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Streamlined Disclosure vs. Current Tax Compliance | SDOP Lawyer

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Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I would like to discuss with you one of the most interesting problems that almost every taxpayer faces when he does a Voluntary Disclosure: the issue of current Tax Compliance. Let me explain what I mean by this.

Let’s suppose that you discovered (that) you have not filed your form 8938 or perhaps FBAR; let’s say you haven’t done that for a number of years. At this point you’re not able to obtain all the documentation necessary to complete the amended tax forms or to complete the necessary tax forms in order to file your Voluntary Disclosure. So, in essence what you’re facing is an issue of whether to disclose your foreign accounts and potential past non-compliance at this point or to wait and then disclose everything when you file your Voluntary Disclosure.

The temptation is to file the tax documents as they are without disclosing anything with respect to your foreign accounts and foreign income. However, this temptation must be resisted at all costs. Let me explain why.

If you file your tax forms without the disclosure of foreign accounts and foreign income and you know that you must disclose these foreign accounts and income, then you’re doing it with knowledge; in other words, the IRS may allege that you are doing this willfully. If you are doing this willfully, then it’s going to be very hard for you to participate, later on in the Streamlined Voluntary Disclosure.

The concern that many taxpayers have with disclosing foreign accounts that even if they don’t have all the documentation is that they are afraid that the IRS will find out about it and will commence an investigation and thereby prevent any possibility of participating in a Voluntary Disclosure Program. This, of course, is a valid concern. The issue really is ‘how much time will it take to complete the Voluntary Disclosure documentation.’ If it takes three years, then yes, this is a huge concern. If it takes less, then it’s less of a concern. If it takes just two or three months, maybe half a year, you should have enough time to complete your Voluntary Disclosure.

Let’s suppose the worst-case scenario: you file your current year compliance correctly or as accurately as you could have filed it and let’s suppose that the IRS finds out about it before you could do the Voluntary Disclosure, then at the very least, you will have an argument at that point that you were trying to disclose this and this will support your non-willfulness later on during the IRS Audit.

On the other hand, if you don’t disclose anything and the IRS finds out about your prior tax non-compliance, then at that point, what you will be facing is a potentially willful situation; in other words willful penalties and maybe even Criminal Penalties.

If you would like to discuss your Voluntary Disclosure more, contact me as soon as possible; you can call me at (952) 500-8159 or you can email me at [email protected].

Thank you for watching, until the next time.

US Tax Residency | International Tax Lawyer

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Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I’m an International Tax Attorney, founder and owner of Sherayzen Law Office, Ltd.

Today, I would like to discuss with you one of the most fundamental concepts of US International Tax Law: US Tax Residency. Specifically, US Tax Residency for Individuals, in the context of the US Income Tax only.

When a Client comes into my office, one of the first things I want to find out about him is whether he’s considered a US Tax Resident or a US Person. For our purposes, these concepts are interchangeable.

Why is that important? If he’s a US Tax Resident, then a whole avalanche of US Tax Reporting Requirements apply to him: the Worldwide Income Requirement, the FBAR, Form 8938, 8621, 5471 etc. etc. On the other hand, if he is not a US Tax Resident, then none of these requirements would apply to him.

How do we figure out if a Client is a US Tax Resident? There are three categories of US Tax Residents. The first are US Citizens; a US Citizen is always a US Tax Resident. This is dramatically different from almost all other countries in the world except Eritrea.

In the majority of other jurisdictions, if a citizen resides outside of their country, then he’s a resident of that country, not a resident of the home country. The United States is different; if a US Citizen resides in another country, he is still a Tax Resident of the United States. He can reside on the moon; he can reside on Mars; he is still a US Tax Resident.

The second category of US Tax Residents consists of US Permanent Residents. A US Permanent Resident is always a US Tax Resident. At this point it’s important to clear up a confusion that exists regarding the concepts of US Tax Residency versus US Permanent Residency. A US Permanent Resident, as I said, is always a US Tax Resident; but a US Tax Resident can be a person who is not a US Permanent Resident and not a US Citizen. It is important to distinguish between these two concepts and not to confuse them.

Let’s turn to the final category of US Tax Residents: Foreign Persons who satisfied the requirements of the Substantial Presence Test. Under the Substantial Presence Test, a Foreign Person is considered to be a US Tax Resident if he is physically present in the United States for at least 183 days in the past three years. The calculation of the 183 days is a little bit peculiar; you take all of the days that you spend in the current year and plus 1/3 of the days you spent in the prior year, plus 1/6 of the days that you spent in the year before that.

Let’s use an example to illustrate how the Substantial Presence Test works. Let’s say Pierre, a citizen of France is sent by his company to work in the United States for one hundred twenty days in each of the years: 2014, 2015 and 2016 on an L1 Visa. We are trying to figure out whether Pierre is a US Tax Resident in the year 2016. For these purposes, we will take 1/6 of the days he spent in the United States in the year 2014 which is 120 divided by 6 = 20 plus 1/3 of the days he spent in the United States in the year 2015 which is 120 divided by 3 = 40. Forty plus twenty = 60 plus all of the days he spent in the United States in the year 2016 which is 120 days; So 120 plus 60 = 180 which is below the 183 day threshold. This means that Pierre was not a US Tax Resident in the year 2016.

