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New Series of Vlogs on IRS Audits | 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 starting a new series of blogs from San Antonio, Texas. In fact, behind me you will see the famous Alamo, the historical place where the Texians stood up to the Mexicans during their independence war. The whole battle with the Mexicans for independence reminds me of the battle that taxpayers are doing with respect to the IRS US international tax enforcement.

In this series, I’d like to start out with saying that right now, due to the Inflation Reduction Act that just passed in congress, we expect a humongous increase in IRS litigation and IRS audits. This whole series is going to be dedicated to IRS audits. I will cover a little bit of the international tax compliance in this series, but most of it will be focused on audits.

The first thing to say about the IRS audits is that they are never pleasant and it is best to provide documents to the IRS in a manner that would reduce the risk of an IRS audit. However, sometimes, this cannot be done.

Thank you for watching, until the next time.

US Tax Residents in Mexico: US Tax Obligations | International Tax Lawyers Laredo Texas

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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 standing on the border of the United States and Mexico near Laredo, Texas. As you can see, this is the Rio Grande that separates Mexico from the United States and you can see over there, there is the fence from the US side separating the border.

What I would like to talk to you about today is how this fence and this border affect the perception of people with respect to their US international tax compliance requirements and why many of these perceptions are absolutely wrong. A lot of people think that once they cross this river from the United States into Mexico, that their US tax reporting requirements have ended – a lot of people think they’re not responsible for anything to Uncle Sam and this is absolutely wrong.

I have seen a lot of examples, by the way of this, where people think that ‘Well, I have a business in Mexico; I’ve crossed the border. I don’t own anything to the IRS’. That is not correct. As a US citizen or a US permanent resident who maintains his US permanent residency, that is he’s not abandoning his US permanent residency, he is required to disclose his worldwide assets and worldwide income and foreign assets.

In essence, there are two reporting requirements: one is the worldwide income – that is income that is earned anywhere in the world, whether it is inside of the United States or outside of the United States, that income has to be disclosed on your US tax return and you have the obligation to disclose your foreign assets on US information returns as long as you, of course, satisfy the filing threshold. For example, if you have foreign bank accounts, this means that you need to disclose these foreign bank accounts on forms like FBAR and Form 8938 as long as you satisfy the threshold. If you have a foreign business, if it is a foreign corporation, then you have to disclose it on Form 5471 as well as related forms concerning the transactions between you and the corporation, or certain transactions that the corporation performs. For a controlled foreign partnership, it’s Form 8865 and if you have a disregarded entity, then it’s form 8858, etc etc.

Basically the point being said: if you have foreign assets, you have to disclose them to Uncle Sam irrespective of whether you reside in the United States or outside of the United States on the other side of the border in Mexico. All of these obligations are very important; they carry significant noncompliance penalties and you want to make sure that you avoid them.

The other important thing to understand is that your obligations to the IRS, once you cross the border, not only will they not decrease, they’re more likely to increase significantly vis-a-vie what you used to do while you were here in the United States. Again, this is the rule that applies to US tax residents of any type: whether you are a US permanent resident or a US citizen.

If you would like to learn more about your US international tax reporting requirements, you can call me at (952) 500-8159 or you can email me at [email protected]

Thank you for watching, until the next time.

Foreign Inheritance: US Taxation & Reporting | Form 3520 | International Tax Lawyers Austin

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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 vlogs from Austin, Texas. Today, I’d like to talk about a previous client experience here in Texas. I had a client from the United Kingdom who received foreign inheritance and it was not reported, neither were the assets he received in the subsequent years on FBAR, Form 8938 and Form 8621 for PFICs obviously.

We were talking about this situation where he essentially was deeply in noncompliance. We resolved all of the PFIC issues in a very interesting way. It was from awhile ago from the old OVDI program from 2011 and in that case, were were able to choose a different PFIC calculation methodology, mark to market which resulted in recognition of significant losses for the client which pretty much which pretty much wiped out his US income tax liability.

Of course, he still needed to pay the OVDI penalty on his foreign assets but we were able to put them in a middle category where his reporting and his penalty was also lower than what it would’ve been otherwise. That is in essence an old but very memorable case because of the fact that it came from the United Kingdom with respect to such a wide array of reporting requirements: foreign inheritance, FBAR, 8938, 8621. The only thing he didn’t have were foreign businesses; otherwise that would’ve been even more of a complicated case because a lot of rules were in flux at that point that gave a lot of opportunities with respect to lowering his income tax liability and his offshore penalty.

