4th Quarter 2016 Underpayment and Overpayment Interest Rates

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On September 14, 2016, the IRS announced that the 4th Quarter 2016 underpayment and overpayment interest rates will remain the same.  This means that, the 4th quarter 2016 IRS underpayment and overpayment interest rates will be as follows:

four (4) percent for overpayments (two (3) percent in the case of a corporation);
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code (IRC), the interest rates are determined on a quarterly basis; for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The IRS underpayment rates are especially important for US taxpayers who participate in the OVDP or a voluntary disclosure under the Streamlined Domestic Offshore Procedures. This is the case because the IRS underpayment rates are used to calculate the interest charged on any tax due as well as PFIC interest (default Section 1291 PFICs) on any excess distributions.

The IRS interest rates remained at 3% for from the 4th quarter of 2011 through the first quarter of 2016. However, in the second quarter of 2016, the IRS raised the interest rates from 3% to 4% following the increase of the federal short-term rate. The recent 4th Quarter 2016 IRS rates remain the same as in the second and third quarters of 2016. However, the situation may change in the 1st quarter of 2017 if the Federal Reserve raises its rates either in September or December of 2016.

Ignorance of the Law and Reasonable Cause Exception

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Ignorance of the Law forms part of a much broader Reasonable Cause Exception which is almost a universal defense against the imposition of IRS civil penalties. Ignorance of the Law is often utilized as a defense against the US international tax information return penalties, including penalties envisioned under FBAR, Form 8938, Form 5471, Form 8865, et cetera. In this article, I would like provide a general description for the Ignorance of the Law defense.

It is important to remember that the application of the Ignorance of the Law defense depends on the specific circumstances of your case and nothing in this article should be interpreted as a legal advice. Rather, you need the help of an experienced tax attorney to determine whether the Ignorance of Law defense applies to your case.

Ignorance of the Law Defense Legal Test

Ignorance of the Law may provide the basis for an effective reasonable cause defense in situations where a taxpayer does no know about his obligations to comply with a tax requirement in question and/or pay taxes. However, the ignorance by itself is not sufficient to establish a reasonable cause; other circumstances must be reviewed in order to determine whether all or the requirements of this defense’s legal test are satisfied.

The legal test for the Ignorance of the Law defense requires that three requirements are satisfied in order the for taxpayer’s conduct to satisfy the reasonable cause exception:

1). The taxpayer was not aware of the tax requirement in question;

2). The taxpayer could not reasonably be expected to know of the requirement; and

3). The taxpayer’s conduct satisfied the “ordinary business care and prudence” standard.

Oftentimes, the second and the third requirement are blended into the same analysis. This is why I now turn to the examination of the ordinary business care and prudence standard for the purposes of the Ignorance of the Law defense.

Ignorance of the Law and Ordinary Business Care and Prudence Standard

Ordinary Business Care and Prudence Standard is a requirement present in all reasonable cause defenses. With respect to the Ignorance of the Law defense, the ordinary business care and prudence standard requires that a taxpayer acts in good faith, reasonably and attempts to determine his tax obligations. This means all of the relevant circumstances must be reviewed before the determination is made whether the taxpayer’s conduct satisfied the ordinary business care and prudence standard.

The precise circumstances that need to be considered depend on the particular facts of a case. Some of the common factors include: the taxpayer’s education, his tax advisors (including what information the taxpayer supplied to his tax advisors, whether he has been previously subject the tax at issue, whether he has filed the tax forms in question before, whether he has been penalized before with respect to the issue at hand, whether there any changes to the tax forms or tax law (which the taxpayer could not reasonably be expected to know), the level of complexity of the issue in question, et cetera.

Contact Sherayzen Law Office for Professional Help with Your Ignorance of the Law Reasonable Cause Defense

If you were penalized by the IRS with respect to a tax requirement and you did not know about this requirement, contact Sherayzen Law Office for professional and experienced legal help. We have helped taxpayers around the world to successfully reduce and even entirely eliminate penalties based on the reasonable cause defense that often stemmed from our clients’ ignorance of relevant tax requirements. We can also help You!

Contact Us Today to Schedule Your Confidential Consultation!

Boulder FBAR Lawyer | Offshore Accounts Tax Attorney

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The definition of a Boulder FBAR Lawyer is much broader than many people believe. In this brief essay, I would like to explain who is considered to be a Boulder FBAR Lawyer and why you should retain the services of Sherayzen Law Office, Ltd. for professional help with your FBAR issues.

