US taxation of Foreign Income

US taxation of Foreign Income

A great perspective on US taxation of foreign income from our Ukranian-born Director of Tax Compliance, Vladyslav Golubovskyi.  No other country is as "exceptionally" horrible to worldwide income as the USA. 

Use These Four Tips to Maximize the Chance of Getting Your Offer in Compromise Accepted

The IRS Offer in Compromise program is the most popular and approved way to resolve delinquent tax liabilities. Unfortunately, the IRS made the qualification requirements so difficult that only fewer people offer gets accepted or they were made to pay out too much money to the federal government. In this post, we have provided an overview of a few tips that will help put an end to your long-standing IRS tax issue.

OIC Tip #1: Standard or the Actual Expense?
Irrespective of your actual expenses, the IRS have got guidelines on exactly how much you can designate as living expenses. You need to know when the IRS will approve expenses above their maximum limit and when they won’t. While arguing for an expense which is more than the national standards, you have to provide relevant documentation and also have to prove why they are necessary. Know what the IRS considers ordinary and necessary. The outcome can be that you weren't qualified for an offer, or it had no chance of approval simply because you didn’t understand the procedures. Also, you have to determine whether to makes use of the IRS Standards deduction or the actual expense deduction to receive maximum tax benefit.

OIC Tip #2: Reduce Equity Positions
Figure out ways to lower equity in your assets. Don't be tempted to overvalue your assets. Take full advantage of allowed tax deductions and know how to maximize your deductible business expenses. Make use of all possible deductions for vehicle expenses that include fuel, repair and maintenance. While claiming write-offs for automobile operating expenses, weigh up which of the IRS method - standard mileage expense or the actual car expenses gives you a bigger tax deduction. The Internal Revenue Service will view the money in your retirement savings account as an asset and will be valued during the OIC evaluation. Check out the limits of liquidating or borrowing money from retirement account and learn how converting the equity into a future stream of income could benefit you directly.

OIC Tip #3: Use the IRS Statute of Limitations to Your Advantage
Knowing how much time is leftover on statute of limitations (CSED) is extremely important, as this could have a huge influence on the entire process. If the Collection Statute Expiration Date (CSED) is near, rather than gambling on to retrieve the pending taxes, the IRS would really consider accepting your Offer in Compromise.

OIC Tip #4: Don’t Hesitate to Appeal if Your Offer is rejected
Obtain the copies of collection's Income/Expense Table and also the Assets/Equity Table from the IRS in case your offer was rejected. If you find any mistakes or if the Offer examiner did not follow the IRS guidelines exactly, you may appeal for a review of the determination. If you believe the assets value is not correct, dispute them with the latest appraisals. In case the income/expense is not correct, give additional supportive documentation at this stage. If the Offer in compromise isn't accepted, there are other alternative solutions available that you can make use of through appeal.

The Realities of OIC program
The Offer in Compromise program could be your excellent way to address the taxes owed, leading to a fresh start with the Internal Revenue Service. But, the process is very comprehensive and complicated that require great attention to detail, knowledge of numerous IRS rules, procedures and tax laws. Submitting an OIC or handling your own case might end up costing you even more than the original tax debt owed. All these tips are just basic outlines and there are actually a lot of tricks of the trade. Furthermore, Offer in Compromise is not for everyone. Plus there exist negative consequences to filing an offer when there is no realistic chance of its success. By utilizing the services of a trusted tax resolution firm, the tax attorney will stand up to the IRS on your behalf and help you put your tax debt problems behind you right away.

The devasting failure of the Bank Secrecy Act of 1970

The devasting failure of the Bank Secrecy Act of 1970



In 1970, the Bank Secrecy Act triggered FBAR filing requirements for accounts over $10,000. Yet.  Did inflation not happen? Let’s assume $10,000 was magical sum of money that should create a presumption of illegal activity. But you know, in these past 44 years, like a lot of stuff has totally happened. One thing that happened is that I my broke my ankle on the first day of summer vacation in 1985 (true story). But another more relevant (and perhaps less tragic) event was inflation. That $10,000 of 1970, is now, as of this writing, $61,348.20 according to the government’s own inflation calculator. So shouldn’t the reporting requirements account for inflation? 

IRS collection process

IRS collection process



Whether you have just learned that you owe money to the IRS, or have had
a lingering tax problem for many years, in this article we will explain
the three phases of the IRS collection process (Cf., The Five Stages of Grief and Loss).
But first, we need to give you a little background so you can determine
when and how the IRS will start “enforced” collections (that is
levying, garnishing you so hard you won’t be able to sit down). Also,
hopefully to give you knowledge that will empower you so that you will
not be intimidated into paying back the IRS something that is
unreasonable.

IRS PFIC rules

IRS PFIC rules



Do you own Foreign Mutual Funds? I got some bad news --- you have some horribly expensive accounting work to do for the IRS. , I can’t say what the cleaned-up “official” reason is, but I can tell you what the real reason is: Protectionism.  PFIC language was snuck into  Section 1291 of the Tax Reform Act of 1986 as a protectionist measure for the the US-based mutual fund industry (sorry Reagan fanboys — or maybe we can blame this on his Democrat rival Tip O’Neil?) . Entrenched Wall Street interests hated the fact that offshore mutual funds had a strategic advantage over domestic funds, with lower costs and higher returns, as foreign funds do not have to jump through the (editorial content warning) expensive, asinine hoops of the Securities and Exchange Commission (SEC). So instead of getting rid of the SEC (and all those federal jobs), Congress decided to intentionally make Foreign Mutual Funds less attractive by requiring expensive, mind-bloggling PFIC accounting. So everyone wins, the person who like to invest overseas. 

IRS Fresh Start program

IRS Fresh Start program



This past weekend, I found myself in a movie theater.  Don't alarm yourself. It was intentional, I assure you. True, I have not intentionally
been in a movie theater since the release of Turk 182 (or
there-abouts), and I remarked to my wife (my lovely date) about how
things changed since the go-go days of the Reagan administration. Now
one thing I noticed, aside from and terrible absence of any John Hughes
movies, was an audio recording playing in the hallway as we were about
take to our stadium seating. And why, it wasn't music. Why, it wasn't a
movie promotion. But rather, it was an advertisement. I heard a
professional voice, with a deep, relaxed timbre of authority, tell me
"If you owe $10,000 or more to the IRS, find out if the IRS Fresh Start program can help you today. Call  888 IRS HALT*  for a free consultation right now!"

Delinquent FBAR filing procedures

Delinquent FBAR filing procedures

For US expatriates who have reported all
foreign-sourced income, or did not have any foreign income to report,
the IRS has made the delinquent FBAR filing procedures *relatively*
straight-forward and *relatively* easy to understand. But here’s where
things get ugly. This is only true for taxpayers who do not have any unreported income in the last 3 years.
Things get complicated in situations where there in no unreported
income in the last three years, but unreported income in any one of the
three years prior. In this article we will demonstrate the apparent
contradictions, and offer strategies for the not-too uncommon issue of
having unreported foreign income, not in the last 3 years, but rather,
4-6 years ago.