Offshore Accounts Voluntary Disclosure Lawyer Spring Texas

If you have undisclosed foreign accounts and you are a resident of Spring, Texas, it is important for you to understand your options in terms of who can help you with the voluntary disclosure of your noncompliant offshore accounts. In this article, I will help you understand your offshore accounts voluntary disclosure lawyer Spring Texas options (I am adding the location – Spring, Texas – in an attempt to match your potential search keyword).

Offshore Accounts Voluntary Disclosure Lawyer Spring Texas: International Tax Lawyer

Since the issue that concerns you is offshore voluntary disclosure of noncompliance concerning foreign accounts and foreign income generated by these accounts, you are dealing with US international tax law (i.e. federal law) and you need help from a US international tax lawyer. In fact, you can easily replace your search words Offshore Accounts Voluntary Disclosure Lawyers with a search for International Tax Lawyer.

Alternatively, you can also search for FBAR Tax Lawyer Spring Texas, because your foreign account reporting noncompliance will most likely involve FinCEN Form 114, commonly known as FBAR. However, you should understand that an FBAR lawyer is still an international tax attorney, because FBAR is part of US international tax compliance.

Offshore Accounts Voluntary Disclosure Lawyer Spring Texas: Voluntary Disclosure Expertise

In selecting your international tax lawyer, it is vital to understand that you need a lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure covers: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.

Offshore Accounts Voluntary Disclosure Lawyer Spring Texas: Geographical Location Does Not Matter

While the expertise and experience of your offshore voluntary disclosure lawyer are highly important, the geographical location (i.e. the city where the lawyer resides) does not matter. Obviously, the term Offshore Accounts Voluntary Disclosure Lawyer Spring Texas applies to lawyers who reside in Spring, Texas.

It is important to understand, however, that this term also applies to lawyers who reside outside of Spring, Texas, but offer their offshore voluntary disclosure services to the residents of this city. This is the case because offshore voluntary disclosures concern US international (i.e. federal) tax law. The locality of a lawyer should not affect his ability to deliver his US international tax services to you.

Sherayzen Law Office is Included in the Definition of Offshore Accounts Voluntary Disclosure Lawyer Spring Texas

Sherayzen Law Office, Ltd. is an international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped hundreds of US clients around the globe, including in city of Spring, Texas, with their offshore voluntary disclosures. We can also help you!

Contact Us Today to Schedule Your Confidential Consultation!

First Quarter 2022 IRS Interest Rates on Overpayment & Underpayment of Tax

On November 23, 2021, the IRS announced that the First Quarter 2022 IRS interest rates on overpayment and underpayment of tax will not change from the Fourth Quarter of 2021.

This means that, the First Quarter 2022 IRS interest rates will be as follows:

three (3) percent for overpayments (two (2) percent in the case of a corporation);
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) of a percent for the portion of a corporate overpayment exceeding $10,000.

Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.

Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

Pursuant to the IRC §6621(b)(1), the First Quarter 2022 IRS interest rates were computed based on federal short-term rates for October 2021 to take effect on November 1, 2021, based on daily compounding. The IRS determined that the federal short-term rate for October of 2021, rounded to the nearest full percent, was zero.

It is important to note that the First Quarter 2022 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. First, these rates will determine the interest a taxpayer will get on any IRS refunds.

Second ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended under the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.

Finally, the First Quarter 2022 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.

We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the First Quarter 2022 IRS interest rates.

CFC Income Recognition: Five Groups | International Tax Lawyer & Attorney

Ownership of a Controlled Foreign Corporation (“CFC”) presents unique income tax challenges under US international tax law. One of them is the fact that US shareholders of a CFC may have to recognize CFC income on their US tax returns beyond what is required under US domestic tax laws. In this article, I will introduce the readers to the main five CFC income recognition groups.

