international-tax-lawyer

First Quarter 2017 Underpayment and Overpayment Interest Rates

On December 5, 2016, the IRS announced that the First Quarter 2017 underpayment and overpayment interest rates will remain the same from the Fourth Quarter of 2016.

This means that, the First Quarter 2017 underpayment and overpayment interest rates will be as follows:

four (4) percent for overpayments (two (3) percent in the case of a corporation);
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The First Quarter 2017 underpayment rates are relevant not only for simple amended tax returns (with amounts due), but also for a number of other different reasons. Here, I would like to emphasize two particular reasons for the importance of the first quarter 2017 underpayment rates. First, it is used to calculate interest for the US taxpayers who participate in the OVDP or the Streamlined Domestic Offshore Procedures.

Second, the first quarter 2017 underpayment rates will be relevant to future PFIC interest calculation on any excess distributions (for default Section 1291 PFICs).

First Colombia-US Tax Treaty is Almost Ready | International Tax Lawyer

The first Colombia-US Tax Treaty nears the final stage of negotiations. This announcement was made on September 28, 2016, in Bogota, Colombia, by Colombian Finance Minister Mauricio Cardenas and U.S. Treasury Secretary Jacob Lew (the details of the meeting were published on the Colombian president’s website).

Despite the fact that United States and Colombia already signed a tax information exchange agreement on March 30, 2001, the two countries still do not have an income tax treaty that would protect its citizens and business from the effect of double-taxation.

There are a lot of expectations that the first Colombia-US Tax Treaty will benefit individuals and business in both countries. “La negociación de un tratado de doble tributación entre Colombia y Estados Unidos está cerca del fin, esperemos avanzar para lograr algo que los empresarios colombianos y los empresarios norteamericanos desean, al igual que muchos colombianos que dividen sus actividades entre los dos países”, said Mr. Cárdenas.

It is also possible that, upon ratification of the first Colombia-US Tax Treaty the Colombians who live in the United States and have businesses in Colombia will finally be able to benefit from the long-term capital gains tax rates that apply to qualified foreign dividends.

Of course, there is a still a long way to go for the first Colombia-US Tax Treaty. Even after the negotiations are successfully concluded and finalized, the first Colombia-US Tax Treaty will need to be signed and ratified by both countries before it enters into force. While it is reasonable to expect a relatively fast ratification in Colombia, the United States is a completely different story. Treaties can languish in the United States Senate for years before they are even considered.

Furthermore, Mr. Cárdenas and Mr. Lew may not have sufficient time to conclude the current negotiations. Before they may be done, a new president may be elected in the United States and he may take a different to negotiating with Colombia. If this happens, the conclusion of the negotiations and the ratification of the first Colombia-US Tax Treaty may be postponed even further into the future.

Sherayzen Law Office will continue to observe the situation surrounding the first Colombia-US Tax Treaty.

Mexican Fideicomiso is not a Foreign Trust | International Tax Attorney

Mexican Fideicomiso is one of the most convenient ways for U.S. persons to purchase land in Mexico. Of course, one can purchase the land through a Mexican corporation, but such an arrangement will require additional tax planning and higher annual compliance costs, including potentially filing form 5471, Form 8938 and other forms. Therefore, most U.S. persons prefer to purchase land in Mexico through a Mexican Fideicomiso.

I am often asked a question about whether Mexican Fideicomiso should be considered a foreign trust for U.S. tax purposes. The answer to this questions is fairly straightforward, but it is important to point out a potential pitfall.

Main Rule: Mexican Fideicomiso is Not a Foreign Trust for U.S. Tax Purposes

The U.S. tax treatment of Mexican Fideicomiso was settled by the IRS in PLR 201245003 and, even more authoritatively, IRS Revenue Ruling 2013-14. In PLR 201245003 and Rev. Rul. 2013-14, the IRS decisively ruled that a Mexican Fideicomiso is not a foreign trust for U.S. tax purposes.

