IRS Releases Proposed Guidance for FFIs under FATCA

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On October 29, 2013, many Austin FATCA tax lawyers received the news that the U.S. Department of the Treasury and the Internal Revenue Service issued a notice for foreign financial institutions (FFIs) to comply with the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA). FATCA is rapidly becoming the global standard in the effort to curb offshore tax evasion.

To date, Treasury has signed nine intergovernmental agreements (IGAs), has reached 16 agreements in substance, and is engaged in related conversations with many more jurisdictions.

The notice, which is the next step in implementation, previews proposed guidance and provides a draft agreement for participating FFIs directly engaging in agreements with the IRS and those reporting through a Model 2 IGA (like Switzerland). It provides FFIs with advance notice prior to the beginning of FATCA withholding and account due diligence requirements on July 1, 2014. The FFI agreement will be finalized by year end.

“The Agreement and forthcoming guidance have been designed to minimize administrative burdens and related costs for foreign financial institutions and withholding agents,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “Today’s preview demonstrates the Administration’s commitment to ensuring full global cooperation and a smooth implementation.”

Congress enacted FATCA in 2010 as a way to identify U.S. citizens using foreign accounts to evade their U.S. tax responsibilities. FATCA requires U.S. financial institutions to withhold a portion of payments made to FFIs that do not agree to identify and report information on U.S. account holders.

Treasury has taken a global approach to the exchange of tax information in its implementation of FATCA. To address situations where foreign law would prevent an FFI from complying with the terms of an FFI agreement, Treasury developed two alternative model IGAs. Under Model 1, FFIs report to their respective governments who then relay that information to the IRS. Under Model 2, FFIs report directly to the IRS to the extent that the account holder consents or such reporting is otherwise legally permitted, and such direct reporting is supplemented by information exchange between governments with respect to non-consenting accounts.

October 29th Notice provides guidance to FFIs entering into agreements directly with the IRS, and to those reporting through a Model 2 IGA. The notice incorporates updates to certain due diligence, withholding, and other reporting requirements, and includes a draft FFI agreement. The draft FFI agreement will be finalized by December 31, 2013. Treasury and the IRS will continue to provide more detailed guidance on FATCA implementation as necessary.

The regulations were intentionally designed to appropriately balance the scope of entities and accounts subject to FATCA with due diligence requirements, while also phasing in the related obligations over several years. For example, the final regulations exempt all preexisting accounts held by individuals with $50,000 or less from review. For similar accounts with less than $1,000,000, an FFI is only required to search the account information that is electronically available. In many cases, FFIs are permitted to rely on information that they already must collect for local anti-money laundering and know-your-customer rules.

Many of these cost-saving simplifications were the result of comments received from affected financial institutions and foreign governments, which helped us to tailor the rules to achieve the policy objectives of the statute without imposing undue burdens or costs.

While withholding requirements begin next July and the first report of FATCA information is due in 2015, the IRS FATCA registration website is already open so that FFIs can begin testing the registration process and entering information.

Contact Sherayzen Law Office for Help with Undisclosed Offshore Accounts

If you have undisclosed foreign financial accounts overseas, contact Sherayzen Law Office for professional legal and accounting help. Our experienced international tax firm will thoroughly review your case, analyze the existing potential liabilities, propose appropriate solutions and implement the plan tailored to the facts of your case.

Tax-Filing Extension for Individuals Expires on October 15, 2013

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Individual taxpayers who filed Form 4868 to request a six-month extension to file their 2012 tax returns should be cognizant of the fast-approaching October 15, 2013 final deadline to timely file these extended tax returns. This is also the last day the IRS will accept an electronically filed tax return for the year 2012.

The deadline equally applies to the extended 2012 tax returns for the taxpayers who reside in the United States and outside of the United States. It also applies to the filing of any required information tax returns such as Forms 3520, 8865, 5471, et cetera. Particular attention should be paid to Forms 8938 (the new forms created by the IRS in 2011 as a result of FATCA).

While this is not true in every situation, generally, the taxpayers who are in the Offshore Voluntary Disclosure Program should nevertheless attempt to file their extended 2012 tax returns timely.

Moreover, October 15, 2013, is the final deadline to fund a SEP-IRA or solo 401(k) for tax year 2012 if the taxpayer requested an automatic extension of time to file.

This essay is provided as a courtesy notice by Sherayzen Law Office, Ltd. a Minnesota international tax law firm for businesses and individuals; the essay does not constitute a legal or tax advice on your particular situation.

IRS Recognized All Legal Same-Sex Marriages For Federal Tax Purposes

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On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.

Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.

Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

How to File a Claim for Refund

Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return.

Taxpayers who wish to file a refund claim for gift or estate taxes should file Form 843, Claim for Refund and Request for Abatement. For information on filing an amended return, see Tax Topic 308, Amended Returns, available on IRS.gov, or the Instructions to Forms 1040X and 843. Information on where to file your amended returns is available in the instructions to the form.

Future Guidance

Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.

Other agencies may provide guidance on other federal programs that they administer that are affected by the Code.

Revenue Ruling 2013-17, along with updated Frequently Asked Questions for same-sex couples and updated FAQs for registered domestic partners and individuals in civil unions, are available today on IRS.gov. See also Publication 555, Community Property.

Treasury and the IRS will begin applying the terms of Revenue Ruling 2013-17 on Sept. 16, 2013, but taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so, as long as the statute of limitations for the earlier period has not expired.

Boston International Tax Attorney: Retainer by Location

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Retaining a Boston international tax attorney is a very important decision. One of the basic issues that taxpayers face is whether it is better to retain an international tax attorney in Boston or in Minneapolis if you live in Boston? If you were to search “international tax attorney Boston”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Boston. The question is: should the geographical proximity of an attorney play a role in the retainer decision?

The answer depends on many factors. On the one extreme, if you are looking for a DUI attorney, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and only an attorney admitted to practice before the court of a local jurisdiction should handle the case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.

One the other end of the spectrum, if you are searching for a Boston international tax attorney because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.

What if you have an international tax attorney in Boston, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is an attorney in Boston.

Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.

What is a fairly unique feature about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most Boston international tax attorneys in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The approach adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.

So, the next time you search for a Boston international tax attorney, keep these issues in mind while retaining an attorney from Minneapolis or any other city.

Contact Sherayzen Law Office for Help With International Tax Issues

If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact an experienced international tax attorney at Sherayzen Law Office for comprehensive legal and tax help.

International Tax Attorney Austin: Geography & Retainer Choice

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Is it is better to retain an international tax attorney in Austin or in Minneapolis if you live in Austin? If you were to search “international tax attorney Austin”, Sherayzen Law Office, PLLC (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Austin. The question is: should the geographical proximity of an attorney play a role in the retainer decision?

The answer depends on many factors. On the one extreme, if you are looking for a criminal law attorney in an involuntary manslaughter case, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and only an attorney admitted to practice before the court of a local jurisdiction should handle the case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.

One the opposite end of the spectrum, if you are searching for international tax attorney Austin because you have undeclared offshore assets, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.

What if you have an international tax attorney in Austin, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is an attorney in Austin.

Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.

The next time you search for international tax attorney Austin, keep these issues in mind while retaining an attorney from Minneapolis or any other city.

Contact Sherayzen Law Office for Help With International Tax Issues

If you have any international tax issues with respect ot undeclared foreign assets, international tax compliance or international tax planning, contact the experienced international tax firm of Sherayzen Law Office for comprehensive legal and tax help.