international-tax-lawyer

Tampa Foreign Accounts Lawyer and Attorney | Florida Tax Lawyers

Tampa Foreign Accounts Lawyer is an interesting specialty among international tax lawyers who offer their foreign account tax compliance services to residents of Tampa, Florida. The term Tampa Foreign Accounts Lawyer does not simply refer to a lawyer who is physically located in Tampa, but also covers lawyers who reside outside of Tampa. Let’s explore why international tax lawyer Eugene Sherayzen of Sherayzen Law Office, Ltd., can be considered a Tampa Foreign Accounts Lawyer.

Tampa Foreign Accounts Lawyer Definition: Foreign Account Tax Compliance Services Offered to Residents of Tampa Florida

Obviously, the definition of a Tampa Foreign Accounts Lawyer includes all FBAR lawyers who are physically located in Tampa, Florida, and offer their tax services there. However, this definition also includes every international tax lawyer who offers out-of-state foreign account tax services to residents of Tampa.

Why is this the case? The answer is simple – it is the federal tax law, not local law, that requires foreign account tax compliance (with the exception of a few states like New York and California; the main requirements, however, come from federal tax law). This means that an international tax lawyer licensed to practice anywhere in the United States is qualified to help residents of Tampa with their US tax compliance requirements concerning foreign accounts (such as FBAR and FATCA Form 8938).

Tampa Foreign Accounts Lawyer Definition: Knowledge of US International Tax Law is Required

Having stated the definition of a Tampa Foreign Accounts Lawyer so broadly, I do not mean to imply that any lawyer can offer foreign account tax compliance services to Tampa residents. On the contrary, in order to help his clients, a Tampa Foreign Accounts Lawyer must be an international tax attorney who specializes in the area of foreign accounts tax compliance. Otherwise, the lawyer simply would not have the required expertise to practice in this area of law.

Tampa Foreign Accounts Lawyer: Modern Technologies Eliminated the Advantages of Hiring a Local Lawyer

There is still some hesitance on part of many taxpayers to retain the services of an out-of-state tax lawyer. This hesitance comes from a false myth that working with a local attorney is more convenient.

This myth is false for two reasons. First, the development of modern means of communication has completely resolved the communication problems of the past. Email, Video Skype Conferences, telephone and text messages make your out-of-state Tampa Foreign Accounts Lawyer as equally accessible as your local Tampa Foreign Accounts Lawyer.

Second, in reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail.

Sherayzen Law Office is Your Preferred Choice for Your Tampa Foreign Accounts Lawyer

Sherayzen Law Office is a highly experienced international tax law firm which specializes in the area of foreign account tax compliance. We have been helping our clients worldwide with their FBAR and FATCA issues for a very long time; in fact, we are one of the few firms which advised clients with respect to all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP and Streamlined Submission Procedures (Domestic and Foreign). We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Greece Publishes the List of Noncooperative States | FATCA Lawyer Atlanta

On February 28, 2017, the Ministry of Finance of Greece published a list of noncooperative states.

What are Noncooperative States

In order for a state to be designated as “noncooperative”, it has to satisfy the following four conditions:

1. The state is not a member of the European Union;

2. The state’s legal structure with respect to transparency and exchange of information in tax matters has not been reviewed by the OECD (Organisation for Economic Co-Operation and Development);

3. The state has not signed any treaty with Greece on administrative assistance in tax matters (basically tax information exchange) nor do they offer such assistance; and

4. The state has not signed tax administrative assistance treaties with at least twelve other states.

The last requirement appears to be somewhat random in the number of states.

Why the List of Noncooperative States Matters

The list of noncooperative states is important because transactions with any states on this list are subject to heightened scrutiny by the Greek tax authorities. Moreover, certain limitations may be imposed on the companies involved in transactions with noncooperative states, especially with respect to tax deductibility of certain expenses. Additionally, the Greek tax authorities may look particularly close at such companies with respect to transfer pricing issues and the controlled foreign corporation tax compliance issues.