Boulder FBAR Lawyer Definition: Legal FBAR Services Provided in Boulder, Colorado

Obviously, the definition of a Boulder FBAR lawyer includes all FBAR lawyers who are physically located in Boulder, Colorado, and offer services there. However, this definition also includes every international tax lawyer who offers FBAR services in Boulder, Colorado,

This is the case because FBAR is a creation of federal law, not state law. This means that, irrespective of his physical location, an international tax lawyer can provide his FBAR services in Boulder as long as he is licensed to practice law in any of the 50 states or District of Columbia. What is really important is the competence and experience of an international tax lawyer, not his residence in Boulder.

Boulder FBAR Lawyer’s Knowledge of US International Tax Law is the Key Factor

Indeed, the competence of a lawyer should be the key factor in retaining the services of a Boulder FBAR lawyer. The level of competence of an FBAR lawyer depends on his knowledge of and the experience in US international tax law in general and FBARs specifically.

Why this emphasis not just on FBARs, but competence in US international tax law? First, FBAR forms just a part of a much bigger area of US international tax law. Second, in almost all cases, the FBAR issues are related to and often depend on other international tax compliance requirements (e.g. foreign income determination). In fact, the interaction between FBAR and other international tax issues is a major factor that determines a taxpayer’s legal position. This is why your Boulder FBAR lawyer should have a profound understanding of both FBARs and US international tax law in general.

Boulder FBAR Lawyer: Out-of-State Ability to Communicate is Not a Problem

Some readers may wonder why I emphasize the competence as a key factor in retainer of a Boulder FBAR lawyer and ignore the ease-of-communication considerations. It seems that some persons still cling to an obsolete belief that it would be more convenient to communicate with a local Boulder FBAR lawyer rather than an out-of-state one.

This is a flawed belief that I have been battling for a long time now. There are two reasons for why the communications factor no longer depends on the actual residence of your Boulder FBAR lawyer. First of all, the development of modern means of communications completely resolved the communications issues of the earlier centuries. Email, Video Skype Conferences, telephone and text messages make your out-of-state Boulder FBAR lawyer as equally accessible as your local Boulder FBAR lawyer.

Second, in reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail. Your local Boulder FBAR lawyer simply would not have the time to meet with you every time he needs to communicate something to you. Moreover, given the large amount of issues that often arise with respect to FBARs, personal meetings on every issue would simply make the case too expensive and inconvenient.

There is one additional point that is worth making here. While the geography of your Boulder FBAR lawyer does not matter, it is important that the lawyer is accessible to you and you can communicate with him on the progress of the case. However, this is a retainer factor that is highly personal to each lawyer.

In my case, my clients have no problems communicating with me; most of the time I will be able to respond before the end of the day and, often, immediately.

Sherayzen Law Office is Your Preferred Choice for Your Boulder FBAR Lawyer

Sherayzen Law Office is a highly experienced international tax law firm with profound knowledge of FBARs. We have been helping our clients worldwide with their FBAR issues for a very long time; in fact, we are one of the few firms which advised clients with respect to all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP and Streamlined Procedures (Domestic and Foreign). We can help you!

This is why, if you are looking for a Boulder FBAR lawyer, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

US–Hungary Totalization Agreement Enters Into Force

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On September 1, 2016, the US–Hungary Totalization Agreement entered into force. In this article, I will briefly discuss the main benefits of this Agreement to US and Hungarian nations.

US–Hungary Totalization Agreement: What is a Totalization Agreement?

The Totalization Agreements are authorized by Section 233 of the Social Security Act for the purpose of eliminating the burden of dual social security taxes. In essence, these are social security agreements between two countries that protect the benefit rights of workers who have working careers in both countries and prevent such workers and their employers from paying social security taxes on the same earnings in both countries.

Usually, such a situation arises where a worker from country A works in Country B, but he is covered under the social security systems in both countries. In such cases, without a totalization agreement, the worker has to pay social security taxes to both countries A and B on the same earnings.

US–Hungary Totalization Agreement Background

The US–Hungary Totalization Agreement was signed by the United States and Hungary on February 3, 2015 and entered into force on September 1, 2016. This means that Hungary now joined 25 other countries – Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, South Korea, Spain, Sweden, Switzerland and the United Kingdom – that have similar Totalization Agreements with the United States.

US–Hungary Totalization Agreement: Key Provisions

There are three key provisions of the US–Hungary Totalization Agreement which are relevant to Hungarian and US workers. First, protection of workers’ benefits and prevention of dual taxation. US workers who work in Hungary and are already covered under Hungarian social security system should be exempt from US social security payments, including health insurance (under FICA and SECA only), retirement insurance, survivors and disability insurance contributions. However, US–Hungary Totalization Agreement does not apply to the Medicare; US employees must still make sure that they have adequate medical insurance coverage. Similarly, Hungarian workers who work in the United States and are already covered by the US social security system should be exempt from Hungarian social security taxes.

