The Location of Your International Tax Lawyers Austin Texas

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Choosing your lawyer among International Tax Lawyers Austin Texas is not a simple task, especially for a US taxpayer thinking about doing an offshore voluntary disclosure. One of the critical questions often arises is whether it is better to retain an international tax lawyer in Austin or in Minneapolis if you live in Austin? It is also related to a broader question: is the location of your international tax lawyer important?

Let’s analyze this question in the context of retaining one or more International Tax Lawyers Austin Texas.

International Tax Lawyers Austin Texas: US International Tax Law and Geography

One of the most critical aspects of US international tax law is that it does not respect national or state borders. Rather, it focuses on the individual taxpayer; if the taxpayer is a US person, then he is subject to US international tax law.

Another important aspect of US international tax law is that it applies uniformly (with a few exceptions, such blockades, sanctions, et cetera) irrespective of where the individual taxpayer is.

This means that, if you are in Austin and searching for International Tax Lawyers Austin Texas, it does not matter whether your lawyer is physically located in Austin, Minneapolis or Buenos Aires. The knowledge of international tax law of your lawyer and the application of that law to your specific case does not depend on the physical location of your lawyer.

International Tax Lawyers Austin Texas: Expertise and Experience in International Tax Law is the Critical Criteria, Not Geography

Based on this logic, it is easy to see that the geographical location of your International Tax Lawyers Austin Texas is not the most important factor in your decision to retain an attorney. Rather, it is a lawyer’s expertise in international tax law that should drive your decision.

If you feel comfortable with the lawyer’s grasp of the subject matter and his experience in handling cases involving issues similar to the ones involved in your case, then these factors should be the critical factors on which your decision to retain the an international tax lawyer should be based.

International Tax Lawyers Austin Texas: “Face-to-Face” Meetings Obstacle Has Been Overcome By Modern Technology

There is a common misconception that your international tax lawyer must be near you in order to understand you and be able to render advice.

About a third of my clients are overseas and, additionally, more than a third of my clients are located in the United States but outside of Minnesota, leaving me with only about a quarter of my clients physically located in Minnesota. Yet, this factor never influenced the outcome in any of my cases.

In the modern world of Video Skype Conferences, the value of the face-to-face meetings has deteriorated and, in most cases, completely disappeared.

Contact Sherayzen Law Office for Help With International Tax Issues

Hence, if you are searching for International Tax Lawyers Austin Texas, contact the international tax law team of Sherayzen Law Office (physically based in Minneapolis, MN). Our team of international tax professionals has developed deep expertise in international tax law based on the help that we have rendered to hundreds of US taxpayers worldwide.

So, if you have international tax issues with respect to undeclared foreign accounts, international tax compliance or international tax planning, please contact an experienced international tax attorney, Mr. Eugene Sherayzen of Sherayzen Law Office for comprehensive legal and tax help.

Call Us Today to Schedule Your Confidential Consultation!

FBAR Lawyers Warn That 2014 FBAR is Due on June 30, 2015

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2014 FBAR may be the most important (in terms of potential penalties) of all 2014 information tax returns. The FBAR is an abbreviation for the Report of Foreign Bank and Financial Accounts (the “FBAR”). The current official name of the FBAR is FinCEN Form 114 (prior to mandatory e-filing, Form TD F 90-22.1 was the FBAR).

Under the Bank Secrecy Act (31 U.S.C. §5311 et seq.), the Department of Treasury (the “Treasury”) requires that an FBAR is filed whenever a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. If you had such a situation in 2014, then you must seek an advice from an FBAR lawyer on whether you need to file the 2014 FBAR.

If you believe that the 2014 FBAR requirement applies in your case, then the 2014 FBAR must be e-filed with the IRS by June 30, 2015. There are no extensions available; the 2014 FBAR must be received by the IRS no later than June 30, 2015.

2014 FBAR Must Be Filed Timely and Accurately to Avoid Penalties

If your 2014 FBAR is not timely filed, then it will be considered delinquent and potentially subject to severe civil and criminal penalties. Similarly, if the 2014 FBAR is incomplete and/or incorrect, then it will also be considered delinquent with potentially an even higher probability of the assessment of the FBAR’s draconian penalties.

