2019 Zurich Trip Completed | Zurich US International Tax Lawyer & Attorney

In July of 2019, Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., completed his business trip to Zurich, Switzerland. Let’s discuss in more detail this 2019 Zurich Trip, its goals and accomplishments.

2019 Zurich Trip: Goals

Mr. Sherayzen outlined the firm’s goals for the Zurich trip during the Sherayzen Law Office Board of Director’s meeting on March 19, 2019. At the beginning of the meeting, he outlined two long-term goals for Sherayzen Law Office: (1) deepen the firm’s ties to the global banking and investment community, and (2) promote Sherayzen Law Office’s international tax services in Europe.

Mr. Sherayzen stated that the particular goals for the 2019 Zurich trip were as follows: (1) gather the necessary intelligence to achieve the long-term goals; (2) resolve certain issues for the firm’s current clients with Swiss bank accounts; and (3) make promotional videos of the firm’s services.

2019 Zurich Trip: Achievements

The 2019 Zurich trip achieved all of the goals that were outlined above. During the trip, Mr. Sherayzen gathered a large amount of data that will need to be analyzed in the future for the purpose of improving the firm’s marketing strategies.

Second, while in Zurich, Mr. Sherayzen successfully resolved all of the pending issues for the firm’s clients.

Finally, a number of videos were made for the purpose of promoting the vast experience and deep expertise that Sherayzen Law Office has accumulated in US international tax law. Sherayzen Law Office is a leader in US international tax compliance, including offshore voluntary disclosures.

2019 Zurich Trip and Future Plans

Sherayzen Law Office intends to capitalize in the near future on the achievements made by Mr. Sherayzen during this trip. We encourage our clients and followers on social media to stay tuned for future updates, including video updates.

The Board of Directors of Sherayzen Law Office, Ltd., will analyze the successes of the 2019 Zurich trip in order to modify the plans for the firm’s marketing strategies in Europe. The Board already commenced planning for new targeted trips which will lead to the expansion of the firm’s clientele in Europe.

Sherayzen Law Office already has a very large exposure in the European continent. We have helped clients with undisclosed European assets in most countries on the European continent: Austria, Belarus, Belgium, Croatia, Cyprus, the Czech Republic, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Monaco, Poland, Portugal, Romania, the Russian Federation, Spain, Sweden, Switzerland, United Kingdom and Ukraine.

Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance

Sherayzen Law Office is a US international tax law firm with deep expertise in all relevant areas of US international tax law, including offshore voluntary disclosures. With clients from over 70 countries around the world, our firm is a leader in US international tax compliance.

We have helped hundreds of US taxpayers around the world with their US international tax compliance issues, and We can help You! Contact Us Today to Schedule Your Confidential Consultation!

2019 Karlovy Vary Trip Completed | US International Tax Lawyer & Attorney

Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., completed his trip to Karlovy Vary, Czech Republic, on July 10, 2019. Let’s discuss in more detail this brief 2019 Karlovy Vary trip, its motivations and results.

2019 Karlovy Vary Trip: Reasons for this Excursion

There were several reasons why Mr. Sherayzen decided to undertake this trip to Karlovy Vary. He outlined them at the Sherayzen Law Office board of directors meeting on March 19, 2019.

First, this is part of the firm’s overall expansion effort into the European market of high-net worth individuals.

Second, this is a very attractive venue for new clients from all over the world, because Karlovy Vary is a world-famous resort. It is important for Sherayzen Law Office to establish a foothold in this city.

Third, Karlovy Vary offers amazing scenery which is perfect for filming promotional videos for the firm.

Finally, the 2019 Karlovy Vary trip was undertaken during Mr. Sherayzen’s Switzerland-Prague business trip. In other words, it was very a convenient time for a journey into this prestigious European high-end legal market.

2019 Karlovy Vary Trip: Results

The 2019 Karlovy Vary trip was very successful in three aspects. First of all, the firm now has acquired certain information about the city sufficient to commence building a comprehensive marketing strategy. Second, the trip laid basis for several business relationships which the firm hopes to explore further in the future. Finally, a large set of promotional material was created during the trip.

