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IRS Compliance Campaigns | US International Tax Attorney and Lawyer

On January 31, 2017, the IRS announced a complete new approach to tax enforcement – Issue-Focused IRS Compliance Campaigns. A total of thirteen IRS compliance campaigns were announced; all of them will be administered by the LB&I (Large Business and International) division of the IRS. Let’s explore in more detail this highly important IRS announcement.

Background Information: IRS Compliance Campaigns is the Second Phase of the LB&I Restructuring

The announcement of the IRS Compliance Campaigns does not come as a surprise. The IRS has been talking about the LB&I division restructuring for a long while and the first details of the new campaigns already appeared as early as September of 2015.

In fact, the IRS Compliance Campaigns represent the second phase of this restructuring. Already in the fall of 2015, the LB&I completed the first phase – the administrative re-organization of the LB&I into nine units, including four geographic practice areas and five issue-based practice areas.

The first phase of the LB&I reorganization focused on the administrative structure of the Division. The IRS Compliance Campaigns are meant to reorganize the Division’s tax enforcement process in a way that fits best the new administrative structure.

IRS Compliance Campaigns are Focused on Specific Tax Issues

On January 31, 2017, during a conference call announcing the new IRS Compliance Campaigns, the IRS stated that each campaign is meant to provide “a holistic response to an item of either known or potential compliance risks.” In other words, each Campaign is focused on a specific tax issue which carries a heightened noncompliance risk.

This focus on specific issues fits perfectly with the new organizational structure of the LB&I which we already discussed above. Again, this is all part of a large IRS plan to devote its scarce resources towards the areas which have significant noncompliance risk and, hence, require a more intense level of IRS scrutiny.

Issue-Focused IRS Compliance Campaigns: What Areas Will the Campaigns Affect?

As of March 21, 2017, the IRS identified thirteen such high-risk areas. A separate campaign was assigned to each of these areas. The campaigns can be grouped according to the IRS LB&I Practice Areas.

1. Cross Border Activities Practice Area

The following campaigns are included within the Cross Border Activities Practice Area of the LB&I Division: Form 1120-F Non-Filer Campaign and Repatriation Campaign.

2. Enterprise Activity Practice Area

The Enterprise Activity Practice Area of the LB&I Division contains more campaigns than any other area by a large margin. Seven different campaigns are launched within this Practice Area: IRC 48C Energy Credit; Domestic Production Activities Deduction, Multi-Channel Video Program Distributors (MVPD’s) and TV Broadcasters; Micro-Captive Insurance Campaign; Related Party Transactions; Deferred Variable Annuity Reserves & Life Insurance Reserves IIR Campaign; Basket Transactions Campaign; and Land Developers – Completed Contract Method (CCM) Campaign.

3. Pass-Through Entities Area

Two huge campaigns are launched in the Pass-Through Entities Area of the LB&I Division: TEFRA Linkage Plan Strategy Campaign and S Corporation Losses Claimed in Excess of Basis Campaign.

4. Treaty and Transfer Pricing Operations Practice Area

One campaign is launched within the Treaty and Transfer Pricing Operations Practice Area: the Inbound Distributor Campaign.

5. Withholding and International Individual Compliance Practice Area

Only one, but highly important campaign was launched within the Withholding and International Individual Compliance Practice Area – OVDP Declines-Withdrawals Campaign.

The taxpayers should remember that they may be subject to multiple IRS Compliance Campaigns at the same time.

IRS Compliance Campaigns: Treatment Streams

The goal of the campaigns is to promote tax compliance – even more fundamentally, to change the taxpayer behavior in general, replacing noncompliance with compliance.

In order to achieve this goal, the IRS may utilize a variety of “treatment streams” as part of a campaign. The first and most fundamental treatment stream is the traditional audit, which will remain the ultimate weapon in all IRS Compliance Campaigns.

Second, the IRS stated that it will also include “soft letters” to taxpayers. The idea behind the soft letters is to draw a taxpayer’s attention to a particular item or issue on the taxpayer’s return, explain the IRS position and give the taxpayer an opportunity to amend his return himself (i.e. without resorting to an audit). If the taxpayer does not do so after he receives the IRS letter, an audit will most likely follow.

Additionally, the IRS stated that it will pursue four additional strategies: guidance, new forms and instructions, published practice units, and practitioner and stakeholder outreach.

More IRS Compliance Campaigns Will Be Launched in the Future

The IRS has affirmatively stated that the number of the IRS Compliance Campaigns will increase in the future. At this point, it is not yet known what particular areas the new Campaigns will affect.

