§318 Sidewise Attribution Limitation | US International Tax Attorney

This article explores the third main limitation on the general IRC (Internal Revenue Code) §318 corporate stock re-attribution rules – §318 Sidewise Attribution Limitation.

§318 Sidewise Attribution Limitation: What is “Sidewise Attribution”?

A sidewise attribution occurs when corporate stock owned by an owner of a business entity (or a beneficiary of a trust or estate) is first attributed to this business entity (or estate or trust) and then re-attributed again to another owner of the same business entity (or another beneficiary of the same trust or estate). In other words, stock deemed to be owned by an entity due to the ownership of that stock by an owner or beneficiary of the entity is re-attributed “sidewise” to another owner or beneficiary of the same entity.

Sidewise attribution may have far-reaching income tax and tax reporting consequences, because it may result in a person with no real ownership of a corporation being treated as an owner of this corporation’s stock simply because a member of another entity (in which the first person also has an ownership interest) happens to own corporate stock of this corporation.

§318 Sidewise Attribution Limitation: §318(a)(5)(C) Prohibition

§318(a)(5)(C) describes the §318 Sidewise Attribution Limitation. Under §318(a)(5)(C), stock constructively owned by a partnership, estate, trust or corporation pursuant to §318(a)(3) is not treated as owned by this partnership, estate, trust or corporation for the purpose of treating a partner, beneficiary, or shareholder as owner of the stock. In other words, the sidewise attribution limitation prevents re-attribution of corporate stock to an owner of an entity where such stock is constructively-owned by an entity solely by virtue of ownership of this stock by another owner of the entity.

Let’s look at the following example to illustrate the §318 Sidewise Attribution Limitation: A and B are unrelated persons, they equally own a partnership P and A owns 100 shares of corporation X’s stock. In this situation, partnership P is a constructive owner of A’s 100 shares of X under §318(a)(3)(A). Without any sideways limitation, B would have been also treated as an owner of these 100 shares of X due to §318(a)(2)(A). Under §318(a)(5)(C), however, none of these stocks are attributed to B.

§318 Sidewise Attribution Limitation: Attribution from Actual Ownership Not Affected

It is important to emphasize that §318(a)(5)(C) applies only to the re-attribution of stock constructively owned as a result of the application of §318(a)(3). This prohibition does not affect the §318(a)(2) attribution of stock actually owned by an entity to its beneficiary, partner, or shareholder.

§318 Sidewise Attribution Limitation: Re-Attribution Under Other Rules

Additionally, stock constructively owned under §318(a)(3) may still be re-attributed under an attribution rule other than §318(a)(2). In other words, stock constructively owned under §318(a)(3) may still be re-attributed under the upstream corporate attribution rules or the option attribution rules of §318(a)(4) (see Treas. Reg. §1.318-4(c)(2)).

Moreover, re-attribution under the §318 family attribution rules still possible. A potential situation for such re-attribution would arise in a situation where corporate stock is attributed from an entity to its member and from this member to a qualified family member of the same entity. Berenbaum v. Commissioner, 369 F.2d 337 (10th Cir. 1966), rev’g T.C. Memo 1965-147.

Let’s look at a couple of examples to understand better the interaction between the §318 Sidewise Attribution Limitation and the re-attribution rules other than §318(a)(2).

Here is the first hypothetical fact pattern: A is a beneficiary of a trust T, B is another beneficiary of T, T is a beneficiary of an estate, and A owns 100 shares of a c-corporation X. Under §318(a)(3)(B), T is a constructive owner of 100 shares of X. Since T is a constructive owner of A’s shares of X, these shares are re-attributed to the estate under §318(a)(3)(A); §318(a)(5)(C) does not apply to this type of a re-attribution since it is not a sidewise attribution. On the other hand, the §318 Sidewise Attribution Limitation would prevent the re-attribution of A’s shares of X to B that otherwise would have occurred under §318(a)(2)(B).

Note, however, that, if B is A’s son (or other qualified relative under the §318 family attribution rules), then the re-attribution of A’s stocks of X to B is possible under §318(a)(1)(A).

