2020 First Quarter IRS Interest Rates | International Tax Lawyers

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On December 6, 2019, the Internal Revenue Service (“IRS”) announced that the 2020 First Quarter IRS underpayment and overpayment interest rates will not change from the 4th Quarter of 2019. This means that, the 2020 First Quarter IRS underpayment and overpayment interest rates will be as follows:

  • five (5) percent for overpayments (four (4) percent in the case of a corporation);
  • two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • five (5) percent for underpayments; and
  • seven (7) percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. The IRS used the federal short-term rate for October of 2019 to determine the 2020 First Quarter IRS interest rates. The IRS interest is compounded on a daily basis.

2010 First Quarter IRS interest rates are important to US international tax lawyers and taxpayers. The IRS uses these rates to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an IRS audit or an amendment of his US tax return. The IRS also utilizes these rates with respect to the calculation of PFIC interest on Section 1291 tax.

As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment interest rates on a regular basis. We often amend our client’s tax returns as part of an offshore voluntary disclosure process. For example, both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures require that a taxpayer amends his prior US tax returns, determines the additional tax liability and calculates the interest on this liability.

Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology. This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.

Finally, it is important to point out that the IRS will use the 2020 First Quarter IRS overpayment interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. This situation may often arise in the context of offshore voluntary disclosures.

November 21 2019 BSU Seminar in Minsk, Belarus | International Tax News

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On November 21, 2019, Mr. Eugene Sherayzen, an international tax attorney and founder of Sherayzen Law Office, Ltd., conducted a seminar at the Belarusian State University Law School (the “2019 BSU Seminar”) in Minsk, Belarus. Let’s explore the 2019 BSU Seminar in more detail.

2019 BSU Seminar

2019 BSU Seminar: Topic and Attendance

The topic of the seminar was “Unique Aspects of the US International Tax System”. The seminar was well-attended (more than 80 attendees) by the students of the Belarusian State University (“BSU”), BSU law school faculty and attorneys from the Minsk City Bar Association.

The seminar with the follow-up Q&A session lasted close to two and a half hours.

2019 BSU Seminar Part I: Mr. Sherayzen Biography As Illustration of a Successful Career of an International Tax Attorney

The first part of the seminar was devoted to the discussion of Mr. Sherayzen’s legal career. He commenced by describing his educational path: a bachelor’s degree in Political Science, History and Global Studies with Summa Cum Laude honors and a Juris Doctor degree in Law with Cum Laude honors from the University of Minnesota Law School. Then, Mr. Sherayzen discussed how he acquired the passion for US international tax law, founded Sherayzen Law Office at the end of the year 2005 and developed his career as a successful international tax attorney.

At that point, Mr. Sherayzen described his main specialties in US international tax law: (1) offshore voluntary disclosure of foreign assets and foreign income; (2) IRS international tax audits; (3) US tax compliance concerning foreign gifts and foreign inheritance; (4) US tax compliance concerning US information returns, including FBAR and FATCA compliance; and (5) US international tax planning.

2019 BSU Seminar Part II: Discussion of Eight Unique Characteristics of the US International Tax Law

The second pat of the seminar was devoted to the long discussion of eight main unique characteristics of US international tax law. Mr. Sherayzen commenced this part with the concept of “Voluntary Compliance” and its significance for a taxpayer’s personal liability for the accuracy of his IRS submissions. Then, the attorney discussed the enormous complexity and extremely invasive nature of US international tax law. Mr. Sherayzen also separately emphasized the potentially huge penalty exposure as the fourth characteristic of the US international tax law, specifically referring to FBAR penalties.

The attorney continued the discussion with the description of the worldwide reach of the US tax jurisdiction. Here, he used the Foreign Account Tax Compliance Act (“FATCA”) as an example.

Then, Mr. Sherayzen described the obscurity that surrounds many US international tax provisions and explained how such obscurity presents problems and opportunities for US taxpayers. The attorney concluded the second part of the 2019 BSU seminar with the discussion of the flexibility of US international tax system and how the US tax system should be considered a source of endless opportunities to knowledgeable US international tax attorneys and their clients.

