tax code, and none of the good. That would include, for example, the inability to benefit from the $250,000 per person ($500,000 per couple) exclusion from gain on a principal residence (Section 121 of the Internal Revenue Code) and many other rules. The exit tax is like an estate tax, in the sense that everything that would be part of your estate will be subject to income tax on unrealized gains as of the day before you expatriate, as if you sold all your assets the day before leaving. In effect this is Congress' way of making sure your assets don't escape the estate tax entirely through expatriation.

"Should I Stay or Should I Go?"
 
 

Need Advise on Expatriation? 
 
 

Contact the Tax Lawyers of
Marini & Associates, P.A. 

For a FREE Tax Consultation at:
Toll Free at 888-8TaxAid ( 888 882-9243)  

  


 

Read more at: Tax Times blog

In-Person IRS Tax Compliance Visits Coming to Your Neighborhood Soon!

According to accountingTODAY, the Internal Revenue Service is expanding its efforts to ensure businesses and individuals are paying their taxes, particularly payroll taxes, with in-person visits planned by revenue officers to more parts of the country, starting recently in Wisconsin and later this month Texas and Arkansas.
The goal of the visits is to help resolve tax compliance issues by meeting face-to-face with taxpayers who have ongoing tax issues, such as payroll tax compliance for employers. The IRS plans to focus its efforts in areas where there have been a limited number of revenue officers available due to declining IRS resources. Thanks to recent budget increases, the IRS has been expanding its staff and has been on a hiring spree, allowing it to expand its enforcement efforts.
The IRS has been identifying areas of the country where it either no longer has an office near taxpayers or where it has no presence at all. The new program will supplement the IRS’s Private Debt Collection program, in which it works with contracted collection agencies who telephone individual taxpayers who owe longstanding tax debts..
“These new visits that we're doing outside involve teams of revenue officers traveling to locations where we have reduced resources or no resources to visit higher-risk cases involving larger balances due and cases that have needed visits from a revenue officer for some time, in some cases years,”
 said Guillot.
One of the main focuses will be unremitted payroll taxes. “In many cases business owners have been withholding large amounts of employment taxes from their employees and not [sending] them over to the Treasury,” said Guillot.
“It’s an extremely high priority. Our efforts are to try to get them into compliance when we meet with them face to face. We have data that proves this is an effective way of getting them to be compliant, which is the kind of success we want, because if the business becomes compliant, they continue to provide jobs for our citizens, and that's good for everybody.”
He noted that there will be additional compliance events like this throughout the year. The IRS plans to send around a dozen revenue officers to an area and they will be splitting up to visit multiple taxpayers to resolve high-priority cases. 
Have an IRS Tax Problem?
 
 
 
Contact the Tax Lawyers at
Marini & Associates, P.A. 
 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 
 

Read more at: Tax Times blog

IRS Announces Increases Enforcement on Syndicated Conservation Easements

The Internal Revenue Service announced in IR 2019-182, 11/12/2019 a significant increase in enforcement actions for syndicated conservation easement transactions, a priority compliance area for the agency. Coordinated examinations are being conducted across the IRS in the Small Business and Self-Employed Division, Large Business and International Division and Tax Exempt and Government Entities Division. Separately, investigations have been initiated by the IRS' Criminal Investigation division. These audits and investigations cover billions of dollars of potentially inflated deductions as well as hundreds of partnerships and thousands of investors.

 

"We will not stop in our pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition
of artificial, highly inflated deductions
based on these aggressive transactions.
 
 

Every available enforcement option will be considered, including civil penalties and, where appropriate, criminal investigations that could lead to a criminal prosecution," said IRS Commissioner Chuck Rettig.

"Our innovation labs are continually developing new, more extensive enforcement tools that employ advanced techniques. If you engaged in any questionable syndicated conservation easement transaction, you should immediately consult an independent, competent tax advisor to consider your best available options. It is always worthwhile to take advantage of various methods of getting back into compliance by correcting your tax returns before you hear from the IRS.

Our Continued Use Of Ever-Changing Technologies

Would Suggest That Waiting Is Not A Viable Option
For Most Taxpayers." 


In December 2016, the IRS issued Notice 2017-10 (PDF), which designated certain syndicated conservation easements as listed transactions. Specifically, the Notice listed transactions where investors in pass-through entities receive promotional material offering the possibility of a charitable contribution deduction worth at least two and half times their investment. In many transactions, the deduction taken is significantly higher than 250 percent of the investment. Syndicated conservation easements are included on the IRS's 2019 "Dirty Dozen" list of tax scams to avoid.
 

"Abusive syndicated conservation easement transactions undermine the public's trust in private land conservation and defraud the government of revenue," Rettig said. "Putting an end to these abusive schemes is a high priority for the IRS."
 