Main Rule Applies Only If a True Mexican Fideicomiso Relationship is Preserved

It is important to understand, however, that PLR 201245003 and Rev. Rul. 2013-14 apply only if the true Fideicomiso relationship is preserved. If this relationship is modified with other features and agreements, then the U.S. tax treatment of the new arrangement may actually change. For example, if the trustee of Mexican Fideicomiso suddenly acquires the ability to act independently and in complete disregard of the beneficiary’s instructions, the IRS may start treating this modified Mexican Fideicomiso as a foreign trust.

Contact Sherayzen Law Office for Help with Reporting of Your Foreign Assets and Foreign Income

If you have foreign assets or foreign income, you are facing a difficult challenge of trying to comply with the numerous complex U.S. tax requirements. It is very easy to make mistakes in this area; given the high penalties associated with noncompliance, the cost of remedying these mistakes may be high.

This is why you need the help of Sherayzen Law Office, an experienced international tax law firm that has helped hundreds of U.S. taxpayers around the globe to bring and maintain their tax affairs in full compliance with U.S. tax laws.

Contact Us Today to Schedule Your Confidential Consultation!

Experienced International Tax Law Firm of Sherayzen Law Office

Most U.S. taxpayers who need international tax services look for an experienced international tax law firm to help them. Sherayzen Law Office, Ltd. is a highly experienced international tax law firm. In this essay, I will conduct the analysis explaining why Sherayzen Law Office is considered such an experienced international tax law firm.

Areas of Law Covered by an Experienced International Tax Law Firm

In order for a firm to be considered an experienced international tax law firm, it must have sufficient breadth of coverage of international law – i.e. a firm cannot be considered experienced if it only operates on the margins of international tax law. Sherayzen Law Office covers the full range of areas of international tax law, including: Offshore Voluntary Disclosures (all types – OVDP, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Noisy Disclosures and Reasonable Cause Disclosures); Annual International Compliance with respect to PFICs (Form 8621), foreign business ownership (5471, 8865, 8858, et cetera), foreign business transactions (926 and other related forms) and ownership of foreign accounts (FBAR, Form 8938, et cetera); Foreign Gifts and Inheritance (Form 3520), Beneficiary and/or Owner of a Foreign Trust (Form 3520 and 3520-A); Anti-Deferral Regimes (PFICs, Subpart F rules, et cetera); full domestic compliance (1040, 1065, 1120, et cetera); tax withholding; International Tax Planning; FATCA compliance; and numerous other areas and sub-areas of international tax law.

Furthermore, Sherayzen Law Office helps clients with IRS audits (including FBAR audits), IRS Appeals, and tax court appeals.

The expertise developed by Sherayzen Law Office covers both legal and accounting aspects of international tax law. This means that this is one of the few law firms in the United States where a client’s U.S. legal and accounting needs are fully met without the expense and inconvenience of involving third parties.

Experienced International Tax Law Firm and its Clients

Sherayzen Law Office is an experienced international tax law firm not only because it is in this business for more than 10 years, but also because, during this period of time, it has helped hundreds of U.S. taxpayers throughout the world to resolve their U.S. international tax matters. While a minority of our clients belong to middle class, the majority of our clients consist of the upper middle-class and high-net-worth individuals (including owners of foreign and domestic businesses) with highly complex international tax issues.

Countries Covered by an Experienced International Tax Law Firm

The breadth of the geographical experience is one of the most important characteristics of an experienced international tax law firm. Sherayzen Law Office is proud to state that it has worked with U.S. taxpayers with foreign accounts and/or assets in countries in all continents inhabited by humans: North America (Canada, Mexico and the United States), Central America (Costa Rica, Nicaragua and Panama – geographically, part of the North American continent), South America (Argentina, Brazil, Chile and Colombia), the Caribbean region (Bahamas, Barbados, Saint Kitts and Nevis and Cayman Islands), Europe (Austria, Belarus, Belgium, Croatia, Cyprus, Czech Republic, France, Germany, Hungary, Ireland, Italy, Luxembourg, Monaco, Poland, Portugal, Russia, Spain, Switzerland, Ukraine and the United Kingdom), Middle East (Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Turkey and United Arab Emirates – geographically part of Asia), Australia, New Zealand, Africa (Cote D’Ivore, Ethiopia, Morocco and Nigeria), and Asia (Bangladesh, China, India, Hong Kong, Japan, Philippines, Singapore, South Korea and Thailand).

