What is Closing Agreement

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Closing agreements constitute an important part of tax representation and tax planning. A “closing agreement” is a final agreement between the IRS and the taxpayer on a specific issue or liability. Closing agreements are entered into pursuant to IRC Section 7121.

Usually, closing agreements may be entered into when it is beneficial to permanently and conclusively close a pending matter. However, a taxpayer may use other good reasons for this type of an agreement to convince the IRS. In both cases, however, it should be demonstrated that the agreement will not prejudice the government’s interests.

If a transaction is eligible for a letter ruling, the taxpayer may request a closing agreement with or in lieu of a letter ruling. Sometimes, it is the IRS that may impose closing agreement as a condition for the issuance of a letter ruling.

Sherayzen Law Office offers full IRS representation, including handling your case through a private letter ruling request and entering into a closing agreement, where appropriate.

If you have a case pending before the IRS or you are unsure about the tax consequences of a business transaction, call NOW to discuss your case with an experienced Minneapolis tax lawyer!

Understanding Citations of Treasury Regulations

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Understanding how to cite Treasury Regulations is crucial to being able to find the regulations relevant to a tax case.  This is why I devote this brief essay to explaining the location and basics of citation of Treasury Regulations.

Treasury Regulations are located in Title 26 of the Code of Federal Regulations (“C.F.R.”).  This corresponds to title 26 of the United States Code.

The overall form of citation is as follows: C.F.R. part number, a decimal point, a Code section number, a dash, and a number of further subdivisions.  The “C.F.R. part number” basically indicates the general nature of the regulations – i.e. to what area is the regulation related.  The numbers are assigned to areas in the following way: “1″ relates to income tax, “20″ relates to estate tax, “25″ relates to gift tax; “31″ relates to employment tax (withholding), “301″ relates to administration and procedure, and “601″ relates to the Commissioner’s rules.

Let’s look at a specific example and try to decipher what it says at according to the general form described above: Treas. Reg. § 1.162-1.  “Treas. Reg.” is a common form of abbreviation of “Treasury Regulations”; “1″ is a C.F.R. part number which tells the reader that this regulation relates to the income tax;  “162″ is a Code section number which specifically discusses the deduction of business expenses; “ dash 1″ indicates a citation to the first subdivision of the regulation.  In sum, Treas. Reg. § 1.162-1 refers directly to a first subdivision of the regulation with respect to business expense deduction from income tax.

The ability to quickly read, understand, and find a relevant treasury regulation is just one of the many skills that an experienced tax attorney needs to have.

Business Lawyers Minneapolis: Preparing for Initial Consultation II

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In previous article, I discussed what type of information you should bring to your Minneapolis business attorney. In this essay, I shift the focus toward the second part of the preparation which is about what type of questions you need to ask your business lawyer.

Usually, the questions that you want your Minneapolis business lawyer to answer should, at the very least, cover the following four areas:

1.    Cost and Billing

The most common and important issue is the cost of the case as well as the manner in which you will be billed.  Unless this is a flat-fee case, you should not expect your business attorney to give you a precise amount of money you will need to spend on your case.  Usually, a Minneapolis business lawyer will give you an estimate, which, in the end, may or may not correspond to the actual cost of the case.

In terms of the manner of billing, you are likely to billed per hour in most business litigation and large business transaction matters. Small contracts and certain common-place business services are often subject to a flat fee with an additional hourly fee charged in case of further modifications as requested by a client.

2.     Time

The next area you should discuss with your Minneapolis business attorney is how long the case will need to be conducted.   The estimates here are likely to vary significantly.   While it is often fairly easy to predict when an employment contract will be finished, it is much harder to estimate an amount of time a business litigation case may take (especially if an extensive motion practice is anticipated).

3.    Participation

Ask your Minneapolis business lawyer about who will handle your case – i.e. whether the attorney will handle it personally or turn it over to his associates.  When you are dealing with a large law firm, you run the risk that the attorney with whom you are having the initial consultation will not be the one handling your case, especially if you are a small business or an individual.  Due to common division of labor in large law firms, it is very likely that the case will be turned over to inexperienced associates whose work will be only reviewed by the attorney who conducted the initial consultation.

If, however, you are hiring a small firm or a solo practitioner, you are very likely to avoid this problem and your case will be handled from the beginning through the end by your experienced business lawyer who is probably an owner of the law firm and personally responsible for the case.

4.     Percentage of Practice

The last question is how much time per month, on the average, your Minneapolis business attorney devotes to his business practice.  At a minimum, your business lawyer should devote about 25% of his practice to business law.

Conclusion

While these four questions do not represent a complete list of questions you should ask your business attorney, they are likely to provide that minimum background necessary for the review of a retainer agreement with your Minneapolis business lawyer.

Sherayzen Law Office can help you with your business issues, whether you want to establish a new business, create a legal structure for an existing one, draft an employment contract or an Independent Contractor Agreement, engage in complex business planning, litigate a business dispute, and so on.