Multiple Years of FBAR Delinquency and 2014 FBAR

If you were required to file the FBARs in prior years and you have not done so, you should seek advice of an experienced FBAR lawyer with respect to your voluntary disclosure options. In most cases, the failure to file FBARs in the past should not deter you from filing your 2014 FBAR timely; however, this filing should be done in conjunction with your voluntary disclosure strategy as outlined by your FBAR lawyer.

Contact Sherayzen Law Office for 2014 FBAR Assistance

If you need help with filing your 2014 FBAR or you have multiple years of FBAR delinquency and wish to bring your US tax affairs into full compliance, contact owner Eugene Sherayzen an experienced FBAR lawyer of Sherayzen Law Office as soon as possible. We have helped hundreds of US taxpayers around the world to lower their FBAR penalties and bring themselves into full compliance with US tax laws. And, we can help You!

Contact Us NOW to Schedule Your Confidential Consultation!

Introduction to US International Tax Anti-Deferral Regimes

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Despite their enormous importance to tax compliance, there is a shocking level of ignorance of the US international tax anti-deferral regimes that is being displayed by US taxpayers, foreign bankers, foreign accountants, foreign attorneys, US accountants and even many US tax attorneys. In this article, for educational purposes only, I would like to provide a brief overview of the history and features of the main US international tax anti-deferral regimes.

What is a US International Tax Anti-Deferral Regime?

A US international tax anti-deferral regime is a set of US tax laws designed to prevent US taxpayers from utilizing various offshore strategies to defer US taxation of their income for a period of time or indefinitely.

Three Main US International Tax Anti-Deferral Regimes

Since 1937, there have been three main US international tax anti-deferral regimes: Foreign Personal Holding Company (“FPHC”) rules, subpart F rules, and PFIC rules. Let’s review the brief history and main features of each of these US international tax anti-deferral regimes.

First US International Tax Anti-Deferral Regime: FPHC

In 1937, the Congress for the first time addressed the offshore investment strategy problems by enacting the FPHC regime, which were designed to contemporaneously (i.e. in the year the income was earned) tax certain types of foreign corporations. In particular, FPHC rules targeted foreign corporations that had substantial investment income (i.e. passive income) compared to active business income – i.e. the FPHC rules effectively treat certain corporations as pass-through companies for the purposes of certain categories of passive income..

The FPHC rules were triggered only if both conditions of the then-Code §552(a) were satisfied. First, at least 60% of a foreign corporation’s gross income from the taxable year had to consist of “foreign personal holding company income”. The FPHC income included interest income, dividends, royalties, gains from the sale of securities or commodities, certain rents and certain income from personal services provided by shareholders of the FPHC. This was called the “income test”.

The second condition of the §552(a) was known as the “ownership test”. The ownership test was satisfied if at least 50% of either the total voting power or total value of the stock of the foreign corporation was owned by 5 or fewer individuals who were citizens or residents of the United States.

Despite the appearances, the FPHC regime was not very effective. It was actually not very hard to work around the FPHC rules with careful and creative tax planning. This is why, after the enactment of the Subpart F rules and the PFIC rules (which addressed some of the main inefficacies of the FPCH rules and made them redundant as a US international tax anti-deferral regime), the FPHC regime was finally repealed in the year 2004.

Second US International Tax Anti-Deferral Regime: Subpart F Rules

The second US international tax anti-deferral regime, the Subpart F rules, was enacted in 1962 and, despite numerous amendments, forms the core of the anti-deferral rules with respect to Controlled Foreign Corporations (“CFCs”). It is definitely one of the most important and complex pieces of US tax legislation.

The most important feature of the Subpart F regime is that it greatly expands the scope of the former FPHC regime by expanding the contemporaneous (i.e. pass-through) taxation to a much broader range of income and activities, including many kinds of active business activities as well as passive investment activities of a foreign corporation. Obviously, the focus of this US international tax anti-deferral regime is still on passive income or attempts to disguise passive income as active income.

Third US International Tax Anti-Deferral Regime: PFIC Rules

The third US international tax anti-deferral regime consists of the passive foreign investment company (“PFIC”) rules that were adopted by US Congress in 1986. Perhaps because it is the youngest of all US international tax anti-deferral regimes, the PFIC regime is more aggressive and less forgiving than Subpart F rules or FPHC regime. A lot of innocent taxpayers have fallen victims to this severe law.