CFC Income Recognition: General Definitions of “CFC” and “US Shareholder”

Before we describe the five main CFC income recognition groups, we should briefly define the US international tax concepts of “CFC” and “US Shareholder”. I will provide only a general definition of both here; there are some specific circumstances that may modify this definition.

Generally, a foreign corporation is a CFC if US shareholders own more than 50% of the corporation’s stock. One determines the percentage of stock ownership either based on the value of stocks or the voting rights associated with these stocks.

A person is considered to be a US Shareholder if this person is a US person that owns more 10% or more of the total voting power or the total value of all classes of stock in a foreign corporation. Besides the direct ownership of stock, one should also include this US person’s indirect ownership of stock as well as any stock he (or it) owns constructively by the operation of any of the attribution rules of IRC §958(b). These rules are described in detail in other articles on sherayzenlaw.com.

CFC Income Recognition As A Special Set of US International Tax Rules

When we talk about “CFC income recognition”, we mean a set of special US international tax rules that require US shareholders of a CFC to recognize income from the CFC that would not be normally taxed. In other words, this is income that no one would recognize under the normal US domestic tax rules or even any other US international tax rules.

CFC Income Recognition: Five Main Groups

The CFC income recognition rules force US shareholders of a CFC to increase their gross income only by certain types of income of a CFC. There are five main groups of this special CFC income:

  1. §951(a)(1)(A): subpart F income earned by a CFC;
  2. Former §951(a)(1)(A)(ii) and former §951(a)(1)(A)(iii) (both repealed by the 2017 tax reform, but still relevant for the years beginning before January 1, 2018): previously excluded subpart F income withdrawn from certain types of investments;
  3. §951(a)(1)(B): investments in certain types of US property;
  4. §951A: GILTI (Global Intangible Low-Taxed Income) income starting January 1, 2018; and
  5. §59A: base erosion minimum tax starting January 1, 2019.

Note that these are not the only rules that may accelerate recognition of CFC income. As stated above, these five groups of income are the ones that apply only to US shareholders of a CFC. However, there are other tax rules that apply to CFCs as well as other types of corporations.

Contact Sherayzen Law Office Concerning CFC Income Recognition Rules

Each of the aforementioned five groups of CFC income contains a huge amount of highly complex rules and exceptions. There are also important rules for the interaction of these categories with each other as well as other general US tax rules. It is very easy to get into trouble in this area of law without the help of an experienced international tax lawyer.

If you are US shareholder of a CFC contact Sherayzen Law Office for professional tax help. We have successfully helped US shareholders around the world with their US tax compliance concerning their ownership of CFCs, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Brazilian Mutual Funds: US Tax Obligations | International Tax Lawyer & Attorney

It is a common, almost default practice in Brazil to invest in Brazilian mutual funds. While this practice is perfectly innocent for majority of Brazilians, it may present a huge compliance issue for Brazilians who are also US taxpayers. The problem is that this type of an investment draws at least two important US tax reporting requirements – FBAR and Form 8621. In this article, I will provide a broad overview of each of these requirements concerning Brazilian mutual funds.

Brazilian Mutual Funds: FBAR Reporting

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”, is undoubtedly the most important requirement that applies to US taxpayers with Brazilian mutual funds. As long they meet the filing threshold, US taxpayers are required to disclose all of their Brazilian mutual funds on FBAR.

The threshold is very easy to meet for two reasons. First, it is very low, just $10,000. Second, this threshold is determined by taking the calendar-year highest balances of all of the taxpayer’s foreign accounts and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the FBAR reporting threshold.

What makes FBAR compliance so important is its draconian penalty system. FBAR noncompliance may result in severe noncompliance penalties, even criminal penalties. The 2025 Civil FBAR Penalties and the IRS FBAR Tax Lawyer & Attorney willful penalties are huge and are imposed on a per-account basis. Even if the taxpayer did not know about the existence of FBAR, the IRS may still impose large non-willful FBAR penalties.