Let’s now look at another fact pattern to understand the power of the option rule attribution vis-a-vis §318(a)(5)(C): A and B are beneficiaries of a trust T; T has an option to buy corporate stock from A. The most important point to understand here is the fact that T is considered here as an owner of A’s stock not under the upstream trust attribution rules of §318(a)(3)(B), but under the option attribution rules of §318(a)(4). Hence, the sidewise attribution limitation under §318(a)(5)(C) does not apply and B becomes a constructive owner of a his proportional part of A’s stock under the downstream trust attribution rules of §318(a)(2)(B).

Contact Sherayzen Law Office for Professional Help With US International Tax Law Compliance

US international tax law is incredibly complex and the penalties for noncompliance are exceptionally severe. This means that an attempt to navigate through the maze of US international tax laws without assistance of an experienced professional will most likely produce unfavorable and even catastrophic results.

Contact Sherayzen Law Office for professional help with US international tax law. We are a highly experienced, creative and ethical team of professionals dedicated to helping our clients resolve their past, present and future US international tax compliance issues. We have helped clients with assets in over 70 countries around the world, and we can help you!

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Critical Business Exemption | Minnesota Shelter-In-Place Order

On March 25 , 2020, the Honorable Tim Walz, Governor of the State of Minnesota, issued a “Shelter-In-Place” Emergency Executive Order 20-20. The Executive Order mandates all persons in Minnesota to stay at home or in their place residence, unless they go out to engage in certain activities or do work for a business which is designated as a critical business (in some states, critical business is called “essential business”). I will first discuss the definition of the critical business exemption and its importance; then, I will provide a list of industries that fall under the critical business exemption based on NAICS codes.

Critical Business Exemption: Importance

The critical business exemption is very important for many business and tax reasons. Let’s briefly discuss the two most important of them.

First, from a business perspective, it is very important for business to continue to operate; a shutdown of two weeks may deal a critical blow to a business’ ability to remain profitable and meet all of its clients’ demands. Hence, the very existence of a business may depend on its eligibility for a critical business exemption.

Second, a non-exempt business will have to make a tough choice between laying off all of its employees and paying forced leave of absence. Prior to April 1, 2020, the forced leave of absence will not be compensated by the federal government. Starting April 1, 2020, however, pursuant to the Families First Coronavirus Response Act (“FFCRA”), employees are entitled to certain paid leave as well as potentially expanded family and medical leave for COVID-19 related reasons. In return, eligible employers will receive a compensation from the federal government in the form of a Paid Sick Leave Tax Credit.

These are just two of numerous examples of the importance of the critical business exemption.

Critical Business Exemption: Definition Sources

In order for a business to exempt its workers from the requirements of the Governor’s Executive Order 20-20, two conditions must be satisfied: (1) a business must fall within the definition of a critical business, and (2) a worker cannot perform work duties from home.

There are three resources that provide guidance to help you determine if your business is in a critical industry:

  1. The U.S. Department of Homeland Security’s Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response (“CISA”). This is the federal government’s definition of critical industries.
  2. The aforementioned is Governor’s Executive Order 20-20. The order sets forth all sources of the critical business exemption definition as well as certain general categories of exempt businesses.
  3. The designation of critical industries based on NAICS Codes. This the most detailed and most comprehensive list of critical industries for many businesses. I provided the list below as it existed as of March 26, 2020.

The analysis should start from CISA categories. If your business does not fall within any of the CISA categories, then you proceed with the examination of the categories listed in the Executive Order 20-20. Finally, if neither of the first two sources provides an answer (for example, if you are a tax accountant, this would be the case), then you need to look at the NAICS Codes. If your business falls within any of the critical industry categories described in either of these documents, then, you will satisfy the first condition for exempting your workers from Minnesota Shelter-in-Place order.

Critical Business Exemption: Inability to Perform Work Duties from Home

If a business belongs to one of the critical industries, an employee can leave home to work only if he cannot perform his duties from home. It is important to understand that Executive Order 20-20 requires all employees who can work from home to do so, even if they are eligible for a critical business exemption.

Critical Business Exemption: NAICS Codes

For the convenience of the readers, I provided this list of companies eligible (and ineligible) for Minnesota critical business exemption based on NAICS Codes. This list was originally published by MN DEED (Minnesota Department of Employment and Economic Development); it is up-to-date through March 26, 2020.

As a Minnesota-based US international tax law firm which deals with highly-confidential information, Sherayzen Law Office falls within an exemption under NAICS code 5412.