Despite its successes, the 2019 Karlovy Vary trip was merely an exploratory marketing trip. In order to build a more solid foothold in the city, Mr. Sherayzen and the employees of Sherayzen Law Office will need to continue to visit the city on a more sustained basis.

2019 Karlovy Vary Trip: What Sherayzen Law Office Can Offer to Its European Clients

Sherayzen Law Office specializes in US international tax compliance, including offshore voluntary disclosures, current tax compliance and international tax planning. Europeans who reside in Europe, but who are US citizens or US permanent residents, may be exposed to high IRS non-compliance penalties. This is why they should contact Sherayzen Law Office for professional help with US international tax compliance requirements.

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PLR TAM Comparison | IRS International Tax Lawyer & Attorney

The IRS Private Letter Rulings (“PLR”) and the IRS Technical Advice Memoranda (“TAM”) often get confused by non-practitioners. In this small essay, I will engage in a brief PLR TAM comparison in order to clarify the similarities and differences between both types of IRS administrative guidance.

PLR TAM Comparison: Similarities

Let’s begin our PLR TAM comparison with the similarities. The similarities are great between both types of the IRS administrative guidance; this is why so many taxpayers cannot tell the difference between PLR and TAM. Both, PLR and TAM are written determinations issued by the IRS National Office. Also, PLR and TAM both interpret and apply US tax law to a taxpayer’s specific set of facts. Finally, both PLR and TAM are written IRS determinations which are binding on the IRS only in relation to the taxpayer who requested them.

PLR TAM Comparison: Differences

The differences between PLR & TAM are more nuanced but highly important. The two main differences are: (a) the requesting party and (b) timing of the request.

PLR is requested by a taxpayer; i.e. the IRS issues its opinion to the taxpayer, based on the taxpayer’s pattern of facts and at his request. The request for TAM, however, is made by a district IRS office. Oftentimes, though, the district IRS office makes this request at the urging of a taxpayer to seek technical advice from the IRS National Office.

With respect to the timing of the request, a taxpayer requests a PLR before he files his tax return. The taxpayer wishes to know the IRS position (or he is seeking IRS permission to do something, like a late election) in order to prevent the imposition of IRS penalties by filing an incorrect or late return.

TAM, however, deals with refund claims and examination issues after a tax return has been filed. In fact, oftentimes, a TAM is issued in response to a question concerning a specific set of facts uncovered during an IRS audit.

Contact Sherayzen Law Office for Experienced US International Tax Help

If you have questions concerning US international tax law and procedure, contact Sherayzen Law Office for professional help. We are a highly experienced US international tax law firm that has helped hundreds of US taxpayers around the globe with their US international tax compliance issues, including offshore voluntary disclosures, IRS audits and various annual tax compliance issues.

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Panamanian Bank Accounts | US International Tax Lawyer & Attorney

A large number of US taxpayers own Panamanian bank accounts. These taxpayers have bank accounts in Panama for a variety of reasons: personal, business, tax planning and/or estate planning. Many of these account holders still do not realize that their Panamanian bank accounts may be subject to numerous reporting requirements in the United States. In this essay, I will outline the three most common US tax reporting requirements that may apply to Panamanian bank accounts.

Panamanian Bank Accounts: Definition of a “Filer”

Each of the requirements discussed below has its own eligibility requirements – i.e. each has its own definition of “filer” who is required to comply with these requirements. Despite these differences in the definition of a filer, we can identify a certain common definition that underlies all of the requirements we will discuss in this article, even if this definition is modified for the purposes of a particular form. This common denominator is the concept of “US tax residency”.

US tax residents include the following persons: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and persons who declare themselves as US tax residents. It is important to remember that this general definition of US tax residents is subject to a number of important exceptions.

All of the US international tax reporting requirements adopt US tax residency as the basis for their definitions of a filer. Where there are differences from the definition of US tax residency, they are mostly limited to the application of the Substantial Presence Test and/or the first-year and last-year definitions of a US tax resident.