2019 BSU Seminar Part III: Basic Unique Principles of US International Tax System

The next part of the seminar focused on the basic principles of the US international tax system. Mr. Sherayzen organized this part from the perspective of how US taxpayers should declare their foreign assets and taxable income. The structure of this part was based on answering three questions: “who”, “what” and “when”.

The first question was: who should declare their foreign assets and pay taxes on their income? In this context, Mr. Sherayzen defined the concept of “US tax residency”. He further emphasized that non-resident aliens who are not US tax residents may still need to file non-resident US tax returns with the IRS.

The next question was: what income is subject to US taxation and what assets should be declared to the IRS? Here, Mr. Sherayzen describes the most fundamental principle of US international tax law that applies to US tax residents – the worldwide income taxation requirement. He also emphasized that US tax residents must declare on their US international information returns virtually all classes of their foreign assets with the exception of directly-owned real estate.

Then, as part of his discussion of US tax responsibilities of non-residents (for tax purposes), the attorney introduced the “source of income” rules used to characterize income as US-source income or foreign-source income. He provided the audience with the basic rules concerning sourcing of bank interest, dividends, earned income, rental income and royalties.

The final question was: when should the tax be paid on income? In this context, Mr. Sherayzen explained the concept of “realized income” and the general principle that income becomes taxable when it is realized for US tax purposes. He also described the anti-deferral regimes and the Section 250 full participation exemption as exceptions to the general principle of income recognition.

2019 BSU Seminar Part IV: International Information Returns and Conclusion

During the final part of the seminar, Mr. Sherayzen briefly discussed the most important US international information returns. He concluded his lecture by re-stating that US international tax provisions reflect the reality of US position in the world economy and other countries should understand this basic fact before they attempt to copy any US international tax provisions.

Greek Flat Tax Residency: Draft Bill | International Tax Lawyer News

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The new Greek government headed by Prime Minister Kyriakos Mitsotakis wishes to reach 2.8% economic growth next year. Part of the plan to achieve this goal includes a tax reform which introduces a curious new concept of Greek flat tax residency for wealthy foreign investors. Let’s discuss this interesting idea in more detail.

Greek Flat Tax Residency: Basic Description

The government envisions that the flat tax residency scheme will function in the following way: a foreign individual who makes qualified investments into the Greek economy will be allowed to shift his tax residency to Greece and pay a certain flat tax rate on his entire taxable income. In order to counter the other EU members’ potential objections, these new Greek tax residents will need to be physically present in Greece for at least 183 days per year.

Greek Flat Tax Residency: Required Investments

In order to become a qualified individual, the investor will need to invest at least 500,000 euros into the Greek economy during the first three years of his tax residency.

Greek Flat Tax Residency: Flat Tax Rates

The exact flat tax rate depends on the amount of investments into the Greek economy. If an investor invests only the minimum required 500,000 euros, then his flat tax will be 100,000 euros plus 20,000 euros for each family member.

If, however, this investor invests 1.5 million euros into Greek assets, then the flat tax will be only 50,000 euros. An investor who invests 3 million euros into the Greek economy will see this flat tax halved again to a mere 25,000 euros.

Given the unstable nature of Greek politics, the government intends to insert a grandfather clause which will protect investors against any tax reforms by future governments.

Greek Flat Tax Residency: Term of the Program

The flat tax residency program will be in place for at least fifteen years, unless renewed by future governments.

Greek Flat Tax Residency: Bill Voting

At this point, the flat tax residency scheme is merely a bill, not a reality. The government expects that the Hellenic parliament will vote on the draft bill by the end of November of 2019.

Greek Flat Tax Residency: Impact on US Citizens

The proposed flat tax residency would be a great tax planning tool for the high-net worth citizens of the great majority of countries in the world, because the majority of the world follows either the territorial model of taxation or residency-based model of taxation. This is not the case with respect to the United States.

The United States follows a citizenship-based worldwide income model of taxation. US citizens are considered to be US tax residents irrespective of where they reside and whether they acquire tax residency in another country. This is almost unique in the world.