Industry Description Industry Code Critical Industry
Oilseed and Grain Farming 1111 YES
Vegetable and Melon Farming 1112 YES
Fruit and Tree Nut Farming 1113 YES
Greenhouse, Nursery, and Floriculture Production 1114 YES
Other Crop Farming 1119 YES
Cattle Ranching and Farming 1121 YES
Hog and Pig Farming 1122 YES
Poultry and Egg Production 1123 YES
Other Animal Production 1129 YES
Timber Tract Operations 1131 YES
Forest Nurseries and Gathering of Forest Products 1132 YES
Logging 1133 YES
Fishing 1141 YES
Hunting and Trapping 1142 YES
Support Activities for Crop Production 1151 YES
Support Activities for Animal Production 1152 YES
Support Activities for Forestry 1153 YES
Oil and Gas Extraction 2111 YES
Metal Ore Mining 2122 YES
Nonmetallic Mineral Mining and Quarrying 2123 NO
Support Activities for Mining 2131 YES
Residential Building Construction 2361 YES
Nonresidential Building Construction 2362 YES
Utility System Construction 2371 YES
Land Subdivision 2372 YES
Highway, Street and Bridge Construction 2373 YES
Other Heavy and Civil Engineering Construction 2379 YES
Foundation, Structure and Building Exterior Contractors 2381 YES
Building Equipment Contractors 2382 YES
Building Finishing Contractors 2383 YES
Other Specialty Trade Contractors 2389 YES
Grain and Oilseed Milling 3112 YES
Sugar and Confectionery Product Manufacturing 3113 YES
Fruit and Vegetable Preserving and Specialty Food Manufacturing 3114 YES
Dairy Product Manufacturing 3115 YES
Animal Slaughtering and Processing 3116 YES
Bakeries and Tortilla Manufacturing 3118 YES
Other Food Manufacturing 3119 YES
Beverage Manufacturing 3121 YES
Fabric Mills 3132 NO
Textile Furnishings Mills 3141 NO
Other Textile Product Mills 3149 NO
Cut and Sew Apparel Manufacturing 3152 NO
Leather and Hide Tanning and Finishing 3161 NO
Sawmills and Wood Preservation 3211 NO
Veneer, Plywood and Engineered Wood Product Manufacturing 3212 NO
Other Wood Product Manufacturing 3219 YES
Pulp, Paper and Paperboard Mills 3221 YES
Converted Paper Product Manufacturing 3222 YES
Printing and Related Support Activities 3231 NO
Petroleum and Coal Products Manufacturing 3241 YES
Basic Chemical Manufacturing 3251 YES
Resin, Synthetic Rubber and Artificial Synthetic Fibers and Filaments Manufacturing 3252 NO
Pesticide, Fertilizer and Other Agricultural Chemical Manufacturing 3253 YES
Pharmaceutical and Medicine Manufacturing 3254 YES
Paint, Coating and Adhesive Manufacturing 3255 NO
Soap, Cleaning Compound and Toilet Preparation Manufacturing 3256 YES
Other Chemical Product and Preparation Manufacturing 3259 YES
Plastics Product Manufacturing 3261 YES
Rubber Product Manufacturing 3262 YES
Glass and Glass Product Manufacturing 3272 NO
Cement and Concrete Product Manufacturing 3273 NO
Other Nonmetallic Mineral Product Manufacturing 3279 NO
Steel Product Manufacturing from Purchased Steel 3312 YES
Alumina and Aluminum Production and Processing 3313 YES
Foundries 3315 YES
Forging and Stamping 3321 YES
Cutlery and Handtool Manufacturing 3322 NO
Industry Description Industry Code Critical Industry
Architectural and Structural Metals Manufacturing 3323 NO
Boiler, Tank and Shipping Container Manufacturing 3324 YES
Hardware Manufacturing 3325 NO
Spring and Wire Product Manufacturing 3326 NO
Machine Shops, Turned Product and Screw, Nut and Bolt Manufacturing 3327 YES
Coating, Engraving, Heat Treating and Allied Activities 3328 NO
Other Fabricated Metal Product Manufacturing 3329 NO
Agriculture, Construction and Mining Machinery Manufacturing 3331 YES
Industrial Machinery Manufacturing 3332 YES
Commercial and Service Industry Machinery Manufacturing 3333 YES
Ventilation, Heating, Air-Conditioning and Commercial Refrigeration Equipment Manufacturing 3334 YES
Metalworking Machinery Manufacturing 3335 NO
Engine, Turbine and Power Transmission Equipment Manufacturing 3336 NO
Other General Purpose Machinery Manufacturing 3339 NO
Computer and Peripheral Equipment Manufacturing 3341 YES
Communications Equipment Manufacturing 3342 YES
Audio and Video Equipment Manufacturing 3343 YES
Semiconductor and Other Electronic Component Manufacturing 3344 YES
Navigational, Measuring, Electromedical and Control Instruments Manufacturing 3345 YES
Manufacturing and Reproducing Magnetic and Optical Media 3346 NO
Electrical Equipment Manufacturing 3353 YES
Other Electrical Equipment and Component Manufacturing 3359 YES
Motor Vehicle Manufacturing 3361 NO
Motor Vehicle Body and Trailer Manufacturing 3362 NO
Motor Vehicle Parts Manufacturing 3363 NO
Aerospace Product and Parts Manufacturing 3364 NO
Railroad Rolling Stock Manufacturing 3365 NO