Contact Sherayzen Law Office for Professional Help If You Are Affected by One or More of the IRS Compliance Campaigns

If you are affected by any of the IRS campaigns or you have received a soft letter from the IRS, contact Sherayzen Law Office for professional help. Our team of tax professionals, headed by Attorney Eugene Sherayzen, will thoroughly analyze your case, create a plan to move forward to resolve the situation, implement the plan and defend your position against the IRS.

Poland AEOI Rules Still Not Implemented | FATCA Lawyers

On September 29, 2016, the European Commission announced that it had asked Poland to fully implement into its domestic law Council Directive 2014/107/EU on mutual assistance in income and capital taxation matters (which amends the earlier Directive 2011/16/EU on mandatory automatic exchange of information between member states). The request came in after the realization that Poland AEOI Rules were still not implemented despite the deadline.

Poland AEOI Rules Implementation, CRS and Council Directive 2014/107/EU

After the United States adopted Foreign Account Tax Compliance Act (FATCA) into law, the OECD (including the European Union) created the Common Reporting Standard (CRS) which established the standard for what type of information needs to be automatically exchanged between signatory countries. AEOI is essentially the practical application of the CRS.

In December 2014, the EU Council adopted Directive 2014/107/EU, which extended cooperation between tax authorities to automatic exchange of financial account information (i.e. AEOI) and expanded the scope of information to be exchanged on an automatic basis to include interest, dividends, and other types of income. Virtually all countries, except Poland and Portugal, have implemented the directive on AEOI

The Delays in Poland AEOI Rules Implementation

In reality, Poland, like other member states, were requires to implement the directive into their national laws by January 1. According to Tax Analysts, the European Commission already sent a formal notice to Poland on January 27, 2016. Then, it send another formal notice in March of 2016. At that time, Poland replied that the government was working on transposing Directive 2014/107/EU into national law.

However, Poland AEOI Rules still have not been implemented. What is worse, it appears that the Polish government has taken no concrete steps into that direction. Poland also has yet to fully inform the Commission of its plans to meet that requirement.

What Happens if Poland AEOI Rules Implementation Stalls

While the latest Commission action comes at a difficult time in Poland (on September 28, 2016, Polish Prime Minister Beata Szydlo sacked Finance Minister Pawel Szalamacha), it may not save Poland from later EU actions. If Poland does not respond in a satisfactory manner within the next two months, the Commission may refer Poland to the Court of Justice of the European Union.

Boston FATCA Lawyer

Often, people are searching for a Boston FATCA lawyer without a clear definition of who a Boston FATCA lawyer is. Indeed, who is a Boston FATCA Lawyer? Just a lawyer who resides in Boston or can a lawyer who resides outside of Boston qualify as a Boston FATCA lawyer? Is it any lawyer or only an international tax lawyer? Do all international tax lawyers qualify as a Boston FATCA lawyer?

Boston FATCA Lawyer Definition: Physical Residence Does Not Matter

Let’s first resolve the issue of physical residence. Here, we find that there are two types of lawyers who can qualify as a Boston FATCA Lawyer. First, a lawyer who resides and works in the city of Boston; this is logical and does not need further explanation.

Second, a Boston FATCA lawyer can also be a lawyer who resides outside of Boston, but who has clients in Boston. There are two reasons for this statement. First, the enormous improvements in modern communication technologies eliminated for all practical purposes the difference between a Boston FATCA lawyer who resides in Boston and a Boston FATCA lawyer who resides outside of Boston. The logistical ability of lawyers who reside outside of Boston to advise (with respect to FATCA) and prepare documents for their clients who live in Boston is virtually the same.

The second reason for why a lawyer who resides outside of Boston can still be considered as a Boston FATCA lawyer is the fact that FATCA is a federal law that concerns US international tax compliance; there is no special relationship between Boston and FATCA.  FATCA applies to all US taxpayers equally, not just US taxpayers who reside in Boston.  The logical extension of this statement is that the lawyers who practice in this area of law are able to provide their services with respect to FATCA irrespective of their residence.  This means that a lawyer in Boston has no inherent advantage over a lawyer who resides outside of Boston, because there is simply no local legal Bostonian addition to FATCA.

Boston FATCA Lawyer Definition: a FATCA Lawyer is an International Tax Lawyer

Not every lawyer qualifies as a Boston FATCA lawyer; in fact, very few lawyers qualify for this title because this is a very narrow specialty. A Boston FATCA lawyer is an international tax lawyer who is knowledgeable about FATCA, foreign accounts voluntary disclosure and the US international tax system in general.

The knowledge of US international tax requirements is highly important for a FATCA Lawyer. Many clients do not initially understand that FATCA is merely a part of a much larger network of international tax laws of the United States. The interaction of these laws with FATCA is what has an actual impact on the tax position of a US taxpayer. This is why it is highly important for a FATCA Lawyer to know not only FATCA itself, but also the entire US international tax law system.