Brazilian Mutual Funds: Form 8621 PFIC Reporting

The biggest practical problem with Brazilian mutual funds, however, lies in the fact that all of these funds are classified as Passive Foreign Investment Companies or PFICs under US international tax law. This is bad news for US taxpayers, because being an owner of a PFIC means a substantial tax compliance burden, especially under the default IRC Section 1291 rules.

There are four PFIC problems that make PFIC tax compliance so burdensome to US owners of foreign mutual funds. First, the PFIC tax and PFIC interest can be substantial. Moreover, since PFIC tax and PFIC interest are calculated independent of a taxpayer’s actual tax bracket, a taxpayer with Brazilian mutual funds may see a significant rise in his US tax liability. It may occur even in a situation where a taxpayer may not otherwise owe any tax to the IRS. This fact may also be significant in the context of an offshore voluntary disclosure.

Second, PFIC calculations may be very complex and expensive. The professional fees for PFIC calculations may easily outstrip all other professional fees related to other aspects of your US tax compliance.

Third, the actual disclosure of PFIC income occurs on Form 8621 before it is entered into your personal or business tax return. This information return must be filed with your US tax return. Unfortunately, since the vast majority of tax software programs (consumer and professional) do not support Form 8621 compliance, it is very likely that you will not be able to e-file your US tax return; rather, you may have to mail it.

Finally, Form 8621 is a very obscure requirement known mostly to a handful of US tax professionals who specialize in US international tax compliance (such as Sherayzen Law Office). This means that your local tax accountants are unlikely to be able to do PFIC calculations. Rather, in order to stay in full US tax compliance, you will have to secure help from someone among a very small number of PFIC specialists, like Mr. Eugene Sherayzen of Sherayzen Law Office, that exist in the United States.

Contact Sherayzen Law Office for Professional Help With US Tax Reporting of Your Brazilian Mutual Funds

If you are a US owner of Brazilian mutual funds, contact Sherayzen Law Office for professional assistance. We have helped hundreds of US taxpayers resolve their US tax compliance issues concerning foreign mutual funds, including Brazilian mutual funds, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Pakistani Bank Accounts FBAR & FATCA Compliance | International Tax Lawyer

Over the past couple of years, I have seen a rise in the number of clients with Pakistani bank accounts. This increase is undoubtedly tied to the last year’s changes to Pakistani tax laws, which now require a disclosure of certain foreign assets for certain Pakistani tax residents. These new laws created for the very first time awareness among Pakistani taxpayers that foreign assets may be subject to a separate disclosure. For Pakistanis who are also US Persons, this awareness created further inquiries into their US tax reporting of their Pakistani bank accounts. In this article, I will discuss the two most important US tax reporting requirements that may be applicable to US taxpayers with Pakistani bank accounts – FBAR and FATCA Form 8938.

Pakistani Bank Accounts: Income-Reporting Requirements

Before we delve into our discussion of FBAR and FATCA, it is important to address the income tax reporting requirements concerning foreign accounts in general as well as Pakistani accounts in particular. If you are a tax resident of the United States, you are subject to the worldwide income reporting requirement and you must disclose all income generated by your Pakistani bank accounts on your personal US tax return.

This is an absolute rule with almost no exceptions. It does not matter whether you live outside of the United States or reside in the United States, whether this income is brought to the United States or if it continues to accumulate in your foreign bank accounts, or whether you already paid Pakistani taxes on this income or not. As long as you are a tax resident of the United States, you must comply with the worldwide income reporting requirement.

This requirement applies to all reportable income as determined by US tax rules. I want to emphasize this point: the worldwide income reporting rule requires US tax residents to disclose all of their foreign income deemed reportable under the US tax rules, not the Pakistani rules. Since there are huge differences between the Pakistani tax code and the US Internal Revenue Code, this is a potential tax trap for US taxpayers with Pakistani bank accounts.