Ship and Boat Building 3366 NO
Other Transportation Equipment Manufacturing 3369 NO
Household and Institutional Furniture and Kitchen Cabinet Manufacturing 3371 NO
Office Furniture (including Fixtures) Manufacturing 3372 NO
Other Furniture Related Product Manufacturing 3379 NO
Medical Equipment and Supplies Manufacturing 3391 YES
Other Miscellaneous Manufacturing 3399 NO
Electric Power Generation, Transmission and Distribution 2211 YES
Natural Gas Distribution 2212 YES
Water, Sewage and Other Systems 2213 YES
Motor Vehicle and Motor Vehicle Parts and Supplies Merchant Wholesalers 4231 YES
Furniture and Home Furnishing Merchant Wholesalers 4232 NO
Lumber and Other Construction Materials Merchant Wholesalers 4233 YES
Professional and Commercial Equipment and Supplies Merchant Wholesalers 4234 YES
Metal and Mineral (except Petroleum) Merchant Wholesalers 4235 YES
Electrical and Electronic Goods Merchant Wholesalers 4236 YES
Hardware, Plumbing, Heating Equipment and Supplies Merchant Wholesalers 4237 YES
Machinery, Equipment and Supplies Merchant Wholesalers 4238 YES
Miscellaneous Durable Goods Merchant Wholesalers 4239 NO
Paper and Paper Product Merchant Wholesalers 4241 YES
Drugs and Druggists’ Sundries Merchant Wholesalers 4242 YES
Apparel, Piece Goods and Notions Merchant Wholesalers 4243 NO
Grocery and Related Product Merchant Wholesalers 4244 YES
Farm Product Raw Material Merchant Wholesalers 4245 YES
Chemical and Allied Products Merchant Wholesalers 4246 YES
Petroleum and Petroleum Products Merchant Wholesalers 4247 YES
Beer, Wine and Distilled Alcoholic Beverage Merchant Wholesalers 4248 YES
Miscellaneous Nondurable Goods Merchant Wholesalers 4249 YES
Wholesale Electronic Markets, Agents and Brokers 4251 YES
Automobile Dealers 4411 NO
Other Motor Vehicle Dealers 4412 NO
Automotive Parts, Accessories and Tire Stores 4413 YES
Furniture Stores 4421 NO
Home Furnishings Stores 4422 NO
Electronics and Appliance Stores 4431 NO
Building Material and Supplies Dealers 4441 YES
Lawn and Garden Equipment and Supplies Stores 4442 NO
Grocery Stores 4451 YES
Specialty Food Stores 4452 YES
Beer, Wine and Liquor Stores 4453 YES
Health and Personal Care Stores 4461 YES
Industry Description Industry Code Critical Industry
Gasoline Stations 4471 YES
Clothing Stores 4481 NO
Shoe Stores 4482 NO
Jewelry, Luggage and Leather Goods Stores 4483 NO
Sporting Goods, Hobby and Musical Instrument Stores 4511 NO
Book, Periodical and Music Stores 4512 NO
Department Stores 4522 YES
General Merchandise Stores, including Warehouse Clubs and Supercenters 4523 YES
Florists 4531 NO
Office Supplies, Stationery and Gift Stores 4532 NO
Used Merchandise Stores 4533 NO
Other Miscellaneous Store Retailers 4539 NO
Electronic Shopping and Mail-Order Houses 4541 NO
Vending Machine Operators 4542 NO
Direct Selling Establishments 4543 NO
Scheduled Air Transportation 4811 YES
Nonscheduled Air Transportation 4812 YES
Rail Transportation 4821 YES
Deep Sea, Coastal and Great Lakes Water Transportation 4831 YES
Inland Water Transportation 4832 YES
General Freight Trucking 4841 YES
Specialized Freight Trucking 4842 YES
Urban Transit Systems 4851 YES
Taxi and Limousine Service 4853 YES
School and Employee Bus Transportation 4854 YES
Other Transit and Ground Passenger Transportation 4859 YES
Pipeline Transportation of Crude Oil 4861 YES
Pipeline Transportation of Natural Gas 4862 YES
Other Pipeline Transportation 4869 YES
Scenic and Sightseeing Transportation, Land 4871 NO
Scenic and Sightseeing Transportation, Water 4872 NO
Support Activities for Air Transportation 4881 YES
Support Activities for Rail Transportation 4882 YES
Support Activities for Water Transportation 4883 YES
Support Activities for Road Transportation 4884 YES
Freight Transportation Arrangement 4885 YES
Other Support Activities for Transportation 4889 YES
Postal Service 4911 YES
Couriers 4921 YES
Local Messengers and Local Delivery 4922 YES
Warehousing and Storage 4931 YES
Newspaper, Periodical, Book and Directory Publishers 5111 YES
Software Publishers 5112 YES
Motion Picture and Video Industries 5121 NO
Sound Recording Industries 5122 NO
Radio and Television Broadcasting 5151 YES
Cable and Other Subscription Programming 5152 YES
Telecommunications Resellers 5173 YES
Data Processing, Hosting and Related Services 5182 YES
Other Information Services 5191 YES
Monetary Authorities – Central Bank 5211 YES
Depository Credit Intermediation 5221 YES
Nondepository Credit Intermediation 5222 YES
Activities Related to Credit Intermediation 5223 YES
Securities and Commodity Contracts Intermediation and Brokerage 5231 YES