Contact Sherayzen Law Office If You Are Looking for a FATCA Lawyer

If you are looking for a Boston FATCA Lawyer, you should contact Sherayzen Law Office, PLLC – an international tax law firm that specializes in FATCA compliance, offshore voluntary disclosures of foreign accounts (and other foreign assets) and US international tax issues in general.  While based in Minneapolis, Sherayzen Law Office has provided its services to hundreds of clients throughout the world with respect to their FBAR and FATCA compliance, including correcting past US tax compliance through OVDP, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause (Noisy) Disclosures.

Contact Us Today to Schedule Your Confidential Consultation!

H1B Holder FATCA Requirements

There is a confusion in general public about the H1B holder FATCA requirements. The key concept that lies at the heart of the U.S. tax obligations of an H1B holder is tax residency (which is very different from the definition of a U.S. permanent resident in immigration law). In this article, I will discuss the concept of tax residency and the H1B Holder FATCA requirements.

H1B Holder FATCA Requirements: H1B Visa

H1B visa is a non-immigrant visa that allows U.S. companies to hire foreign workers to work in the United States. These workers have to be working in occupations that require theoretical or technical expertise in specialized fields such as in architecture, engineering, mathematics, science and medicine.

H1B Holder FATCA Requirements: FATCA

The Foreign Account Tax Compliance Act (FATCA) was signed into law in the year 2010. This law was passed by U.S. Congress with the specific purpose of combating tax noncompliance of U.S. taxpayers with undeclared offshore accounts. Today, FATCA is one of the most influential tax information exchange regimes in the world; through a huge network of bilateral treaties, the IRS managed to implement FATCA in the great majority of the countries.

FATCA consists of basically two parts. First, it obligates foreign financial institutions to turn over to the IRS certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. The H1B Holder FATCA information is also required to be turned over to the IRS.

The second part of FATCA imposes a new reporting requirement, IRS Form 8938, which must be filed with a U.S. tax return. Form 8938 requires U.S. taxpayers to disclose specified foreign assets to the IRS. “Specified Foreign Assets” includes various class assets, including foreign financial accounts.

H1B Holder FATCA Requirements: Tax Residency and FATCA Requirements

The key to understanding H1B holder FATCA requirements is the determination of whether an H1B holder is a tax resident of the United States. In order for an H1B holder to be classified as a U.S. tax resident, he must pass the “substantial presence test”. The substantial presence test determines the tax residency of a person based on the number of days this individual was physically in the United States.

If the substantial presence test is satisfied, the H1B holder is considered to be a tax resident of the United States. As a U.S. tax resident, the H1B holder FATCA requirements will be the same as those of any other U.S. tax resident, including U.S. citizens and U.S. permanent residents.

This means that, under FATCA, foreign banks should disclose to the IRS all of the foreign financial accounts owned directly, indirectly or constructively by the H1B holder. At the same time, the H1B holder FATCA obligations extend to filing Form 8938 for all of the required specified foreign assets, including foreign financial accounts, foreign stocks and other securities, foreign bonds, foreign derivatives and ownership of foreign businesses (unless such ownership is reported on another IRS form; in this case, Form 8938 should indicate the form on which such foreign business ownership is disclosed), and other assets.

H1B Holder FATCA Requirements: Late Disclosure

What if H1B holder FATCA obligations were not timely satisfied (i.e. Forms 8938 should have been filed, but they never were) and the H1B holder just found out about it? If an H1B holder did not file Forms 8938 timely, he may be subject to Form 8938 penalties. Moreover, in most such cases, such an H1B holder is likely to have failed to comply with other important U.S. international tax requirements such as FBAR and worldwide income reporting. The combination of FATCA, FBAR, income reporting and other penalties may create a huge tax liability that may even exceed the total value of the H1B holder’s foreign assets.

In such cases, the H1B holder should contact an international tax attorney experienced in offshore voluntary disclosures as soon as possible. Various offshore voluntary disclosure options offer varying rates of reduced penalties, sometimes even with the possibility of eliminating all penalties. However, time is of the essence – if foreign banks report the H1B holder’s foreign assets as part of their FATCA compliance and the IRS commences its investigation of the H1B holder FATCA noncompliance, then all of the voluntary disclosure options may automatically close.

Contact Sherayzen Law Office for Legal Help with H1B Holder FATCA Compliance

If you work in the United on H1B visa, have foreign assets which are required to be disclosed under FATCA and have not done so, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is an experienced international tax law firm that specializes in FATCA compliance for U.S. taxpayers, including voluntary disclosures for H1B holders.

Contact Us Today to Schedule Your Confidential Consultation!