For example, Form 8938 identifies its filers as “Specified Persons” while FBAR defines its filers as “US Persons”. Yet, the differences between these two terms mostly arise with respect to persons who voluntarily declared themselves as US tax residents or non-residents. A common example can be found with respect to treaty “tie-breaker” provisions, which foreign persons use to escape the effects of the Substantial Presence Test for US tax residency purposes.

The determination of your US tax reporting requirements is the primary task of your international tax attorney. It is simply too dangerous for a common taxpayer or even an accountant to attempt to dabble in US international tax law.

Panamanian Bank Accounts: Worldwide Income Reporting

Now that we understand the concept of US tax residency, we are ready to explore the aforementioned three US reporting requirements with respect to Panamanian bank accounts.

The first and most fundamental requirement is worldwide income reporting. It is also the requirement that applies to US tax residents as they are defined above (i.e. we are dealing here with the classic definition of US tax residency in its purest form).

All US tax residents must disclose their worldwide income on their US tax returns. This means that they must report to the IRS their US-source and foreign-source income. The worldwide income reporting requirement applies to all types of foreign-source income: bank interest income, dividends, royalties, capital gains and any other income.

The worldwide income reporting requirement applies even if the foreign income is subject to Panamanian tax withholding or reported on a Panamanian tax return. It also does not matter whether the income was transferred to the United States or stayed in Panama. US tax residents must disclose their Panamanian-source income on their US tax returns.

Panamanian Bank Accounts: FBAR/FinCEN Form 114

The second requirement that I would like to discuss in this essay is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. Under the Bank Secrecy Act of 1970, the US government requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Panamanian (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. If these requirements are met, the disclosure requirement is satisfied by filing an FBAR.

It is important to understand all parts of the FBAR requirement are terms of arts that require further exploration and understanding. I encourage you to search our firm’s website, sherayzenlaw.com, for the definition of “US Persons” and the explanation of other parts of the FBAR requirement.

There is one part of the FBAR requirement, however, that I wish to explore here in more detail – the definition of “account”. The reason for this special treatment is the fact that the definition of an account for FBAR purposes is a primary source of confusion among US Persons with respect to what needs to be disclosed on FBAR.

The FBAR definition of an account is substantially broader than what this word generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.

Despite the fact that FBAR compliance is neither easy nor straightforward, FBAR has a very severe penalty system. On the criminal side, FBAR noncompliance may lead to as many as ten years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.

Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. In 2015, the IRS added another layer of limitations on the FBAR penalty imposition. One must remember, however, that these are voluntary IRS actions which the IRS may disregard whenever circumstances warrant such an action.

Panamanian Bank Accounts: FATCA Form 8938

The third requirement that I wish to discuss today is a relative newcomer, FATCA Form 8938. This form requires “Specified Persons” to disclose all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency.

The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to report the same foreign assets on FBAR and Form 8938.

Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities. You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.

Finally, Form 8938 has its own penalty system which has far-reaching income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.

One must also remember that, unlike FBAR, Form 8938 is filed with a federal tax return and forms part of the tax return. This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.

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

If you have Panamanian bank accounts, you should contact Sherayzen Law Office for professional help with your US international tax compliance. We have helped hundreds of US taxpayers with their US international tax issues (including disclosure of Panamanian bank accounts), and We can help You!

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Employee Stock Option Sourcing Rules | International Tax Lawyer & Attorney

Employee stock option sourcing rules govern the US tax classification of income generated by stock options as US-source income or foreign-source income. In this article, I will provide a general overview of the employee stock option sourcing rules.

Employee Stock Option Sourcing Rules: Importance of Income Sourcing Rules

Income sourcing rules are very important in US international tax law for two reasons. First, for US taxpayers, these rules will determine the ability to utilize their foreign tax credit. Second, for foreign taxpayers, the issue is whether they will be taxed in the United States. For example, if a non-resident alien received stock options the income from which is sourced to a foreign country, then he may completely escape US taxation of this income.

Employee Stock Option Sourcing Rules: Qualified vs. Non-Qualified Options

There are two types of stock options relevant to the employee stock option sourcing rules – qualified options (also called Incentive Stock Options) and non-qualified options. Let’s discuss both types in more detail.