Securities and Commodity Exchanges 5232 YES
Other Financial Investment Activities 5239 YES
Insurance Carriers 5241 YES
Agencies, Brokerages and Other Insurance Related Activities 5242 YES
Lessors of Real Estate 5311 YES
Offices of Real Estate Agents and Brokers 5312 YES
Activities Related to Real Estate 5313 YES
Automotive Equipment Rental and Leasing 5321 NO
Consumer Goods Rental 5322 NO
General Rental Centers 5323 NO
Commercial and Industrial Machinery and Equipment Rental and Leasing 5324 NO
Lessors of Nonfinancial Intangible Assets (except Copyrighted Works) 5331 NO
Legal Services 5411 YES
Industry Description Industry Code Critical Industry
Accounting, Tax Preparation, Bookkeeping and Payroll Services 5412 YES
Architectural, Engineering and Related Services 5413 YES
Specialized Design Services 5414 NO
Computer Systems Design and Related Services 5415 YES
Management, Scientific and Technical Consulting Services 5416 YES
Scientific Research and Development Services 5417 YES
Advertising and Related Services 5418 NO
Other Professional, Scientific and Technical Services 5419 YES
Management of Companies and Enterprises 5511 YES
Office Administrative Services 5611 NO
Facilities Support Services 5612 YES
Employment Services 5613 NO
Business Support Services 5614 NO
Travel Arrangement and Reservation Services 5615 NO
Investigation and Security Services 5616 YES
Services to Buildings and Dwellings 5617 YES
Other Support Services 5619 NO
Waste Collection 5621 YES
Waste Treatment and Disposal 5622 YES
Remediation and Other Waste Management Services 5629 YES
Elementary and Secondary Schools 6111 YES
Junior Colleges 6112 YES
Colleges, Universities and Professional Schools 6113 YES
Business Schools and Computer and Management Training 6114 YES
Technical and Trade Schools 6115 YES
Other Schools and Instruction 6116 YES
Educational Support Services 6117 YES
Offices of Physicians 6211 YES
Offices of Dentists 6212 YES
Offices of Other Health Practitioners 6213 YES
Outpatient Care Centers 6214 YES
Medical and Diagnostic Laboratories 6215 YES
Home Health Care Services 6216 YES
Other Ambulatory Health Care Services 6219 YES
General Medical and Surgical Hospitals 6221 YES
Psychiatric and Substance Abuse Hospitals 6222 YES
Specialty (except Psychiatric and Substance Abuse) Hospitals 6223 YES
Nursing Care Facilities (Skilled Nursing Facilities) 6231 YES
Residential Intellectual and Developmental Disability, Mental Health and Substance Abuse Facilities 6232 YES
Continuing Care Retirement Communities and Assisted Living Facilities for the Elderly 6233 YES
Other Residential Care Facilities 6239 YES
Individual and Family Services 6241 YES
Community Food and Housing and Emergency and Other Relief Services 6242 YES
Vocational Rehabilitation Services 6243 YES
Child Day Care Services 6244 YES
Performing Arts Companies 7111 NO
Spectator Sports 7112 NO
Promoters of Performing Arts, Sports, and Similar Events 7113 NO
Agents and Managers for Artists, Athletes, Entertainers and Other Public Figures 7114 NO
Independent Artists, Writers and Performers 7115 NO
Museums, Historical Sites and Similar Institution 7121 NO
Amusement Parks and Arcades 7131 NO
Gambling Industries 7132 NO
Other Amusement and Recreation Industries 7139 NO
Traveler Accommodation 7211 NO
RV (Recreational Vehicle) Parks and Recreational Camps 7212 YES
Rooming and Boarding Houses 7213 NO
Special Food Services 7223 YES
Drinking Places (Alcoholic Beverages) 7224 NO
Restaurants 7225 YES
Automotive Repair and Maintenance 8111 YES
Electronic and Precision Equipment Repair and Maintenance 8112 NO
Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance 8113 NO
Personal and Household Goods Repair and Maintenance 8114 NO
Personal Care Services 8121 NO
Death Care Services 8122 YES
Drycleaning and Laundry Services 8123 YES
Other Personal Services 8129 YES
Industry Description Industry Code Critical Industry
Religious Organizations 8131 YES
Grantmaking and Giving Services 8132 NO
Social Advocacy Organizations 8133 NO
Civic and Social Organizations 8134 NO
Business, Professional, Labor, Political and Similar Organizations 8139 NO
Private Households 8141 YES
Executive, Legislative and Other General Government Support 9211 YES
Justice, Public Order and Safety Activities 9221 YES
Administration of Human Resource Programs 9231 YES
Administration of Environmental Quality Programs 9241 YES
Administration of Housing Programs, Urban Planning and Community Development 9251 YES
Administration of Economic Programs 9261 YES
Space Research and Technology 9271 NO
National Security and International Affairs 9281 YES