The second key provision of the US–Hungary Totalization Agreement provides for a Certificate of Coverage. The Certificate can be used by an employee to remain covered under his home country’s social security system for up to 60 months. Additional extensions are possible upon approval by the host country.

Finally, under the US–Hungary Totalization Agreement, workers may qualify for partial US benefits or partial Hungarian benefits based on combined (or “totalized”) work credits from both countries. This means that, where there is insufficient number of periods (or credits in the United States) to claim social security benefits, the periods of contributions in one country can be added to the period of contributions in another country to qualify to these benefits.

Contact Sherayzen Law Office for US Tax Issues Concerning Hungarian Assets and Income

If you have foreign accounts and other assets in Hungary and/or income from these Hungarian assets, contact Sherayzen Law Office for professional help. We have helped hundreds of clients throughout the world, including in Hungary, with their US tax issues and we can help you!

Miami FBAR Lawyer | Foreign Accounts Tax Attorney

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Are you looking for a competent Miami FBAR Lawyer to help you with the filing current or delinquent FBARs? Then, you need to understand who is considered to be a Miami FBAR Lawyer and why you should retain the services of Sherayzen Law Office, Ltd. – an international tax law firm that provides FBAR services to Miami residents.

Miami FBAR Lawyer Definition: Legal FBAR Services Provided in Miami, Florida

The definition of a Miami FBAR lawyer is determined based on the geographical spread of a lawyer’s legal services (i.e. where a lawyer offer his legal services) rather than his physical presence. This means that as long as a lawyer offers his FBAR services in Miami, Florida, he will be regarded as a Miami FBAR lawyer.

The reasoning for this definition is rather straightforward – FBAR is a creation of federal law, not state law. This means a lawyer can provide his services in Miami in the area of US international tax law and specifically FBARs irrespective of his actual location (but as long as he is licensed to practice law in any of the 50 states or District of Columbia).   Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. is an excellent example of such a lawyer -he is physically located in Minneapolis, but successfully provides FBAR services to its clients who reside in Miami.

What are these FBAR services? Mr. Sherayzen helps his clients with current (on-going) FBAR compliance as well as FBAR voluntary disclosures in cases where his clients did not timely comply with their required FBAR filings.

Miami FBAR Lawyer Must Be an International Tax Lawyer

Unlike location, the competence of a lawyer should be the key factor in retaining the services of a Miami FBAR lawyer. The knowledge of FBARs and US international tax law should be the key consideration in this matter.

Why is competence in US international tax law so important? Two Reasons. First, FBAR forms part of a much bigger area of US international tax law. Second, in almost all cases, the FBAR issues are highly related to other international tax compliance requirements. In fact, the interaction between FBAR and other international tax issues is one of the main considerations that determines a taxpayer’s legal position. This is why your Miami FBAR lawyer should be an expert not just FBARs, but US international tax law in general.

Miami FBAR Lawyer: the Local Ease-of-Communication Myth

There is a substantial minority of persons who prefer, in spite of all of the factors in favor of a, for example, Minneapolis-based Miami FBAR lawyer (better knowledge of the FBARs and international tax law, higher experience and sometimes even better fee structure), to retain a local Miami FBAR lawyer mainly due to their belief that it would easier to communicate and control a local lawyer.

This belief is nothing more than an illusion and can be highly harmful to a person’s case. First of all, the development of modern means of communication completely erase any purported advantages of ease of communication with a lawyer in your town. Email, Video Skype Conferences, telephone and text messages make your out-of-state Miami FBAR lawyer at least as equally accessible as your local Miami FBAR lawyer.

Second, it is simply naive to believe that your local lawyer will be meeting with you every day while the case lasts. In addition to the unnecessary expense of such a situation, the lawyer simply will not have the time or the necessity to do it. In reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail. The only exception may be your initial consultation and your final meeting; both of these meetings can be easily replaced by Skype.

Sherayzen Law Office is a Preferred Choice for Your Miami FBAR Lawyer

Sherayzen Law Office is one of the leading US international tax firms with respect to FBARs and US international tax law. Our strength lies in extensive knowledge of the subject matter and large experience concerning all major relevant areas of international tax law including offshore voluntary disclosures (in fact, we are one of the few firms which advised clients regarding all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP, as well as Streamlined Procedures (Domestic and Foreign)).

This is why, if you are looking for a Miami FBAR lawyer, contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!