Seattle FBAR Lawyer | IRS FATCA International Tax Attorney

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I recently received a phone call from a person who was looking for a Seattle FBAR lawyer online and found my website. He asked me whether I can help him even though Sherayzen Law Office is based in Minneapolis, Minnesota. I responded to him: “yes, I can help you”.

This conversation brought to light an important topic of who should be considered a Seattle FBAR Lawyer and why an international tax lawyer based in Minneapolis can help a client in Seattle with FBAR issues.

Seattle FBAR Lawyer Definition: Legal FBAR Services Provided in Seattle, Washington

There are two categories of lawyers that fit the term Seattle FBAR Lawyer. The first category consists of US international tax lawyers who reside in Seattle and offer FBAR services to the residents of Seattle. The second category is comprised of US international tax lawyers who reside outside of Seattle but offer FBAR services to the residents of Seattle.

The first category is clear – if a lawyer resides in Seattle and offers FBAR services, he is considered to be a Seattle FBAR Lawyer. The question is: why is a lawyer who resides outside of Seattle still considered a Seattle FBAR lawyer? The answer lies in the legal nature of FBARs. FBAR is a federal information return, not a local requirement of Seattle or the State of Washington. This means that any licensed US international tax lawyer can offer FBAR services in any of the 50 states and the District of Columbia irrespective of his physical location. This is why a lawyer who resides in Minneapolis can offer FBAR legal services in Seattle with the same ease as a lawyer who resides in Seattle.

Seattle FBAR Lawyer Must Be US International Tax Lawyer

It should be emphasized that, while the residence of a Seattle FBAR Lawyer is not relevant, his area of practice is highly important. A Seattle FBAR lawyer must be an international tax lawyer – i.e. a lawyer who not only knows how to complete FBARS, but who has profound knowledge of US international tax law and the place the FBARs occupy in this law.

This emphasis is based on the fact that FBAR is only a small part of a much larger area of US international tax law. Indeed, there is a deep and complex relationship between the FBAR and international tax law that determines the legal position of a client and the potential voluntary disclosure strategies associated with delinquent FBARs.

This is why your Seattle FBAR lawyer should have deep knowledge of and extensive experience in both FBARs and all related US international tax laws and regulations.

Sherayzen Law Office Can Be Your Seattle FBAR Lawyer

Sherayzen Law Office is an international tax law firm that specializes in FBARs and international tax law. Our legal and accounting team has both: a profound knowledge of this area of law and extensive experience in helping clients with international tax law issues, including offshore voluntary compliance with respect to delinquent FBARs. We have helped hundreds of US taxpayers worldwide with their FBAR issues and we can help You!

Contact Sherayzen Law Office today to schedule Your Confidential Consultation!

Swiss-Indian AEOI Declaration Signed | FATCA Lawyer New York

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On November 22, 2016, Switzerland and India signed a joint declaration on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis. The joint declaration (Swiss-Indian AEOI Declaration) was signed by Sushil Chandra, chair of India’s Central Board of Direct Taxes, and Gilles Roduit, deputy chief of mission of the Swiss Embassy in India.

Swiss-Indian AEOI Declaration Will Follow CRS

The Swiss-Indian AEOI Declaration foresees that AEOI will be based on the Common Reporting Standard (CRS) adopted by OECD. From the Swiss legal perspective, the AEOI with India will be based on the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA). The MCAA is based on the international standard for the exchange of information developed by the OECD. The OECD introduced the standard in February of 2014; the G-20 leaders approved it in November of 2015 during the G-20 summit in Brisbane, Australia.

Implementation Time Frame for Swiss-Indian AEOI Declaration

Both governments committed to start collecting the CRS-required data in 2018. The actual exchange of the CRS data will commence in 2019 and continue onwards. Both governments must notify each other of relevant developments regarding the implementation of the CRS in their domestic legislation.

Implications of Swiss-Indian AEOI Declaration for US Taxpayers

The Swiss-Indian AEOI Declaration increases the probability of the IRS being able to obtain FATCA data from both countries regarding noncompliant US taxpayers with assets in Switzerland and/or India. The reason is simple: as financial institutions comb through their client data, there is an increased probability that they may encounter that some of their taxpayers are US taxpayers whose information needs to be reported to the IRS under FATCA.