Coronavirus Offshore Voluntary Disclosure: Problems & Opportunities

The advancement of coronavirus in the United States and around the world has significantly disrupted the normal conditions and assumptions for a US taxpayer who engages in an offshore voluntary disclosure of his unreported foreign income and foreign assets. I will refer to a voluntary disclosure conducted in this context of the coronavirus disruptions as Coronavirus Offshore Voluntary Disclosure. In this essay, I would like to discuss the most unique problems and opportunities that arise in the context of a Coronavirus Offshore Voluntary Disclosure.

Coronavirus Offshore Voluntary Disclosure: Most Important Problems

The spread of coronavirus created two important problems to conducting an offshore voluntary disclosure of foreign assets and foreign income.

The first and most significant problem is the ability of taxpayers to obtain the information necessary for the correct completion of US international information returns such as FBAR (FinCEN Form 114), Form 8938, Form 8865, Form 5471, et cetera. Oftentimes, in order to complete these returns, taxpayers have to retrieve information from many years ago.

This is a difficult task even without the coronavirus, because electronic access is often limited to just a few years. In cases that involve small and regional banks, the electronic access to information may simply not exist. Hence, a taxpayer often has to engage in a long process of mailing letters to banks requesting information; it is also a standard practice for taxpayers to personally travel to a foreign financial institution to obtain the necessary information.