Pakistani Bank Accounts: Asset Disclosure In General

As I mentioned above, under FATCA (Foreign Account Tax Compliance Act) as well as the BSA (Bank Secrecy Act of 1970), Pakistani bank accounts may be subject to multiple asset disclosure requirements. FinCEN Form 114 (FBAR) and FATCA Form 8938 are undoubtedly the most important among these requirements.

Pakistani Bank Accounts: FBAR

The most important requirement that applies to US taxpayers with Pakistani bank accounts is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. As long they meet the filing threshold (see below), US taxpayers are required to disclose all of their Pakistani bank accounts over which they have signatory authority or in which they have a financial interest (i.e. they own an account directly or indirectly, either individually or jointly).

FBAR is a unique information return. The anomaly begins with the fact that FBAR is not technically a tax form, but a BSA form which has been administered by the IRS since the year 2001. This is why FBAR is not filed together with the tax return, but has to be e-filed separately through BSA website.

Second, FBAR also has a very low filing threshold – just $10,000. Moreover, this threshold is determined by taking the highest balances during a calendar year of all of the taxpayer’s foreign accounts (even if these accounts are located in another country in addition to Pakistan) and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the reporting threshold.

Finally, FBAR has the most severe noncompliance penalties among all information returns concerning foreign asset disclosure. Its penalties range from non-willful penalties (i.e. potentially a situation where a person simply did not know about FBAR’s existence) to extremely high civil willful penalties and even criminal penalties. In other words, in certain circumstances, FBAR noncompliance may result in actual jail time.

Pakistani Bank Accounts: FATCA Form 8938

While a relative newcomer, FATCA Form 8938 quickly occupied a special place in US international tax compliance. It may appear that Form 8938 duplicates FBAR with respect to foreign bank account reporting, but there are very important differences between these forms. Let’s focus on the top five differences.

First of all, unlike FBAR, it is filed with a US tax return and forms part of the return. This means that the Form 8938 noncompliance may keep the statute of limitations open on the entire tax return indefinitely, potentially subjecting it to an IRS audit indefinitely.

Second, there are differences in how information concerning foreign accounts is being disclosed on FBAR and Form 8938. Form 8938 forces US taxpayers to disclose not only most of the information that is required to be reported on FBAR, but also such details as whether an account was opened or closed in the reporting year, whether it produced any income, how much income was produced, et cetera. This may give the IRS additional information necessary to determine if there was prior tax noncompliance with respect to these accounts.

Third, there are important substantive differences between these two forms with respect to what accounts have to be disclosed. For example, signatory authority accounts must be disclosed on FBAR, but Form 8938 has no such requirement. On the other hand, a bond certificate may not need to be reported on FBAR, but it must be disclosed on Form 8938. In general, Form 8938 is likely to apply to a wider range of Pakistani assets than FBAR; this is why it is often called the “catch-all” form.

Fourth, while FBAR penalties are extremely severe, Form 8938 sports its own arsenal of noncompliance penalties. While they are theoretically lower than FBAR penalties, the Form 8938 penalties may have an equivalent impact due to the fact that they have a much wider range. For example, Form 8938 noncompliance may lead to higher accuracy-related penalties with respect to income-tax noncompliance. A taxpayer’s ability to utilize foreign tax credit may also be impacted by the Form 8938 penalties.

Finally, unlike FBAR, Form 8938 comes with a third-party FATCA verification mechanism. Under FATCA, the IRS should receive foreign-account information not only from taxpayers who file Forms 8938, but also from their foreign financial institutions. This means that it is much easier for the IRS to identify Form 8938 noncompliance than that of FBAR. It also means that Form 8938 noncompliance may have a higher chance to be investigated and penalized by the IRS.

Contact Sherayzen Law Office for Professional Help With US Tax Reporting of Your Pakistani Bank Accounts

If you are a US Person who has undisclosed Pakistani bank accounts, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers around the globe to resolve their past FBAR and FATCA noncompliance, including with respect to financial accounts in Pakistan We can help you!

Contact Us Today to Schedule Your Confidential Consultation!