This Year’s List of Noncooperative States

In February of 2017, a total of twenty-nine states were on the list of noncooperative states. Here is the list: Andorra, Antigua and Barbuda, Bahamas, Bahrain, Barbados, Brunei, Cook Islands, Dominica, Grenada, Guatemala, Hong Kong, Lebanon, Liberia, Liechtenstein, Macedonia, Malaysia, Marshall Islands, Monaco, Nauru, Niue, Panama, Philippines, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Samoa, Uruguay, the U.S. Virgin Islands, and Vanuatu. As the readers can see, some of the “states” are really just tax jurisdictions within a state (such as U.S. Virgin Islands).

It should be noted that some of these tax jurisdictions are favorite designations for forming foreign corporations (e.g. Bahamas and Barbados), other foreign entities (such as Nevis LLC) and foreign trusts (e.g. Cook Islands). Furthermore, a lot of these tax jurisdictions are also designated as “tax shelters” by other countries.

IRS Civil Penalties and Voluntary Compliance | US International Tax Lawyer

There has been a spectacular growth in the number of the IRS civil penalties. In 1955, there were about 14 penalties in the entire Internal Revenue Code (“IRC”); on the other hand, today, there are over 150 penalties. The most recent growth in penalties has been driven mostly by offshore compliance concerns and the appearance of new requirements to address these concerns. FATCA Form 8938 is just the most recent example of this trend.

Does this growth in the IRS civil penalties mean that our tax system is shifting its focus from encouraging voluntary compliance to punishing abusive behavior? Let’s explore this issue from a historical perspective and try to answer the question.

The Stated Purpose of the IRS Civil Penalties

The US tax system is based on the taxpayers’ voluntary compliance with US tax laws. As I explained in a previous article, “voluntary compliance” really means the self-assessment of tax and the filing of tax returns by US taxpayers; the actual compliance with US tax laws is compulsory.

In other words, the Congress burdened the taxpayers with all of the hassle and complexity of US tax compliance and it still wants them to do it accurately, timely and in direct opposition to their self-interest of paying the least amount of tax. How can such a system function?

The solution lies in the creation of a system of the IRS civil penalties (a discussion of criminal penalties is outside of the scope of this article). The threat of the imposition of the IRS civil penalties during a random audit is meant to “encourage” voluntary compliance. This is the official purpose of the IRS penalties.

How exactly do the IRS civil penalties encourage voluntary compliance according to Congress? First, the penalties establish the standard of compliant behavior by defining noncompliance. Second, the penalties are meant to define the “remedial consequences” for noncompliant behavior. Finally, the IRS civil penalties impose monetary sanctions against the taxpayers and tax professionals who fail to comply with the aforementioned standard.

IRS Civil Penalties Must be Viewed as Precise and Proportional

Yet, in order to properly function and accomplish their goal of encouraging voluntary compliance, the IRS Civil Penalties must be viewed by the taxpayers as precise and proportional to the fault committed and the harm that resulted from that fault. In other words, the taxpayers must view the IRS Civil Penalties as a deterrence of improper conduct rather than punishing innocent taxpayers. If these penalties are viewed as excessive, the goal of voluntary compliance will be undermined.

Unfortunately, with respect to many IRS Civil Penalties, the taxpayers feel that they are disproportionate and imprecise. This is especially true with respect to international information tax returns, such as FBAR, Form 8938, Form 5471 and so on. The FBAR penalties are especially abhorred by the taxpayers because they apply to even non-willful conduct.
IRS Past Efforts to Change the Taxpayers’ Perspective on the IRS Civil Penalties

The IRS has been trying to battle this impression of unfairness of the IRS civil penalties, though we cannot say that it has been entirely successful in this respect.

Already in February of 1989, the IRS Commissioner’s Executive Task Force issued a “Report on Civil Tax Penalties” which emphasized the complexity and perceived unfairness of the IRS Civil Penalties. This Report remains one of the key documents which has not been substantially modified for past twenty some years.

The report established a philosophy of penalties, provided a statutory analysis of the three broad categories of penalties (filing of returns, payment of tax and accuracy of information), and proposed a list of action items to resolve the inconsistencies between civil penalties.