The coronavirus prohibitions have made such travel virtually impossible due to cancellation of flights between countries. Even traveling within a country has been severely impacted. Moreover, there have been significant disruptions to ability of taxpayers to access financial institutions in the quarantined areas, such as northern Italy. Many financial institutions have simply closed their branches and ceased to operate in a normal way.

The combination of all of these factors has significantly curtailed taxpayers’ ability to collect the vital information necessary for the completion of an offshore voluntary disclosure.

The second most important problem caused by the coronavirus panic are communication disruptions. During a voluntary disclosure, taxpayers need to have access to their financial advisors and their international tax attorney. I’ve already explained above how the coronavirus bank closures have affected such communications.

The most significant communication issue between a taxpayer and his international tax attorney has been limited to mailing documents, particularly securing an original signature for Certifications of Non-Willfulness, Reasonable Cause Statements, amended tax returns and certain other IRS documents (such as Extension of Statute of Limitations in the context of an IRS audit). The coronavirus containment procedures have affected the flow of regular mail around the world and have caused significant delays in obtaining signed documents from clients.

It should mentioned that the normal communications between a client and his attorney were not significantly impacted. If there were any communication problems, this is most likely the result of the attorney’s failure to take advantage of modern means of communication.

Sherayzen Law Office’s usage of email, phone, Skype, Viber and certain other platforms for information exchange and other modern means of communication has assured continuous and uninterrupted communication between our firm and our clients. We have also encouraged and helped our clients to adopt certain procedures to mitigate other problems that have risen as a result of the coronavirus panic.

Coronavirus Offshore Voluntary Disclosure: Unique Opportunities

The coronavirus panic created not only unusual problems, but also unique opportunities for taxpayers with undisclosed foreign assets and foreign income. I will discuss here the two most important coronavirus opportunities.

First, the spread of this virus has given more time for noncompliant US taxpayers to bring their tax affairs into compliance with US tax laws. Not only has the IRS ability to pursue new international tax cases has been impacted by the virus, but the IRS moved the tax filing deadline to July 15, 2020. This means that taxpayers suddenly have three more months to work on their offshore voluntary disclosures without any interruption with respect to current tax compliance.

Second, more time means that taxpayers now can plan for and adopt more complex and beneficial strategies with respect to their offshore voluntary disclosures. For example, taxpayers who were planning to file extensions can now adopt a strategy to shift their voluntary disclosure period by timely filing their 2019 tax returns and 2019 FBARs.

Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure

If you have undisclosed foreign bank accounts and other foreign assets, contact Sherayzen Law Office for professional help. We have successfully helped hundreds of US taxpayers to bring their tax affairs into full compliance with US tax laws, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

New July 15 Deadline for 2019 Tax Compliance | International Tax News

On March 21, 2020, the IRS moved the federal income tax filing and tax payment due date from April 15, 2020, to July 15, 2020. Let’s discuss the new July 15 deadline in more detail.

July 15 Deadline: Why the IRS Moved the Tax Deadline to July 15, 2020?

The IRS moved the deadline because of the huge logistical problems that have arisen as a result of the spread of the coronavirus pandemic in the United States. The coronavirus panic as well as the imposition of what can be described as curfew and other restrictive safety measures in many states have dramatically reduced the ability of tax professionals to effectively and timely help their clients.

It would have been unfair and unreasonable to require taxpayers to file their tax returns by April 15 during this unprecedented national crisis. Hence, President Trump and the IRS decided to prevent this injustice and moved the tax filing and tax payment deadlines to July 15, 2020. This was the right move to make and it is applauded by tax professionals around the country.

The legal authority for the deferral of the April 15 deadline came from President Trump’s emergency declaration last week pursuant to the Stafford Act. The Stafford Act (enacted in 1988) is a federal law designed to bring an orderly and systematic means of federal natural disaster and emergency assistance for state and local governments in carrying out their responsibilities to aid citizens.

July 15 Deadline: What Returns Are Affected?

The deferment of the April 15 deadline applies to all taxpayers – individuals, corporations, trusts, estates and other non-corporate filers, including those who pay self-employment tax. In other words, all Forms 1040, 1041, 1120, et cetera are now due on July 15.

