High Income Non-Filer IRS Compliance Campaign Update: Notice CP-59 With International Tax Compliance Focus

On February 29, 2024, the IRS announced a major update to one of its compliance campaigns that focuses on high income non-filer taxpayers.  Let’s discuss this major update to the High Income Non-filer IRS Campaign in more detail.

High Income Non-Filer IRS Campaign: Background Information

As part of its extensive tax enforcement planning in the mid-2010s, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.

The first thirteen campaigns were announced by LB&I on January 13, 2017. Since then, there have been numerous campaigns announced by the IRS with a focus on various priority topics. The most recent wave (during the years 2023 and 2024) of the IRS campaigns is due to the additional funding that the Congress allocated to the IRS as part of the Inflation Reduction Act.

This very much applies to High Income Non-Filer Campaign. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that did not allow to properly work on these cases. With the new Inflation Reduction Act funding available, the IRS has now upgraded and essentially re-launched this campaign.

High Income Non-Filer IRS Campaign: Focus on US international Tax Compliance

Even if you did not read the description of the IRS campaign, the very fact that the Director of the Withholding & International Individual Compliance Practice Area is in charge of this campaign gives away the focus on US international tax compliance.  Moreover, the emphasis is on individuals with potentially high income, not businesses.   

Indeed, High Income Non-Filer IRS Campaign focuses on individuals who have not filed their US tax returns even though they have received high (including foreign-source) income in the past. The very first phrase of the campaign’s description states: “U.S. citizens and resident aliens are subject to tax on worldwide income”.  The campaign, however, applies to all high-income non-filers, not just those who did not report their foreign income.

High Income Non-Filer IRS Campaign: IRS Targets 125,000 Noncompliant Taxpayers

It is very interesting to note that this campaign begins with direct targeting of known individuals — the IRS already identified 125,000 taxpayers that the agency wishes to contact.  In other words, this is a well-planned campaign with the IRS already knowing who it wants to target.

Where did the IRS get the information about these taxpayers? Mostly, IRS has received third-party information – such as through Forms W-2 and 1099s – indicating these people received high income. Additional information the IRS received from foreign banks and other sources.

High Income Non-Filer IRS Campaign: CP-59 Notice

The IRS has launched the new compliance effort with the IRS CP-59 Notice letters.  The letters already started to go out focusing on taxpayers who have not filed their tax returns since 2017. The mailings include more than 25,000 notices to taxpayers with more than $1 million in income and over 100,000 notices to taxpayers with incomes between $400,000 and $1 million between tax years 2017 and 2021.

Not all letters will go out at the same time. The IRS plans to mail anywhere between 20,000 to 40,000 letters each week, beginning with the filers in the highest-income categories. The IRS noted that some of these non-filers have multiple years included in the case count so the number of taxpayers receiving letters will be smaller than the actual number of notices going out.

High Income Non-Filer IRS Campaign: FBAR Noncompliance Is Also Targeted

This campaign has one very unpleasant side-effect.  In many cases, behind income tax noncompliance, there are likely unreported foreign accounts that needed to be disclosed on FBARs and perhaps even Form 8938. This circumstance can turn the case into something a lot more serious beyond just income tax noncompliance.

High Income Non-Filer IRS Campaign: What to Do If You Receive CP-59 Notice

The first thing to do is not to panic and not to procrastinate. You should take the next step very fast in order to avoid follow-up notices and a full audit with potentially severe consequences.

The second step is to contact immediately Sherayzen Law Office for professional help, especially if your noncompliance involves large amounts of income and US international information returns, such as FBAR or Form 8938. We will analyze the facts of your case, estimate your potential IRS penalty exposure and advise on the way to move forward to deal with the situation.

High Income Non-Filer IRS Campaign: IRS Actions Escalate If Tax Returns Are Not Filed

Taxpayers who fail to respond to the IRS notices will first receive additional notices.  If still no response, the IRS enforcement efforts will escalate to an audit, filing of an unfavorable Substitute for Return (SFR) (without any proper deductions or exemptions), collection actions, a petition to Tax Court and even potentially criminal prosecution.

Contact Sherayzen Law Office if Your Receive Notice CP-59 Concerning Unfiled Returns

If you are a taxpayer who has not filed his tax returns and you receive an IRS Notice CP-59, contact Sherayzen Law Office for professional help.  We have helped high-net-worth individuals with their US domestic and US international tax compliance as well as audits of their US tax returns. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Garland FBAR Attorney | International Tax Lawyer Texas

If you reside in Garland, Texas and have unreported foreign bank and financial accounts, you may be looking for a Garland FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, consider us in your search. Let’s understand why this is the case.

Garland FBAR Attorney: International Tax Lawyer

First of all, it is very important to understand that, by looking for Garland FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.

The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.

Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.

Garland FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures

When retaining Garland FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.

Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.

Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures)SFOP (Streamlined Foreign Offshore Procedures)DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.