The PFIC rules impose a unique additional US income tax in two circumstances: where (1) there is a gain on the disposition of the PFIC stock by the US person; or (2) there are PFIC distributions that are considered “excess distributions”. The PFIC rules also impose an additional PFIC interest (calculated similarly to underpayment interest) on the PFIC tax.

The definition of a PFIC is in some ways reminiscent of FPHC rules, but the PFIC regime is a lot more aggressive. Generally, a PFIC is any foreign corporation if it meets either the income tax or the assets test. The income tax is met if 75% of a foreign corporation’s gross income is passive; the assets test is satisfied if at least an average of 50% of a foreign corporation’s assets produce passive income.

Notice that the PFIC rules apply irrespective of the US ownership percentage of the company. This elimination of the FPHC and Subpart F ownership rules makes PFIC rules a much more comprehensive US international anti-deferral tax regime, because it is very easy to trigger PFIC rules – a lot of US naturalized citizens and permanent residents fall into the PFIC trap by simply owning foreign mutual funds as part of their former home countries’ investment portfolio.

Contact Sherayzen Law Office for Professional Help With Dealing with US International Tax Anti-Deferral Regimes

If you have an ownership interest in a foreign business or have foreign investments, you may be facing the extremely complex rules of US international tax anti-deferral regimes.

Please contact Mr. Eugene Sherayzen, an experienced international tax attorney at Sherayzen Law Office. Our international tax firm has helped hundreds of clients around the globe and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

US International Tax Attorney On The Necessity of Anti-Deferral Regimes

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As a US international tax attorney, I am fully aware of the crucially important role that the US international tax anti-deferral regimes (the Subpart F rules and PFIC rules) play in the Internal Revenue Code. Yet, the enormous complexity of the US international anti-deferral regimes often makes some people wonder about why we even have them.

As a US international tax attorney, I feel that it is important to educate the general public about the necessity of the anti-deferral regimes and how this necessity is deeply grounded in our tax system. I also wish to address here the issue of why the US anti-deferral regimes are so complex.

US International Tax Attorney: Anti-Deferral Regimes are a Natural Product of Our Tax System

The anti-deferral regimes is a natural legislative response to the anti-deferral strategies that originate from the deep policy contradictions that form the core of the US tax system. The most important of these contradictions arose from the recognition of income rules.

Generally, the US government imposes an income tax only when income is “recognized.” The recognition rules are complex, but there is a basic asymmetry in the treatment of individuals and corporation. On the one hand, US citizens are taxed on their worldwide income which is usually (though, with important exceptions) recognized when it is earned.

On the other hand, in general and without taking into account any anti-deferral regimes, the individuals are not be taxed on the corporate income (even if this is a one-hundred percent owned corporation) until: (a) the income is distributed (for example, as a dividend), or (b) the shares of the corporation are sold.

In the past, US international tax attorneys would combine these rules with the fact that, in general, foreign corporation would not be subject on foreign-source income earned outside of the United States, to build an effective investment strategy – contribution of all investment assets to a foreign corporation in order to avoid current US taxation of the taxpayers’ investment income. If a US international tax attorney was able to extend this strategy indefinitely, then it brought his clients benefits almost as valuable as not paying taxes at all.

Obviously, such an indefinite offshore deferral of US taxation of otherwise taxable income was not considered consistent with the fundamental goals and policies of US government. This is why the US Congress deemed it necessary to enact various anti-deferral regimes to combat offshore tax avoidance.

US International Tax Attorney: Why Are There Two Anti-Deferral Regimes Instead of One?

Even a US international tax attorney would agree that having multiple esoteric anti-deferral regimes with complex interrelationship between each other cannot be the best way to combat offshore tax avoidance investment strategies. Yet, this is our present reality and it is important to understand why this is the case.

There are four reasons for having multiple anti-deferral regimes. First, the US Congress did not create all of the anti-deferral regimes at the same time. Rather, the anti-deferral regimes appeared gradually over time with multiple amendments and shifting IRS interpretations.

Second, undoubtedly, the political influence of various lobbies with competing policies has greatly hampered the creation of a more transparent anti-deferral regime and elimination of many loopholes and exceptions.

Third, as I explained above, the offshore investment policies arose from the basic contradiction between different income recognition rules of the Internal Revenue Code. This contradiction in itself necessitates a more complex approach to combating any strategies of US international tax attorneys that seek to exploit it. It is difficult to do so with only one anti-deferral regime.