Among these recommendations, the IRS proposed to:

(1) develop and adopt a single-penalty policy statement emphasizing that civil tax penalties exist for the purpose of encouraging voluntary compliance;

(2) develop a single consolidated handbook on penalties for all employees. The IRS emphasized that the handbook should be sufficiently detailed to serve as a practical everyday guide for most issues of penalty administration and provide clear guidance on computing penalties;

(3) revise existing training programs to ensure consistent administration of penalties in all functions for the purpose of encouraging voluntary compliance;

(4) examine its communications with taxpayers to determine whether these communications do the best possible job of explaining why the penalty was imposed and how to avoid the penalty in the future;

(5) finalize its review and analysis of the quality and clarity of machine-generated letters and notices used in various divisions within the IRS;

(6) consider ways to develop better information concerning the administration and effects of penalties; and

(7) develop a Master File database to provide statistical information regarding the administration of penalties. That IRS envisioned that the information would be continuously reviewed for the purpose of suggesting changes in compliance programs, educational programs, and penalty design and penalty administration.

1989 IMPACT’s Effect on the IRS Civil Penalties

The IRS efforts did not go unnoticed. The Congress responded by enacting the Improved Penalty and Compliance Tax Act (“IMPACT”) as part of its Omnibus Budget Reconciliation Act of 1989.

It appears IMPACT had an overall salutary effect on the IRS civil penalties with respect to domestic activities. However, IMPACT’s role in curbing the perceived unfairness with respect to US international tax penalties has been minimal.

The Restructuring and Reform Act of 1998 Changed the Way the IRS Civil Penalties Are Imposed

At the end of the 1990s, the Congress made one more effort to solidify the image of fairness with respect to the imposition of the IRS civil penalties. The Restructuring and Reform Act of 1998 made a valuable contribution to maintaining the focus on encouraging voluntary compliance by creating the IRC Section 6751(b). IRC Section 6751(b) states that most of the IRS Civil Penalties (other than those automatically calculated by a computer) imposed after June 30, 2001, require a written managerial approval by the immediate manager or higher-level official of the employee who initially proposed the penalty.

The idea behind Section 6751(b) is to bring some restrain in the imposition of penalties by the “trigger-happy” employees. The extra level of review is further meant to promote the image of fairness of process during the imposition of the IRS Civil Penalties.

Conclusion: Encouragement of Voluntary Compliance Remains A Priority in General but the Emphasis on Abusive Transactions Dominates International Tax Law Compliance

Now that we have analyzed the IRS Civil Penalties from a historical perspective, let’s return to the original questions that I posed at the beginning of this article: does the growth in the number of the IRS civil penalties mean that our tax system is shifting its focus from encouraging voluntary compliance to punishing abusive behavior?

Based on the IRS past efforts to improve the taxpayer’s perception of the tax system and civil penalties and the Congress’ effort to encourage voluntary compliance through laws like IMPACT, one can say that, in general, the encouragement of voluntary compliance remains the main purpose of the IRS civil penalties.

There is one area, however, where the application of civil penalties has been driven not by only voluntary compliance considerations, but also by the desire to punish certain modes of behavior. This area is international tax law and, more precisely, abusive offshore transactions.

In fact, it appears more and more that the focus of the current tax policy is on punishing abusive offshore transactions irrespective of how it may affect innocent taxpayers. Since 2001, millions of taxpayers found themselves potentially facing draconian FBAR penalties solely for not reporting their foreign accounts. Thousands of small businesses also face large penalties associated with Forms 5471 and 8865 as well as other US international information return penalties. Finally, FATCA Form 8938 created with a new array of penalties and an added compliance burden to US taxpayers.

The fact that all of these forms may be necessary is not the issue. The problem is that the application of these forms has been indiscriminate almost irrespective of the actual income tax impact and the net worth of the taxpayer. For example, small businesses now have to comply with the burden of US GAAP compliance (normally applied only to publicly-traded companies) on Form 5471 or face severe IRS civil penalties for noncompliance. One non-willfully unreported foreign account which could have produced a few dollars of interest may be subject to a $10,000 FBAR penalty.

Naturally, the disproportionate and imprecise application of the IRS civil penalties in the area of the US international tax compliance has generated a great amount of discontent and resentment among the affected US taxpayers. This is precisely what IMPACT tried to avoid in order to encourage voluntary compliance.

This is why the IRS and Congress should work together to make the application of the IRS civil penalties more precise with respect to who should be paying these penalties and more proportionate to the actual fault (i.e. the damage sustained by the US treasury).