Contact Sherayzen Law Office to discuss your business case with an experienced business attorney!

Business Lawyers Minneapolis: Preparing for Initial Consultation I

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Preparing for the initial consultation with your Minneapolis business lawyer usually involves at least two steps. First, gathering the information you need to supply to your business attorney. Second, preparing the questions you want to ask your business lawyer. This essay deals with the first part of the preparation.

It is important to understand that your Minneapolis business lawyer will initially have to rely almost exclusively on the information that you supply to him. Moreover, failure to supply the necessary information during initial consultation may lead to significant delays in your case and increase your legal expenses. This is why it is very important to come prepared to the initial interview.

The first step is to ask your Minneapolis business lawyer about what you should bring with you. While Minneapolis business lawyers commonly recommend that you should bring all documents that are related to your case, I usually list specific documents which are customary in a given business situation.

“Everything related to the case” usually includes all documents, statements, e-mails, letters, corporate business documents, et cetera. Sometimes, this would mean divulging sensitive financial and personal information. You should not feel uncomfortable in doing so, because a lawyer will guard all of this information. Client confidentiality is the cornerstone of Sherayzen Law Office’s practice. We jealously guard all client information that a client supplied to us in confidence.

The second step is for you to review what documents you actually have against the list of the documents requested by your attorney. It is possible that you may lack some documents. The purpose of this step is to identity the missing information.

The third step is to try to obtain the missing information before meeting with your business attorney. If this is not possible, then let your attorney know during the consultation what information you are missing and whether you will be able to find it after the meeting.

Once you go through these three steps, the first part of the your preparation for the initial business consultation is finished. I will discuss the second part of your preparation in the next article.

Remember, Sherayzen Law Office can help you with your business issues, whether they are concerned your business license, administrative appeals, litigation, business organization or business planning.

Contact Sherayzen Law Office to discuss your business case with an experienced business attorney!

Expatriation to Avoid U.S. Taxes

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Although there is a general misconception that U.S. citizens can relinquish their citizenship in order to escape high U.S. taxes, most of the time this is not true. If you are contemplating such a move, it is essential to understand the basic rules relating to expatriation for purposes of tax avoidance, as the taxes and fines can be costly. Under IRS rules, U.S. citizens who renounce their citizenship, as well as long-term lawful permanent residents (also know as “green card” holders), can still be taxed on their worldwide income provided that statutory exceptions are not met.

Expatriation Tax Rules Explained

U.S. citizens and resident aliens generally must pay income taxes on worldwide income, regardless of where individuals live. Under the Internal Revenue Code (IRC) Sections 877 and 877A, U.S. citizens who renounce their citizenship within ten-years of earning U.S.-source income are still subject to U.S. taxes on such income if citizenship was relinquished for tax avoidance purposes.

In addition, pursuant to IRC Section 877(a)(1), nonresident aliens (generally defined to be individuals who are not citizens or residents of the U.S.) who, within a ten-year period immediately preceding the close of the taxable year, lost U.S, citizenship may also be subject to taxes on their U.S.-source income if the purpose of their expatriation was to avoid U.S. taxes. It is presumed that tax avoidance was the purpose if any of the following criteria are met:

1) the average annual net income tax (as defined in IRC section 38(c)(1)) of such individual for the period of 5 taxable years ending before the date of the loss of United States citizenship is greater than $124,000 (subject to adjustments)

2) the net worth of the individual as of such date is $2,000,000 or more, or

3) such individual fails to certify under penalty of perjury that he has met the relevant requirements of IRC for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require.

The tax provisions of IRC Section 877 also apply to long-term lawful permanent residents who cease to be taxed as U.S. residents. A long-term permanent resident is defined to be any individual (other than a citizen of the United States ) who is a lawful permanent resident of the United States in a least 8 taxable years during the 15-years ending with the taxable year in which an individual ceases to be a lawful permanent resident of the U.S. However, generally, an individual shall not be treated as a lawful permanent resident for any taxable year, if such individual is treated as a resident of a foreign country for the taxable year under an income tax treaty between the U.S. and the other country, and does not waive the benefits of such treaty.

Additionally, there are exceptions for certain individuals with dual citizenship, or who are minors.

Form 8854

Individuals will continue to be treated for tax purposes as U.S. citizens or residents until Form 8854 (expatriation notification form) and other required information is filed. There are different rules noted in the form depending upon the date of expatriation. In certain specified cases, Form 8854 must also be filed on an annual basis.

There is a potential $10,000 fine for failure to file the form, if required.

Conclusion

This is a general overview of the taxation rules relating to individuals who expatriate in order to avoid U.S. taxes. There are many other complex issues that may apply, depending upon the circumstances. Are you facing taxes or possible fines relating to expatriation issues? Sherayzen Law Office can assist you with these matters. Call us to set up a consultation with an experienced international tax attorney today!