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Current Affairs

13 things tax preparers get wrong when preparing IRS returns for US expats


For the last ten years, our firm has been the leading offshore disclosure firm. We have reviewed thousands of expat tax returns prepared by hundreds of different tax preparation companies, CPAs, and accountants. We reviewed thousands of returns taxpayers prepared themselves using software such as TurboTax. While we have encountered some truly incredible tax preparers and taxpayers alike. However, on the whole, we are not impressed by what has been filed.

What is IRS Form 5472? Has tax reform changed it?


IRS Form 5472 is the information return of a 25% Foreign-owned U.S. Corporation or a Foreign Corporation Engaged a U.S. Trade of Business. The form is both difficult to file and consequential if not done correctly. The IRS has kept up its enforcement campaign and additionally, the Tax Cuts and Jobs Act of 2017 (TCJA) made some rather significant changes to both the penalties and who is required to file a Form 5472. In this article, we will discuss what hasn’t changed, and what we consider the most important things that have changed.

IRS Revenue Officers: Nine Surprising Things To Know


Dealing with an IRS Revenue Officer can be incredibly intimidating. Especially after the first time one stops by your house or business, completely unannounced. Your heart may be racing -- as you wonder what is going on, and what exactly the IRS can and will do to you. But your anxiety may be misplaced. In this article we dispel the myths that surround Revenue Officers and we give away some keys to using this knowledge for your advantage.

What is GILTI? Six Global Intangible Low-Taxed Income debunked


GILTI was created in Section 951A of the US tax code by the 2017 Tax Cuts and Jobs Act, aka, Tax Reform. GILTI involves incredibly complicated calculations and huge additional compliance burdens starting for tax year 2018, and for certain types of shareholders in foreign corporations, can dramatically increase taxes. In this article, we debunk six myths surrounding GILTI, so you can lower your tax bill, or the tax bill of your clients'.

Help for Common Reporting Standards, FATCA & the OECD


Intergovernmental cooperation on tax reporting has created many complications for not just US persons around the world, but also shareholders and businesses that have nothing to do with the US. In particular, the Foreign Account Tax Compliance Act (FATCA) imposes an obligation on non-US banks and entities to comply with FATCA or risk significant penalties including the withholding of some funds transferred from U.S. sources to their bank accounts. In this article we will discuss the difficulties of filling these FATCA-related forms and what to do if you are still confused.

Advantages of S-corporation taxation for aquisitions


There are far more US corporations that are classified a S Corps than C corps. And this makes sense. For year-to-year taxation, many advisors and taxpayers see the clear advantage of being taxed as an S-corp ( (although some of this may change thanks to the new low 21% tax rate available for C corps). But many wonder if it makes sense to switch to a C corp for a tax advantage in the case of pending acquisition. Yet such a move might not be warranted; in this article we will discuss some of the benefits of S corporation acquisitions.

Why accounting and financial analysis should never scare you


If you are confused when you review the books of your company or a company you are thinking of investing in, consider: perhaps someone wants you to be confused. That's the first lesson of accounting and financial analysis -- confusion can be used as weapon to get you uninterested in something you really should be interested in. In this article, I will share four other key insights that hopefully will make the financial statements, that is, Balance Sheets, Profit & Loss Statements, Statement of Cash Flows, make a lot more sense to you.

PFIC calculations: the IRS gets hoisted by its own petard


We congratulate our colleagues, tax attorneys Robert S. Schwartz & Elizabeth C. Petite, on a great win in US tax court in the case of Roberto Toso and Marcela Salman v. Commissioner, US Tax Court, Dkt. 8324-15 151 TC ___ No. 4, September 4, 2018. What makes their win so refreshing is that the convoluted Passive Foreign Investment Company (PFICs) reporting rules are the exact reason why the IRS was forbidden from going way back to assess additional taxes.

Principled US expat stands up to IRS international compliance regime


Many people who have some sort of IRS problem, whether domestic or international, deal with it in a predictable way. They ignore it. They ignore it until they can't anymore. Now with an understaffed IRS, the chances are that someone can ignore problems longer than ever before, but one must wonder if the IRS is just giving taxpayer more rope by which to hang themselves. For those who want to take control, they see no other way than to deal head-on with a problem, regardless of the consequences. One such person is Ryan Socash, one of our clients and a well-known media personality in Europe, and he explains why he felt he had no choice but to comply with the law, but then why he took the added steps of working to reform the law.

Advocating for a true territorial tax system


As you may know, the US taxes its "persons" based upon their citizenship status. This is called universal tax jurisdiction. And the US is a bit of an outlier -- no other country in the world truly taxes in the aggressive manner the IRS does. While we were promised a fix in the 2017 tax reform package to change to a Territorial Tax For Individuals (TTFI), that definitely did not happen. In fact, things got worse. But there is a strong movement to get the TTFI that we were promised signed into law.

Downward attribution: How a non-US controlled corporation magically becomes US-controlled


As kids, my siblings and I would play a game called Opposite Day. When you said something, the meaning was intended to be the exact opposite of the words you used. Maybe you enjoyed had a similar game. And generally, it was harmless fun, but the game would grow weary. Likewise, Tax Reform created its own opposite day. Now a foreign-controlled corporation may now considered to be the opposite, as US-controlled foreign corporation, creating a weary game. A very weary game indeed.

The Wash Sale Rule and Cryptocurrency


When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss. Selling a security at a lower price than it was purchased qualifies as a capital loss. That is, however, unless you repurchase the same stock or security within 30 days (well technically 61-day window). These sorts of sales are considered wash sales, and they are excluded from the capital loss deduction allowance. So the question is, does the same rule apply to cryptocurrencies? The answer is most likely not. In this article we will explain our reasons why.

How many government agencies does it take to regulate cryptocurrencies?


There is confusion and contradiction between government agencies about how to regulate cryptocurrency. Because of this patchwork regulatory framework, there is much confusion among lawyers and financial experts about what exactly the regulations of cryptocurrency are. The Security and Exchange Commission (SEC) further complicated matters last week when it announced that it does not consider Bitcoin or Ether to be securities. This distinction matters because classifying Bitcoin or Ether as securities would require that they be subject to the same regulations as stocks and bonds.

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