Garland FBAR Attorney: Out-Of-State International Tax Lawyer

Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Garland, Texas. On the contrary, consider international tax attorneys who reside in other states and help Garland residents with their FBAR compliance.

Contact Sherayzen Law Office for Professional FBAR Help

Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Garland, Texas.

Thus, if you are looking for a Garland FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

McKinney Foreign Trust Attorney | International Tax Lawyers Texas

If you live in McKinney, Texas, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a McKinney Foreign Trust Attorney to properly comply with US international tax laws.

You should consider retaining Sherayzen Law Office as your McKinney Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.

McKinney Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance

Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 35203520-A49708938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.

McKinney Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure

Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.

Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore ProceduresStreamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.

McKinney Foreign Trust Attorney: Foreign Trust Tax Planning

Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.

McKinney Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties

Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.

Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust

Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.

We can help You! Contact Us Today to Schedule Your Confidential Consultation!

IRS Corporate Jet Audits Campaign | MN IRS Audit Tax Lawyer

On February 21, 2024, the IRS announced that it will begin dozens of audits of business aircraft usage as part of a new tax enforcement campaign. In this short article, I will discuss these new IRS corporate jet audits in more detail.

IRS Corporate Jet Audits: Focus on Personal Use of High-Net Individuals

The IRS announced that it will be auditing the usage of corporate aircraft for personal purposes.  The chief revenue agency of the United States was blunt in identifying who it is targeting — high-net individuals. The audits will focus on aircraft usage by large corporations, large partnerships and high-income taxpayers and whether, for tax purposes, the use of jets is being properly allocated between business and personal reasons.

Officers, executives, other employees, shareholders and partners often use business aircraft for both business and personal reasons. In general, the Internal Revenue Code allows a business deduction for expenses of maintaining an asset, such as a corporate jet, as long as the company uses the asset for a business purpose. However, the company must allocate use of a company aircraft between business use and personal use. This is a complex area of tax law, and record-keeping can be challenging.

Hence, for someone such as an executive using the company jet for personal travel, the amount of personal usage impacts eligibility for certain business deductions. Use of the company jet for personal travel typically results in income inclusion by the individual using the jet for personal travel and could also impact the business’ eligibility to deduct costs related to the personal travel.

The number of audits related to aircraft usage could increase in the future following initial results and as the IRS continues hiring additional examiners.

IRS Corporate Jet Audits: Funding and Strategies

The IRS was quick to identify  the Inflation Reduction Act as the source of funding of this new IRS campaign. The IRS will be using advanced analytics and resources from the Inflation Reduction Act to more closely examine this area. At the same time, the agency complained that, in the past, it did not have the resources to properly audit this area due to low resources.

“During tax season, millions of people are doing the right thing by filing and paying their taxes, and they should have confidence that everyone is also following the law,” said IRS Commissioner Danny Werfel. “Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”

The examination of corporate jet usage is part of the IRS Large Business and International division’s “campaign” program. Campaigns apply different compliance streams to help address areas with a high risk of non-compliance. These efforts include issue-focused examinations, taxpayer outreach and education, tax form changes and focusing on particular issues that present a high risk of noncompliance.

IRS Corporate Jet Audits: Implications for Broader IRS Tax Enforcement

The IRS corporate jet audits are just part of a larger effort of the IRS to step up tax enforcement worldwide. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to avoid taxes. The IRS is now taking swift and aggressive action to close this gap with the focus on high-net-worth individuals.

“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act,” Werfel said. “We are adding staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law. The IRS will have more announcements to make in this important area.”

Of course, one of the most important areas of the increased IRS tax enforcement is US international tax compliance. This involves compliance with foreign income reporting, FBARs and various other information returns (Forms 3520, 3520-A, 5471, 8865, 8938, et cetera).

Contact Sherayzen Law Office for IRS Audits of Your US International Tax Compliance

If the IRS is auditing your US international tax compliance, including foreign income and foreign asset reporting, contact Sherayzen Law Office for professional help as soon as possible. We have helped taxpayers around the world with the IRS international tax audits. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Second Quarter 2024 IRS Interest Rates on Overpayment & Underpayment of Tax

On February 21, 2024, the IRS announced that the Second Quarter 2024 IRS interest rates on overpayment and underpayment of tax will remain the same as in the First Quarter of 2024.

This means that, the Second Quarter 2024 IRS interest rates will be as follows:

  • eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
  • eight (8) percent for underpayments;
  • ten (10) percent for large corporate underpayments; and
  • five and a half (5.5) of a percent for the portion of a corporate overpayment exceeding $10,000.

Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.

Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

Pursuant to the IRC §6621(b)(1), the Second Quarter 2024 IRS interest rates were computed based on federal short-term rates in January of 2024. 

It is important to note that the Second Quarter 2024 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Second, these rates will determine the interest a taxpayer will get on any IRS refunds.

Second ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.

Finally, the Second Quarter 2024 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.

We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Second Quarter 2024 IRS interest rates.