Finally, the combination of the sheer complexity of international commerce, conflicting policy priorities (for example, Congress does not want to stifle the US companies’ ability to compete overseas just for the purpose of completely closing off some offshore investments) and the great variety of various fact patterns makes it virtually impossible to address the offshore investment strategies in a simple way. This factor partially explains why there is such a variety of international tax rules that form part of the anti-deferral regimes.

Contact Sherayzen Law Office for Help with Anti-Deferral Regime Compliance and Planning

If you are a US person who owns a foreign business or foreign brokerage accounts, you are very likely to run into either Subpart F rules or PFIC rules. At this point, the extremely complex nature of these anti-deferral regimes makes it a reckless gamble to attempt to conduct business overseas without an advice from an experienced US international tax attorney.

This is why you should contact the experienced US international tax professionals of Sherayzen Law Office. We have helped clients around the globe to comply with and plan for the US anti-deferral regimes, and we can help you!

So, Contact Us Today to Schedule Your Initial Consultation!

FATCA Compliance Presents Challenges for Hedge Funds

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The Foreign Account Tax Compliance Act (FATCA) created a worldwide international tax compliance regime that has influenced more industries than simply foreign financial institutions. FATCA compliance presents a formidable challenge even to hedge funds.

FATCA Compliance Challenges for Hedge Funds

The challenges that FATCA compliance poses to hedge funds is best understood by analyzing what FATCA compliance requires of hedge funds – a multi-group coordination effort from various divisions within a business enterprise: business, operations, technology, finance and compliance.

The compliance department, most likely with the cooperation of the in-house counsel (and outside counsel who specializes in FATCA compliance, if in-house counsel lacks such knowledge) should lay out the FATCA compliance goals and make sure that the FATCA compliance process complies with these goals. The operations division should create the framework for the FATCA compliance process, including how this process should be controlled and managed for tax reporting and tax withholding purposes. The technology division needs to build the IT infrastructure to address the technological challenges of FATCA goals in a cost-effective way. The members of the business division (which incorporates the actual customer intake) should be thoroughly educated in the FATCA compliance process as well as the company’s specific IT solutions.

When this FATCA compliance process is applied to the hedge fund industry, one can clearly see the numerous challenges that the hedge funds face in the implementation of their FATCA compliance. The hedge funds need to register their funds for FATCA on the IRS portal, gather various investor data with respect to numerous (and often changing) customers, review and assess such data, and properly report customer data to the IRS.

Another challenge for hedge funds is the required tax withholding. Unlike previous attempts at international tax legislation, FATCA has very effective enforcement mechanisms which forces all US banks, brokers and financial institutions to essentially work for the IRS, including withholding taxes. In fact, the hedge funds that deal in US dollars are likely to be subject to the withholding tax requirement at an increasing rate in the near future.

However, the tax withholding challenge for hedge funds goes far beyond the more straightforward fact that it will need to withhold tax. Rather, the biggest headache for hedge funds is the identification of the beneficial owners and controlling persons of their clients. A lot of investors in hedge funds operate through unregulated legal vehicles or individual agents; this fact makes the FATCA data collection process a much more difficult challenge for hedge funds.

Finally, the variations in IGAs to implement FATCA present an additional challenge. While this problem is not specific to hedge funds, it is the one that they still have to manage.

Impact of FATCA Compliance By Hedge Funds On US Taxpayers

Despite these challenges, many hedge funds are successfully addressing FATCA compliance issues and are incorporating advanced software solutions to make their look-through process more efficient.

These successes of hedge funds in their FATCA compliance make it difficult for US persons investing in mutual funds through foreign entities to conceal their ownership of these entities. This means that one can expect an increase of the IRS discovery of such investors.

If these investors are not in full compliance with their US tax obligations – particularly with respect to FBAR, Form 8938, foreign business ownership reporting, foreign trust ownership and foreign income disclosure – they may be facing catastrophic US tax consequences, including draconian FBAR willful penalties as well as potential imprisonment.

Contact Sherayzen Law Office for Help With Undisclosed Foreign Assets and Income

If you have undisclosed foreign assets or foreign income, please contact Sherayzen Law Office as soon as possible. After reviewing the facts of your case and analyzing the available voluntary disclosure options, Mr. Sherayzen will conduct your voluntary disclosure process from the beginning through the end, including the preparation all of the required legal documents and tax forms.

Contact Us to Schedule Your Confidential Consultation Now!