Moreover, under the Swiss-Indian AEOI Declaration, both countries anticipate that their taxpayers will participate in a local voluntary disclosure program as part of the transaction to the AEOI system. Both countries must notify each other about these programs and it is possible that more information than usual will be revealed during these voluntary disclosures. Hence, the local Swiss and Indian voluntary disclosure programs further increase the probability that the IRS may find out about the assets of noncompliant US taxpayers.

Contact Sherayzen Law Office for Help With the IRS Voluntary Disclosure of Your Unreported Foreign Assets and Foreign Income

If you are a US tax resident with undisclosed assets in India and/or Switzerland, you should contact Sherayzen Law Office for professional help with your IRS voluntary disclosure of these assets as soon as possible. In today’s world, the probability that the information regarding your undisclosed assets will be detected by the IRS has increased exponentially as the recent Swiss-Indian AEOI Declaration demonstrates. Combined with FATCA, you are running an unacceptable risk of IRS detection that may result in the imposition of draconian IRS penalties, including criminal penalties.

Over the past more than 10 years, Sherayzen Law Office has helped hundreds of US taxpayers with assets around the globe 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!

Foreign Inheritance and Stepped-Up Basis | US International Tax Lawyer

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If you received a property as part of your foreign inheritance, one of the key questions that you are facing is whether this inherited property is entitled to a stepped-up basis in the United States. This issue was resolved some time ago by the IRS in Revenue Ruling 84-139, 1984-2 C.B. 168.

What is a Stepped-Up Basis?

First, let’s understand the concept of “stepped-up basis”. From the outset, it is important to understand that this is a purely tax concept – the property that existed right before and right after the step-up in the basis is exactly the same property.

There are two terms that we need to understand here: “basis” and “step-up”. Basis is basically the amount of capital investment in a property – i.e. the amount of capital a taxpayer invested in a property, including the purchase price, the construction costs, subsequent improvements of the property, et cetera. Not all expenses are allowed to be “capitalized” or added to the basis (also referred to as “cost-basis”) under US tax law; sometimes, expenses are just deducted in the year they were incurred. Furthermore, the cost-basis may also be reduced by certain usage of a property through appreciation, amortization, depreciation, et cetera.

The “step-up” in the basis means the adjustment of the basis for tax purposes to the fair market value of the asset at the time the “step-up” event occurs. One of the most common step-up events is inheritance.

Of course, this is a simplified explanation of a stepped-up basis and many complexities are simply omitted here (such as step-up in a community property state, et cetera), but, for educational purposes, it is sufficient to provide the general idea.

Is an Inherited Foreign Property Subject to Stepped-Up Basis?

Despite the fact that the foreign inherited property was not subject to an estate tax in the United States, the IRS has clearly ruled that such a property is entitled to a step-up in its basis. The logic is not complex. IRC (Internal Revenue Code) Section 1014(a)(1) states that the basis of a property acquired from a decedent shall be the fair market value of the property at the date of the decedent’s death. IRC Section 1014(b)(1) adds that an inherited property is considered to be acquired under IRC Section 1014(a)(1). Treasury Regulations Section 1.1014-2(b)(2) in essence provides that the stepped-basis applies to a foreign property (because the requirement that such property is includible in the value of a decedent’s gross estate does not apply).

Contact Sherayzen Law Office for Help with US Tax Issues Concerning a Foreign Inheritance

If you received a foreign inheritance, contact Sherayzen Law Office for professional help with your US tax compliance. Sherayzen Law Office is an international tax law firm that has helped its clients around the world with planning for a foreign inheritance, identification of the relevant US tax requirements and the preparation of the necessary tax forms (including Forms 3520). Our legal team has also helped our clients with the issues concerning late reporting of a foreign inheritance, including as part of an offshore voluntary disclosure.

Contact Us Today to Schedule Your Confidential Consultation!

IRS seeks Bitcoin Accountholder Data from Largest US Bitcoin Exchanger

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On November 17, 2016, the IRS and the US Department of Justice (the “DOJ”) opened a new front against offshore tax evasion – bitcoin accountholder data. On that day, the DOJ filed a petition (accompanied by the IRS memorandum) in the U.S. District Court for the Northern District of California seeking permission to serve a John Doe Summons on bitcoin exchanger, Coinbase Inc. (“Coinbase”), in order to obtain bitcoin transaction records and bitcoin accountholder identities. Coinbase already indicated in its blog post that it will oppose the petition for the bitcoin account holder data in court based on the issues related to its customers’ privacy.