Taxpayers may avoid the imposition of penalties relating to improper contribution deductions if they fully remove the improper contribution and related tax benefits from their returns by timely filing a qualified amended return or timely administrative adjustment request.
The IRS's comprehensive compliance efforts are focused on the abusive syndicated conservation easement transactions described in Notice 2017-10, recognizing that there are many legitimate conservation easement transactions.
 

The IRS is fully committed to putting an end to abusive syndicated conservation easement transactions, and holding accountable the individuals and entities who promoted, assisted with or participated in these schemes. The IRS is committing significant examination and investigative resources to vigorously audit the entities and individuals involved in this scheme, including those who failed to properly disclose their participation as required. Additionally, the IRS is also litigating cases where necessary, with more than 80 currently docketed cases in the Tax Court.
 
In addition to grossly overstating the value of the easement that is purportedly donated to charity, these transactions often fail to comply with the basic requirements for claiming a charitable deduction for a donated easement. The IRS has prevailed in many cases involving these basic requirements and has now established a body of law that the IRS believes supports disallowance of the deduction in a significant number of pending conservation easement cases. Where it hasn't done so already, the IRS will soon be moving the Tax Court to invalidate the claimed deductions in all cases where the transactions fail to comply with the basic requirements, leaving only the final penalty amount to be determined.

In addition to auditing participants, the IRS is pursuing investigations of promoters, appraisers, tax return preparers and others. Further, the IRS is evaluating numerous referrals of practitioners to the IRS Office of Professional Responsibility. The IRS will develop and assert all appropriate penalties, including penalties for participants (40 percent accuracy-related penalty), appraisers (penalty for substantial and gross valuation misstatements attributable to incorrect appraisals), promoters, material advisors, and accommodating entities (penalty for promoting abusive tax shelters and penalty for aiding and abetting understatement of tax liability), as well as return preparers (penalty for understatement of taxpayer's liability by a tax return preparer).

In December 2018, the Department of Justice filed a complaint seeking to stop several individuals and an entity from organizing, promoting or selling allegedly abusive syndicated conservation easement transactions. The IRS continues to work with the Department of Justice in this area and reminds taxpayers that continued disclosure of syndicated conservation easement transactions is required under Notice 2017-10.

 

If You Engaged In Any Questionable Syndicated Conservation Easement Transaction, You Should Immediately Consult An Independent, Competent Tax Advisor

 

To Consider Your Best Available Options.

 
Contact the Tax Lawyers at
Marini & Associates, P.A. 
 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 
 
 
 

 

Read more at: Tax Times blog

IRS CI Identifies Dozens of Cryptocurrency Tax Evaders at J5!

The IRS’s criminal division identified “dozens” of potential cryptocurrency tax evaders or cybercriminals after a meeting this week with tax authorities from four other countries.

 
Leaders of tax enforcement authorities from the U.S., Australia, Canada, the Netherlands and the United Kingdom, known as the J5, met this week to discuss ways to deal with tax crimes and tax evasion, particularly involving cryptocurrency and shared data, tools and tax enforcement strategies to find new leads in a quest to mitigate cross-border money-laundering and cybercrime.
 

“All of the participants from the J5 countries rolled up their sleeves and worked together using real data to identify real criminals. One thing was really clear this week and that’s the J5 countries are committed to identifying and holding accountable tax cheats and other criminals who attempt to use the dark web and cryptocurrency as an underground economy.”

All of this occurred while the IRS is preparing for a new wave of cryptocurrency audits. The agency sent letters to more than 10,000 people earlier this year, warning that they might be subject to penalties for skirting taxes on their virtual investments.

The IRS And Its Partners Are Using Data From Previous Enforcement Activities To Find New Criminals, Korner Said.
 
Using The Data From The Five Countries Gives Them A Broader View Of How Accounts, Money And People Are Connected.

The IRS released guidance last month telling virtual currency investors and their tax advisers how the agency expects them to report income from their holdings. The guidance is the first since 2014 and comes as tax auditors are increasingly focusing on examining individuals with cryptocurrency investments.
“Being able to come together and share expertise, which hasn’t been done before, we can develop new platforms that we can each take back to our respective countries, importing the data that we each have to be able to data map, utilizing these new tools and develop new leads that we previously would not have known about prior to this challenge,” said Brooke Tetzlaff, a supervisory special agent at the IRS Criminal Investigation division and a U.S. participant in the Challenge.
Have a Virtual Currency Tax Problem?
Value Your Freedom?
 
Contact the Tax Lawyers at
Marini & Associates, P.A. 
 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 


 
 
 
 
Sources:
 
accountingTODAY
 
Bloomberg 

Read more at: Tax Times blog

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