international tax lawyers

Florida Streamlined Disclosure Lawyer | International Tax Attorney

Florida is one of the most favorite destinations for immigrants as well as US citizens who do business overseas. Many of these taxpayers own assets in foreign countries and receive income generated by these assets. For this reason, Florida is also one of the leading states when it comes to individuals who wish to go through Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Florida streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I will explain who would be included within the definition of Florida streamlined disclosure lawyer.

Florida Streamlined Disclosure Lawyer: International Tax Lawyer

From the outset, It is important to understand that both SDOP and SFOP are part of US international tax law, because these options deal with US international tax compliance concerning foreign assets and foreign income. In order to be more precise, I should say that SDOP and SFOP fall within a very specific sub-area of US international law – IRS offshore voluntary disclosures.

The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of a lawyer you are looking for when you search for a Florida streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax lawyer.

Florida Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures

As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax lawyer would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.

This means that you are looking for an international tax lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: 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.

Florida Streamlined Disclosure Lawyer: Geographical Location Does Not Matter

While the expertise and experience in offshore voluntary disclosures are highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no relation whatsoever to the SDOP and SFOP.

This means that you are not limited to Florida when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Florida or Minnesota.

Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Florida might have had in the past over out-of-state lawyers. This is especially true in our world today where the pandemic has greatly reduced the number of face-to-face meetings.

Sherayzen Law Office May Be Your Florida Streamlined Disclosure Lawyer

Sherayzen Law Office, Ltd. is a highly-experienced 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 our US clients around the globe, including in Florida, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

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 you should 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. Civil 2021 FBAR Civil Penalties | 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 those at 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!

Indian Mutual Funds & US Person’s Tax Obligations | International Tax Attorney

After having handled so many offshore voluntary disclosures for my Indian and Indian-American clients, I can clearly see that US tax reporting obligations concerning Indian mutual funds is one of the most troublesome areas for my clients. In this article, I will focus on the three most important US tax reporting requirements that may be applicable to US taxpayers with Indian mutual funds – FBAR, FATCA Form 8938 and Form 8621.

Indian Mutual Funds: FBAR Reporting

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

FBAR is a very dangerous form. On the one hand, it is very easy to fall into noncompliance with this form due to its very low filing threshold – just $10,000. Moreover, this threshold is determined by taking the calendar-year highest balances of all of the taxpayer’s foreign accounts (even if these accounts are located in another country in addition to India) 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.

On the other hand, 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.

Indian Mutual Funds: FATCA Form 8938

When it comes to the FATCA Form 8938 compliance, a taxpayer with Indian mutual funds will find it fairly easy as long as he correctly files his Forms 8621 (see below) and indicates on Form 8938 how many of these forms were filed with the tax return. This ease of reporting is meant to alleviate double-reporting of foreign mutual funds on a US tax return.

It is important to emphasize three points with respect to Form 8938 compliance for taxpayers with Indian mutual funds. First, even if you file Forms 8621, Form 8938 must still be attached to your tax return as long as you meet the relevant filing threshold (and the assets listed on Forms 8621 must be counted toward the threshold). Failure to file a Form 8938 may still draw a penalty in these circumstances and keep the statute of limitations open on your entire US tax return.

Second, Form 8938 and Form 8621 compliance does not in any way affect your obligation to file FBARs. This is the case even if this means that the same assets are reported three times.

Third, 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 (and thereby Form 8621) noncompliance than that of FBAR. It also means that a Form 8938 noncompliance may have a higher chance to be investigated and penalized by the IRS.

Indian Mutual Funds: Form 8621 PFIC Reporting

We now come to the most critical difference in US tax compliance between foreign mutual funds and most other foreign assets. All foreign mutual funds, including the funds incorporated in India, are classified as PFICs or Passive Foreign Investment Companies under US international tax law.

While I will not explain here the complex PFIC calculations and the various PFIC elections that may be available to a US taxpayer with foreign mutual funds, I wish to discuss four most important points concerning PFIC compliance.

First, pursuant to the worldwide income reporting requirement, all US tax residents must calculate and disclose their PFIC income on their US tax returns. This is a significant compliance burden as PFIC calculations can 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.

Second, since PFIC tax and PFIC interest are calculated independent of a taxpayer’s actual tax bracket, a taxpayer with Indian 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 be especially significant in a voluntary disclosure context.

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 the majority of US taxpayers are not even aware of the fact that they need to comply with their Form 8621 reporting obligations. In other words, they believe themselves to be in compliance with US tax laws even though, in reality, they are not. Thus, the obscurity and complexity of Form 8621 pushes many US taxpayers into tax noncompliance.

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

If you are a US taxpayer with Indian mutual funds, contact Sherayzen Law Office for professional We have helped hundreds of US taxpayers with foreign mutual funds, including Indian mutual funds, to resolve their past FBAR, FATCA and PFIC noncompliance, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

2021 Tax Filing Season for Tax Year 2020 Starts on February 12 2021

On January 15, 2021, the IRS announced that the 2021 tax filing season for the tax year 2020 will start on Friday, February 12, 2021. On that day, the IRS will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits. This programming work is critical to ensuring IRS systems run smoothly. If the 2021 tax filing season were to open without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” said IRS Commissioner Chuck Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”

Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed during the 2021 Tax Filing Season, with the vast majority before the Thursday, April 15, 2021, deadline.

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check ‘Where’s My Refund’ on the IRS website IRS.gov under ‘Refunds’ for their personalized refund date. Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return.

Here are some important 2021 Tax Season deadlines:

A. Estimated Tax Deadlines: April 15, 2021; June 15, 2021; September 15, 2021; and January 15, 2022.

B. Individual Income Tax Returns: April 15, 2021 for US taxpayers who live in the United States; June 15, 2021, for US taxpayers who live outside of the United States (their tax payment deadline is still April 15); October 15, 2021, for extended tax returns; December 15, 2021, special extension for US taxpayers who reside overseas.

C. Partnership and S-Corporations: March 15, 2021; if extended, September 15, 2021.

D. C-Corporations: April 15, 2021; if extended, October 15, 2021.

E. Forms 3520-A: for calendar-year foreign trusts, March 15, 2021; extension is possible until September 15, 2021.

F. Form 3520: April 15, 2021; extension is possible until October 15, 2021.

G. FBARs: April 15, 2021; extension is possible until October 15, 2021.

H. International Information Returns filed with US tax returns (Forms 5471, 8621, 8865, 926, et cetera): same deadline as for the US income tax return with which these international information returns are filed.