A stock option is a qualified option if it is issued pursuant to rules set forth in the Internal Revenue Code. In the vast majority of cases, if an employee exercises a qualified stock option, he will not receive income at that time. Moreover, as long as he meets the statutory holding requirements, once the employee sells the stock, he will realize a capital gain. So, when we are talking about income sourcing for qualified stock options, we really need to concentrate on the sourcing of long-term capital gain.

Non-qualified options are the options that do not qualify for the preferential tax treatment under the Internal Revenue Code. Obviously, they are taxed in a different manner than qualified stock options. Generally, the employee does not recognize any income when he receives a non-qualified stock option. Rather, he will recognize ordinary income upon the exercise of the option; this ordinary income will equal to the difference between the value of the stock received and what he paid to exercise the option. This is the income that is relevant to our discussion of the employee stock option sourcing rules.

Now that we understand both types of options and what type of income they usually generate, we are ready to apply the employee stock option sourcing rules to this income.

Employee Stock Option Sourcing Rules Concerning Qualified Options

As we have already established, an employee usually generates a long-term capital gain as a result of a disposition of stock from a qualified option. The sourcing rules in this case require that the source of income is determined in the same manner as any other gain from a security disposition. In other words, the income must be sourced to the employee’s residence.

For example, let’s suppose that Pierre, a citizen of France, worked for a few years as a business analyst in New York for a multinational corporation. On the third year of his employment, the employer rewarded Pierre with qualified stock options. Then, the employer moved Pierre back to France. In France, he exercised his options; two years later (while still in France), Pierre sold the stocks. In this scenario, Pierre’s long-term capital gain would be treated as French-source income since he resided in France when the gain was realized.

Employee Stock Option Sourcing Rules & Non-Qualified Options: General Rule

The analysis with respect to non-qualified options is a lot more complex. Our starting point is the fact which we already established – income generated from non-qualified option is treated as compensation.

Second, the IRS does not list non-qualified options as a fringe benefit. Hence, we can assume that the IRS does not wish to apply the fringe benefit sourcing rules to compensation. Rather, most likely, the general salary-sourcing rules should apply.

As I pointed out in another article, the main rule here is that the location where the employee renders his services determines whether this is US-source income or foreign-source income. If an employee works in the United States, then his salary would be considered US-source income; if he works in a foreign country, his salary would be sourced to that country. See §§861(a)(3) and 862(a)(3).

Employee Stock Option Sourcing Rules & Non-Qualified Options: Allocation

In the context of non-qualified stock options, the general rule means that we have to determine where the employee was when he earned the options. If the employee worked only in the United States or only in a foreign country, this is a very easy case.

What happens, however, if we are dealing with a cross-border employee who is paid, in part, with non-qualified options? In this case, we have to engage in the process of allocating time between the United States and a foreign country (or even various foreign countries). As I pointed out in another article, time allocation is the default method in this case, but other options are available.

Let’s use an example to illustrate the time allocation rule with respect to non-qualified options: a US corporation hired Charles to work for its UK subsidiary in 2016. As part of his compensation, the employer granted non-qualified options exercisable in 2019. The work involved working not just in London, but also in New York. In 2019, Charles exercised the options. At the same time, he determined that out of the total 1,200 days he worked during the past three years, he was in the United States for 200 days and 1,000 days in the United Kingdom. This means that one-sixth (200/1,200) of income from non-qualified options will be US-source income.

Employee Stock Option Sourcing Rules & Non-Qualified Options: Foreign Tax Credit

The real complexity comes in, however, when we include the foreign tax credit (“FTC”) considerations into our analysis. Other countries may treat non-qualified options differently from the United States and recognize the income earlier. This means that, potentially, an employee can receive bills from multiple countries at different times. The FTC calculations here will become quite complex.

Contact Sherayzen Law Office for Professional Help with Employee Stock Option Sourcing Rules

If you work in two or more countries and receive stock options from your employer, you will need to engage in complex tax calculations to correctly determine your US tax liability. This is why you need to contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their international tax issues, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!