All international information returns which are filed separately or together with the income tax returns are also now due on July 15, 2020. This includes FBAR, Forms 8938, 3520, 5471, 5472, 8865 and other US international information returns.

July 15 Deadline: When are the Tax Payments Due?

All tax payments which are generally due on April 15 are now due on July 15, 2020.

July 15 Deadline: Do I Need to Do Anything Else to Obtain Tax Return Deferral?

Taxpayers do not need to file any additional forms or call the IRS to qualify for this federal tax filing and payment relief. This deferral to July 15, 2020, automatically applies to all of the aforementioned taxpayers.

July 15 Deadline: Is Extension to October Still Possible?

This automatic deferral does not affect the ability of taxpayers to request extension of the July 15 deadline to October 15. Individuals will need to file a Form 4868 in order to request such an extension. Businesses will need to file a Form 7004 to request this extension.

July 15 Deadline: Can I file Before July 15, 2020?

Taxpayers can still file their tax returns prior to July 15, 2020. The IRS promises to issue most refunds within 21 days if returns are e-filed.

New IRS Updates Possible

The IRS will continue to monitor issues related to the COVID-19 virus. New updates will be posted on a special coronavirus page on IRS.gov.

Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance

The extended July 15 deadline is especially welcome for US taxpayers with foreign assets. The delays caused by coronavirus now become irrelevant and there is plenty of time to finalize both, 2019 US international tax compliance forms and offshore voluntary disclosures.

If you have undisclosed foreign assets and foreign income, contact Sherayzen Law Office for professional assistance. We have successfully helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Coronavirus & Chinese Offshore Voluntary Disclosures | SDOP Tax Law Firm

The ongoing coronavirus pandemic has disrupted many areas of human activity around the planet. The coronavirus even affected the IRS offshore voluntary disclosures concerning US taxpayers’ unreported financial assets and income in China (“Chinese Offshore Voluntary Disclosures”). In fact, the impact of coronavirus on the Chinese Offshore Voluntary Disclosures has been severe and extremely disruptive. Let’s look at the top three ways in which coronavirus has disrupted the Chinese Offshore Voluntary Disclosures.

Coronavirus & Chinese Offshore Voluntary Disclosures: Access to Information

The first and most important disruption caused by coronavirus is reduced access to information necessary to complete offshore voluntary disclosures. As a result of the quarantine measures, many financial institutions in China are either closed or work only limited hours. Hence, it has become much harder to obtain relevant information from the Chinese financial institutions, particularly with respect to certain complex investment products and investment insurance policies.

Moreover, as a result of the suspension of travel between China and the United States, many taxpayers are unable to travel to China to obtain the necessary documents. In many cases, internet access to financial data in China is limited to only a few years, whereas taxpayers often need to go back at least six years to obtain the necessary information to accurately complete their delinquent FBARs. In most instances, a taxpayer needs to personally visit his financial institution to collect this older data. At this point, this is almost impossible.

Coronavirus & Chinese Offshore Voluntary Disclosures: Mailing of Signed Documents

With respect to US taxpayers who are currently in China, many of them have limited ability to execute the documents necessary to complete offshore voluntary disclosures and mail them to their international tax attorneys in the United States.

Coronavirus & Chinese Offshore Voluntary Disclosures: Case Schedule

As a result of the two factors above as well as the current communication disruptions in the United States, the coronavirus has caused long delays in the voluntary disclosures that involve undisclosed financial assets in China. The schedule disruptions can last from weeks to months; in fact, in some cases, it is too early to be able to fully assess the impact of coronavirus on an offshore voluntary disclosure schedule.

While Sherayzen Law Office has been able to minimize the impact of coronavirus on the Chinese Offshore Voluntary Disclosures, certain delays still exist due to clients’ inability to obtain the necessary information.

Contact Sherayzen Law Office for Help With Chinese Offshore Voluntary Disclosures

If you have undisclosed financial accounts or foreign businesses in China, contact Sherayzen Law Office for professional help as soon as possible. While the disruptions caused by coronavirus have been severe, by employing careful planning, we can still help you maximize your ability to complete your offshore voluntary disclosure in an accurate and timely manner.

We have already helped hundreds of US taxpayers like you, including in China, to successfully bring their financial and business affairs in full compliance with US tax laws. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!