Such a broad geographical spread qualifies Sherayzen Law Office as one of the most experienced international tax law firms in the United States.

Contact Sherayzen Law Office for Professional Help with Your International Tax Issues

U.S. international tax law is extremely complex with numerous reporting requirements and traps for the unwary. This is why you need to make sure that you have the right team of international tax professionals on your side, especially for the purpose of voluntary disclosure of your foreign accounts and income. Sherayzen Law Office is your best choice; our international tax firm is highly knowledgeable and experienced in international tax law and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Non-Residency Requirement of the Streamlined Foreign Offshore Procedures

One of the key issues facing U.S. taxpayers who wish to use the Streamlined Foreign Offshore Procedures is meeting the non-residency requirement. If the non-residency requirement is not met (and assuming the regular delinquent FBAR submission procedure is not applicable), the U.S. taxpayer faces the less pleasant choice of either following the Streamlined Domestic Offshore Procedures with a 5% penalty, entering the 2014 Offshore Voluntary Disclosure Program with its 27.5% penalty or pursuing an altogether distinct choice of the statutory reasonable cause exception (also known as Modified Voluntary Disclosure or Noisy Disclosure).

In this article, I will focus on outlining the non-residency requirement under the Streamlined Foreign Offshore Procedures. This article is for the educational purposes only; my strong recommendation is to retain an international tax attorney to determine whether your situation meets this non-residency requirement.

General Framework of the Non-Residency Requirement

In order to make sure that you are applying the correct legal test, you need to understand the dual framework of the non-residency requirement. The IRS draws a sharp distinction between two groups of U.S. taxpayers. The first group consists of U.S. citizens, U.S. lawful permanent residents (i.e. the green card holders), and estates of U.S. persons or lawful permanent residents.
The second group consists of the U.S. taxpayers who are not U.S. citizens, U.S. lawful permanent residents, or estates of U.S. persons or lawful permanent residents. A large swath of people (primarily foreign workers and investors) fall under this category. For example, people who came here on the H-1, L and E visas as well as people who are in the process of obtaining their U.S. permanent residency.

Distinct non-residency requirement will be applicable to each group of taxpayers.

Non-Residency Requirement for U.S. citizens, Green Card Holders and Their Estates

In order to meet the non-residency requirement under the Streamlined Foreign Offshore Procedures, individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents:

1. In any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed,

2. Should not have had a U.S. abode, and

3. Should have been physically outside the United States for at least 330 full days.

Neither temporary presence of the individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that the individual’s abode is in the United States. The IRS made it clear that IRC section 911 and its regulations apply for the purposes of determining whether the non-residency requirement was met for the purposes of the Streamlined Foreign Offshore Procedures.

Non-Residency Requirement for Individuals Who are Not U.S. citizens or Lawful Permanent Residents

The key issue for the second group of individuals is understanding 26 U.S.C. 7701(b)(3). In order to meet the non-residency requirement under the Streamlined Foreign Offshore Procedures, individuals who are not U.S. citizens or lawful permanent residents, or estates of individuals who were not U.S. citizens or lawful permanent:

1. In any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed,

2. Should not have met the substantial presence test under IRC Section 7701(b)(3).

Under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.

The IRS kindly provided this example:

Ms. X is not a U.S. citizen or lawful permanent resident, was born in France, and resided in France until May 1, 2012, when her employer transferred her to the United States. Ms. X was physically present in the U.S. for more than 183 days in both 2012 and 2013. The most recent 3 years for which Ms. X’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011. While Ms. X met the substantial presence test for 2012 and 2013, she did not meet the substantial presence test for 2011. Ms. X meets the non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents.

Contact Sherayzen Law Office for Legal Help with Your Undisclosed Foreign Accounts

If you have undisclosed foreign accounts, contact Sherayzen Law Office. Our experienced international tax law firm has helped numerous clients throughout the world with various types of voluntary disclosures from Modified Voluntary Disclosure to 2009 OVDP, 2011 OVDI, and 2012 OVDP. Our clients can be found on virtually all continents and in all major regions of the world.

If you are looking for reliable, experienced and creative ethical legal help, Contact Us to Schedule Your Confidential Consultation.