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FBAR Reporting for Chinese Foreign Bank Accounts: A Case Study | FBAR Tax Lawyers Portland Oregon

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Good morning and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I’m continuing a series of blogs from Portland, Oregon. As part of this series, I’m doing a review of my cases related to Asian Americans or Asians who became US tax residents.

Today, I’d like to talk to you about a small but interesting case related to FBAR reporting. A Chinese couple has lived in the United States for over 20 years and discovered the existence of FBAR. My clients understood that FBAR requires the disclosure of foreign bank accounts.

They came to me and said: “We have four bank accounts” and I said, “Fine, we’ll do a voluntary disclosure“. They gave me the amounts, they gave me the information and as I was going through the bank accounts, I discovered that there were a lot of deposits and withdrawals; a pattern compatible with that of fixed-deposit accounts. At that point, I asked them: “Besides the four bank accounts you’ve given me, do you have any other accounts which would be fixed-deposit accounts?” At this point, he said: “I didn’t realize that fixed-deposit accounts are treated as separate accounts because all of the money eventually goes back to the main account. Wouldn’t we be double-counting the values on these accounts if we were to include all of them separately on the FBAR?”

My answer was: “Indeed, we would be double-counting but FBAR not only permits but requires that kind of double-counting. You have to report the highest balance of each foreign account on the FBAR“. It turns out that he had over 20 fixed-deposit accounts during a six-year period that is covered by the SDOP disclosure.

We successfully completed the voluntary disclosure; The client paid the penalty. Of course the penalty for SDOP purposes does not double-count the balances because it is based not on the highest balances but on the end-of-year balances.

The morale of the story is that you have to report each account separately; even if this is just an account that was opened and closed in the same year and even if the money came from and went back to the same savings account or checking account.

In my next blog, I will continue discussing issues related to my cases that I’ve handled in the past concerning Asian Americans or Asians who became US tax residents.

Thank you for watching, until the next time.

US Owners’ Tax Reporting Requirements for Uruguayan Corporations | International Tax Attorney

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

Today, I’m continuing a series of blogs from Montevideo, Uruguay and in this blog, I’d like to continue discussing what I started in the previous blog: US international tax reporting requirements for US citizens and US tax residents in general who engage in tax planning here in Uruguay who take advantage of the local territorial system of taxation.

In the previous blog, I discussed the issue of FBAR compliance; today I’d like to discuss the issue of business information reporting requirements concerning Uruguayan corporations owned by US persons.

It’s a huge topic and I am just going to outline the main things here to watch out for. First of all you have to determine how you are going to treat this corporation for US international tax reporting purposes. If you are going to treat it as a corporation and maybe by default it is a corporation; then, you will have a form 5471 requirement here in the United States, especially in the first year for sure. Otherwise, it will depend on whether this is a controlled foreign corporation or not.

The other possibility is to us the ‘check the box rules‘ to modify the default status of your Uruguayan company. If for example, it is a default corporation, you can use the check the box rules to treat the corporation either as a partnership, if that is a possibility, that is if you have more than one owner or a disregarded entity. If it’s a partnership, you are likely to trigger form 8865 depending on your specific circumstances and particularly your ownership percentage and in the case of a disregarded entity, we’re talking about Form 8858.

Besides that, we have to really focus on whether this is a controlled foreign corporation or not. The reason is because you have to understand that the controlled foreign corporation is going to be subject to various anti-deferral tax regimes like Subpart F rules or GILTI tax.

If it is not a controlled foreign corporation, you still need to worry about potential PFIC designation for your company. A PFIC (Passive Foreign Investment Company) is a very complex concept that in my experience only exists really in the United States and nowhere else. It is a concept that has huge US income tax obligations that are absolutely enormous, not to mention that it will make your life a lot harder if you have to use a default methodology.

If you would like to learn more about your US international tax compliance concerning ownership of an Uruguayan corporation, you can call me at (952) 500-8159 or you can email me at [email protected]

Thank you for watching, until the next time.

FBAR Obligations for US Owners of Uruguayan Bank Accounts | FBAR Tax Lawyer Montevideo

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

Today, I’m continuing a series of blogs from Montevideo, Uruguay. I’d like to draw your attention in this blog to the fact that a lot of US taxpayers, who utilize Uruguayan consult – they often focus only on their Uruguayan tax compliance and they keep forgetting about the important US international tax reporting requirements that may apply to the new business structures that they create through with the help of Uruguayan tax consults. One of the first and foremost things you must remember is that if you organize an Uruguayan corporation and open a bank account in Uruguay or outside of Uruguay but not in the United States, then you will have to report your indirect ownership of the account on FBAR and possibly other forms, depending on what exactly happens in these accounts but FBAR would be the main form that you would have to contend with.