In the next vlog, I will continue talking about my prior client experience here in Austin, Texas.

Thank you for watching, until the next time.

Foreign Inheritance & US International Tax Issues | Form 3520 Lawyer & Attorney Austin Texas

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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 my series of blogs from Austin, Texas. In this series of blogs, I’m talking about the US tax reporting requirements that concern immigrants who came to live and work in Austin.

Today, I would like to discuss a very important topic of foreign inheritance. Foreign inheritance, as I’ve said in one of my seminars, is a Pandora’s box of US tax reporting requirements because it’s not only about the reporting of foreign inheritance itself, but also the continuous reporting requirements that may stem from the original foreign inheritance. These reporting requirements may continue for many many years and can be very diverse; so let’s discuss first things first.

Is foreign inheritance taxable in the United States? The answer is usually ‘no’. Of course, US situs property inherited in the United States may be taxed in the United States and the reporting and taxation requirements, will apply to the foreign estate, not to the person who inherited the asset.

The second question is: Is foreign inheritance reportable in the United States? The answer to this question is absolutely, yes. It is highly important that you disclose your foreign inheritance in a timely manner here in the United States. Failure to do so on form 3520, may lead to the imposition of absolutely humongous penalties, up to 25% of the foreign inheritance. I have seen personally, where the IRS imposed penalties like these and I had to fight them.

The other aspect that I mentioned, are the reporting requirements that are associated with foreign inheritance, because usually people inherit assets. That means foreign assets; that means sometimes foreign financial accounts. It may mean foreign businesses; it may mean a foreign trust or beneficiary interest. It may mean other foreign financial assets likely bonds or bond certificates; it also may mean real estate. These foreign assets, which were inherited, may have and usually do have special reporting requirements associated with each of these assets and sometimes, even if they don’t, aside from the Form 3520 reporting of inherited real estate, there may not be any other reporting requirements for the real estate because personally, there may be income tax reporting requirements that are tied to your Form 3520 compliance and may reappear all of a sudden 10, 15, 20 years later.

In some cases, a foreign inheritance may be tied to an IRS audit and there, it could be very significant. For example, I’ve had audits where we had to go back to the 1980s with respect to foreign inheritance and establishing the fair market value of those assets.

Foreign inheritance is not just one reporting requirement; it’s a whole family of reporting requirements that may come in sometimes at the time of a foreign inheritance as well as after the foreign inheritance.

If you would like to learn more about your foreign inheritance reporting requirements, you can contact me at [email protected] or call me at (952) 500-8159.

Thank you for watching, until the next time.

Taiwanese Bank Accounts & Corporation Voluntary Disclosure Case | FBAR 5471 International Tax 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’d like to talk to you about a case that I completed about a year and a half ago with respect to a Taiwanese corporation. The case initially, came to me as a couple, an American who married a Tawainese woman, who have lived in the United States for awhile and she eventually became a permanent resident of the United States (still not a Citizen of the United States) and she had foreign bank accounts about which she had no idea because she gave her mother the Power of Attorney to open up bank accounts in her name.

This is very common in Southeast Asia where parents take liberties with their children’s finances and often times, they would open up bank accounts without their knowledge. Eventually on one of the trips to Taiwan, she found out from her mother that there were bank accounts that she needed to account for. She started researching what she needed to do with respect to those accounts in the United States and eventually found out about FBAR and the foreign income reporting, Form 8938 reporting, etc. etc. After that, she came to me to fix the problem.

While we were doing this voluntary disclosure, we discovered through a series of indirect hints that something else was going on there. Eventually, it turned out that her father assigned 50% of a Taiwanese corporation to her, also without her knowledge. Now in addition to FBAR, Form 8938 and foreign income reporting, and actually also PFIC reporting; she also needed to file a Form 5471 and she also needed to account for her Taiwanese corporation on Form 8938 because she is a minority owner; it’s not a controlled foreign corporation, so the Form 5471 was not required in some of the years; it was only required in the first year.

Eventually we completed the voluntary disclosure and it went through just fine but this is an important lesson to learn, that in a voluntary disclosure, you never know what kind of surprises may come in, even something as unexpected as ownership of a foreign company.

In the next blog, I will continue review of a series of cases that I’ve done for Asian Americans and Asians who became US Tax Residents.

Thank you for watching, until the next time.