I hope that this short presentation has helped you clear up this important concept of US Tax Residency. Thank you for watching, until the next time.

Why Are FBAR Penalties So High? | International Tax Attorney

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Now that we’ve talked about the Income Reporting Requirements, let’s talk about the Information returns. Again, I’m going to limit myself to the most common Information Returns, simply because otherwise we will be talking about it for quite awhile, longer than the time allotted.

The most dangerous and the most important Information return that exists is FBAR. How many people here have heard of FBAR? (A few raised hands in the audience)

FBAR is the report of Foreign Bank and Financial Accounts. It’s official name is FinCEN Form 114; it used to have a very lovely name, ‘TD F 90-22.1’. The FinCEN Form 114 replaced TD F 90-22.1 about three years ago; but I still remember it and I can say without hesitation, how impressive this form was to me.

Why is it so important? If you look at your handout on the right-hand side, where the listed of penalties are referenced, it becomes very clear why compliance with this form is a Centerpiece of US Tax Compliance; US Tax Enforcement efforts are focused on this form. Very few people know that FBAR is actually not a tax form in of itself and comes form Title 31, Bank Secrecy Act that was passed in 1970.

The Internal Revenue Code, Title 26 partially explains why the penalties are so high with respect to the FBAR. Originally it was not meant to fight Tax Evasion but to fight Money Laundering and Financial Crimes so, the penalties there naturally are associated with Criminal Activities.

What happened after 2001 is that the function of enforcing the FBARs was turned over to the IRS and ever since that time, the FBAR turned into a Tax Enforcement mechanism and a very effective one, due to the penalties associated with it.

International Tax Law Firm

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At this point I will switch over to English (laughter) because any discussion of International Tax Law requires precision, which my French, unfortunately cannot convey at this point.

Before we delve into the subject matter of today’s discussion, I would like to give you some background information so that you have an idea about who I am and what it is I do.

My name is Eugene Sherayzen and I’ve been an International Tax Attorney for about eleven years now; I started practicing Law right after I finished Law School and got my Attorney License in 2005. All these years, I’ve been devoted to building my own Law Firm, Sherayzen Law Office, Ltd. which specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures; this is by far the largest area of my practice in International Tax Law but I also do International Tax Planning and Annual US Tax Compliance.

The nature of my practice is such that I have a very wide-range of Clients, from school teachers, to owners of Multimillion dollar businesses, to families of Chiefs of African tribes, to Foreign Businesses that invest in the United States, to US Businesses who wish to expand overseas etc., etc.

These Clients come from various Countries. I’ve had Clients from every Continent in which there is a permanent human settlement except Greenland (but that is a subject of discussion, of dispute as I understand, no one really knows whether it’s an Island or a Continent as this matter isn’t settled just yet).

I did attempt to count how many Countries I’ve dealt with over these years and I have come up with a number which is over sixty, and this is not counting the Consultations from obscure Countries; of Consultations from ships, sometimes people call me while they’re still at sea.

International Tax Lawyer Minneapolis

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Buona Sera, Seniorie Seniorie!

My name is Eugene Sherayzen and I am an International Tax Attorney. Before we delve into the subject matter of today’s presentation, I would like to give you some background information so that you have an idea of who I am and what it is that I do.

I’ve been an International Tax Attorney for about 11 years; I started practising law right after I graduated from Law school, passed the Bar and got my License all in one year, in 2005. I’ve devoted all these years between 2005 and to the present time to expanding my own Law Firm – Sherayzen Law Office, Ltd., which specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures (this is the core area of my practice), but I also do Annual US Tax Compliance and International Tax Planning.

The nature of my practice is such that I have a very diverse Client base with Clients coming from over 60 Countries from every Continent permanently inhabited by human beings.

The majority of my Clients come from Europe both Western and Eastern, Southeast Asia, Canada and of course the United States. A significant number of my Clients come from Latin America and the Middle East and a small number of Clients come from Australia and some African countries like Nigeria.

There are several unique aspects of my firm that I would like to share with you today. First, we’re the only boutique law firm that offers such a wide range of International Tax Services; only very large Accounting and Law Firms do what I do on a regular basis. Second, we combine the Legal and the Accounting aspects of International Tax Practice in one firm.

This is unique; maybe firms like Ernst & Young do that but what it does is that it allows my firm to handle the entire case from the beginning to the end by itself without the necessity of retaining outside Accountants or Lawyers.

Finally, we are a truly International Law Firm because we offer services in three languages: English, Russian and Spanish… no Italian yet, though in a year or two I hope to add French and then we’ll see about the Italian.