The FBAR is obviously a form that is highly important; it has tremendous draconian IRS penalties. You want to make sure that you comply with the form and it’s very easy to trigger this form. You just need to have a highest balance in excess of $10,000 at any point during the year and we’re talking about aggregate assets; so if you have two accounts, you have to figure out the highest balance for both accounts, add them up and you will see if you are required to file FBAR.

If this is a corporation which you own jointly with someone else and you don’t have the majority ownership over the corporation then, you have to look at whether you have signatory authority over the corporate accounts and if you do, then you also have to disclose that signatory authority on FBARs.

In the next blog, I will continue talking about US international tax reporting requirements concerning Uruguayan tax planning for US taxpayers.

Thank you for watching, until the next time.

Uruguay & International Tax Planning | Montevideo US International Tax Lawyer & Attorney

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

Today, I’m in Montevideo, Uruguay and I’ve come here because I have a number of meetings with Uruguayan attorneys here. This is a wonderful nation and a wonderful city. It’s very small-scale European compared to Buenos Aires, for example which feels more like a large European city.

I’d like to begin this series of Montevideo with a discussion of what place Uruguay has in the international tax system. Uruguay is very well known for its adherence to a territorial system of taxation, which is very different from that of the United States.

People here on most of their income, only pay taxes on certain worldwide passive income for local residents, unless you’re a newcomer. In this case the Uruguayan government gives you 11 years of tax-free dividends, interest and other types of income that come from outside of Uruguay, if you become a Uruguayan tax resident with certain exceptions for passive income but overall Uruguay is a territorial system of taxation and as such, offers tremendous opportunities for US taxpayers to properly utilize the Uruguayan tax system to minimize their tax burden in the United States including for US taxpayers who wish to surrender their US tax residency and US taxpayers who wish to give up their US citizenship.

In addition to that, the territorial system of taxation with respect to Uruguayan corporations, is also a very valuable asset for US international tax planning. Overall Uruguay, while it’s a small country, has considerable influence – enough to draw the attention of the European Union which has been pressuring Uruguay to change its system and in fact, the Uruguayan government has made a commitment to modify its territorial system of taxation when it comes to IP (intellectual property) income. The details of this commitment are not yet known. What the final law will look like, is not yet known and so as of today, Uruguay continues to be a very attractive place in terms of US international tax planning.

In the next blog, I will continue talking about Uruguay and US international tax reporting requirements.

Thank you for watching, until the next time.

Building IRS Audit Defense Strategy | International Tax Lawyer & Attorney San Antonio

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

Today, I’m continuing a series of blogs from San Antonio, Texas. This series of blogs is pretty much devoted to IRS audits, specifically IRS audits of foreign assets and foreign income.

In this blog, I would like to discuss an issue that should concern you in every IRS audit. How should your defense be structured? Of course, I’m not going to be talking about the details of that strategy; that’s impossible because every strategy has to be based on facts of that particular case. It has to be adapted to the particulars of each case; I’m just talking about what the general plan would be and how you choose your strategy.

There are three most important points when choosing a plan of defense in an IRS audit:

  • The first one, I’ve already mentioned, whatever the plan is, it has to be based on the facts of the case – very important. It should not be an abstract plan of defense; it should be one that is based specifically on your facts and circumstances.
  • The second point is that it should be based on the documentation that you have or may be able to get, because ultimately, in the IRS audit, the party that can produce documents to prove its point is the one that will prevail on that point unless the evidence is unconvincing or fraudulant of course. I want to take this opportunity to say that you should never, never ever submit fraudulant documentation to the IRS. Having said that, it doesn’t mean that you cannot produce documentation, that is you can get testimony from a third party or parties about an event that happened. For example, if there was a repair or major repair done to a building that you owned, then you can go to the contractor and get a statement from the contractor that the major repair was done, this is how much was paid to me for doing this and this and this work. Of course, if the builder has the original invoices, even better.
  • Point number three is that whatever the strategy is that you choose must be logical and should be presented in the form of a story about what had happened. Basically, if your story does not make sense, it’s not a good strategy. Strategy must be logical and based on the facts of the case – a logical sequence of events – very important.

If you’re being audited by the IRS, and you would like to secure professional help with respect to your IRS audit, you can call me at (952) 500-8159 or you can email me at [email protected]

Thank you for watching, until the next time.