Bitcoin Background Information

Bitcoin is a cryptocurrency and a payment system; its unique nature is in the fact that it is the first decentralized cryptocurrency. It is also the largest virtual currency on the market and the one that has been recognized by users and merchants in many countries (though others have banned it).

The Anonymity of the Bitcoin Accountholder Data Poses a Problem for the IRS

The IRS sees a big problem with bitcoins. While all of the bitcoin transactions are publicly recorded, the actual identity of a bitcoin owner is completely anonymous. The IRS memorandum in support of the John Doe Summons petition is expressly stating the IRS concerns regarding US taxpayers who do not report taxable income from bitcoin transactions and bitcoin trading. Additionally, the IRS (in its aforementioned memorandum) pointed out that bitcoins can be used for creation of non-existing deductions to reduce taxable income.

Offshore Tax Compliance is at the Heart of the IRS Attack on the Bitcoin Accountholder Data

Furthermore, it is no accident that the IRS memorandum that accompanied the DOJ petition was written by Mr. David Utzke, a senior revenue agent with the IRS’s offshore compliance initiatives program. This demonstrates that the IRS views the anonymity of the bitcoin accountholder data not merely a domestic, but also an offshore tax compliance issue. Mr. Utzke expressly states his concerns that bitcoin transactions now replace the more traditional abusive offshore tax schemes.

We also should remember that, in its Notice 2014-21, the IRS treats convertible virtual currency as property for federal tax purposes. This first means that a taxpayer must report any capital gains and losses on his tax returns even if the bitcoin sales occur overseas.

Moreover, this potentially means (though the IRS has not yet expressly stated so) that bitcoins purchased overseas are reportable foreign assets subject to potentially FATCA and FBAR requirements (depending on how they are held – bitcoin wallets can potentially be treated as foreign accounts). The other side of this conclusion is that a bitcoin held overseas may draw FBAR and Form 8938 penalties if it is not timely and properly disclosed. This is indirectly confirmed by Notice 2014-21 which specifically singles out penalties associated with the failure to file an information return under IRC Sections 6721 and 6722.

Sherayzen Law Office Can Help You With Your Bitcoin US Tax Compliance Issues

If you own bitcoins overseas and you have unreported bitcoin income, contact Sherayzen Law Office to help you with your US tax compliance as soon as possible. Time is of the essence; if your identity is disclosed to the IRS and the IRS commences an investigation, you may be precluded from conducting a voluntary disclosure with respect to your bitcoins. In this case, the IRS may impose its draconian tax penalties on unreported income and assets.

Contact Us Today to Schedule Your Confidential Consultation!

IRS AI Software to Analyze Tax Data | IRS Tax Lawyer Minneapolis

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On November 18, 2016, Mr. Benjamin Herndon, the current IRS director for research and analytics, confirmed the recent rumors that the IRS AI Software is being tested to help IRS agents find patterns of tax noncompliance.

The idea is to supplement human analysis of data with the IRS AI software that would analyze any piece of data not only by itself, but also in conjunction with the other data available to the IRS. This way, the IRS AI Software is expected to analyze a very large amount of various data to identify tax noncompliance patterns.

This means that the IRS currently plans to use artificial intelligence for pattern recognition and visualization of data that would help IRS revenue agents uncover tax noncompliance. It is possible that the IRS AI software will even analyze a particular taxpayer’s characteristics in the context of a taxpayer’s behavior to uncover any discrepancies and potential tax noncompliance.

I believe that this is just the first step that the conservative agency is making. In the near future, one can foresee that the IRS AI software will start taking on more and more tasks such as conducting correspondence audits, certain automatized communications with taxpayers, analysis of data during a field audit (the IRS AI Software can be used most effectively during the audits of large corporations which have huge amounts of data), IRS customer support, international tax compliance (particularly analysis of data collected through FATCA and FBARs) and other vital IRS functions. Most likely, the decisions associated with penalty imposition and the negotiation of offer in compromise will rest with human IRS agents for now.

Finally, the biggest immediate impact of the IRS AI software is likely to be felt in the ability of the IRS to more effectively implement US tax laws and conduct more audits due to the fact that the IRS revenue agents will now be able to devote less time to audit analysis and more time to enforcement of tax laws.

In sum, the US taxpayers should be ready for the impending improved ability of the IRS to identify tax noncompliance and conduct more audits due to increased efficiency which will be introduced by the IRS AI Software.