This means that the proposed Greek flat tax residency would be of limited value to US citizens. Despite the fact that they would acquire Greek tax residency, they would still be considered US tax residents and will have to pay US taxes on their worldwide income. Most likely, they will be able to get a Foreign Earned Income Exclusion for any active income (i.e. salary, self-employment income and similar earnings) up to the annual exclusion amount and some tax treaty benefits, but no other direct benefits.

Greek flat tax residency may still, however, offer more indirect benefits in the context of more sophisticated tax planning. For example, foreign corporations owned by US citizens who are also Greek tax residents may be able to obtain better tax treaty benefits.

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

If you are a US citizen who acquires Greek tax residency, you should be concerned about your US tax compliance. US international tax law is extremely complex and it is very easy to run afoul of its provisions, Noncompliance penalties in these cases may be extremely high. This is why it is important to have a trustworthy knowledgeable US international tax attorney by your side.

Sherayzen Law Office has successfully helped hundreds of US taxpayers with their US international tax compliance, including those who are tax residents of other countries. We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

The Pursley Case: Offshore Tax Evasion Leads to Criminal Conviction

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On September 6, 2019, the Tax Division of the US Department of Justice (“DOJ”) announced another victory against Offshore Tax Evasion. This time, a Houston lawyer, Mr. Jack Stephen Pursley, was convicted of one count of conspiracy to defraud the United States and three counts of tax evasion. Let’s discuss this Pursley Case in more detail.

Facts of the Pursley Case

According to the evidence presented at trial, Mr. Pursley conspired with a former client to repatriate more than $18 million in untaxed income that the client had earned through his company, Southeastern Shipping. Southeastern Shipping had a business bank account located in the Isle of Man.

Knowing that his client had never paid taxes on these funds, Mr. Pursley designed and implemented a scheme whereby the untaxed funds were transferred from Southeastern Shipping’s foreign bank account to the United States. Mr. Pursley helped to conceal the movement of funds from the Internal Revenue Service (“IRS”) by disguising the transfers as stock purchases in domestic corporations in the United States, which Mr. Pursley owned and his client owned and controlled.

At trial, the DOJ proved that Mr. Pursley received more than $4.8 million and a 25% ownership interest in the co-conspirator’s ongoing business for his role in the fraudulent scheme. For tax years 2009 and 2010, Mr. Pursley evaded the assessment of and failed to pay the income taxes he owed on these payments by, among other means, withdrawing the funds as purported non-taxable loans and returns of capital. Mr. Pursley then used these funds for personal investments as well as purchase of properties, including a vacation home in Vail, Colorado and a property in Houston, Texas.

Potential Penalties in the Pursley Case

Judge Lynn Hughes has set sentencing for December 9, 2019. Mr. Pursley faces a statutory maximum sentence of five years in prison for the conspiracy count and five years in prison for each count of tax evasion. He also faces a period of supervised release, monetary penalties, and restitution.

Main Lesson from the Pursley Case

The main lesson from the Pursley case is for business lawyers. They should be very careful about involving themselves in schemes related to repatriation of overseas funds. These business lawyers should verify whether US taxes were paid on these funds and consult an international tax attorney concerning the legality of the proposed repatriation scheme.

Of course, if a business lawyer knows that his client never paid any US taxes on the funds, he should not participate in any stratagems which could be interpreted as conspiracy to defraud the United States. Otherwise, this lawyer would be at risk of finding himself in a situation similar to the Pursley case.

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

If a business lawyer finds out that he has a client with untaxed funds stored in an overseas account, he should urge the client to contact Sherayzen Law Office concerning the client’s offshore voluntary disclosure options. The main goal of such a voluntary disclosure would be to reduce and even eliminate the risk of a criminal prosecution.

Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

2019 Fourth Quarter IRS Interest Rates | PFIC Tax Lawyers

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On August 28, 2019, the Internal Revenue Service (“IRS”) announced that the 2019 Fourth Quarter IRS underpayment and overpayment interest rates will not change from the 3rd Quarter of 2019. This means that, the 2019 Fourth Quarter IRS underpayment and overpayment interest rates will be as follows:

  • five (5) percent for overpayments (four (4) percent in the case of a corporation);
  • two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
  • five (5) percent for underpayments; and
  • seven (7) percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. The IRS used the federal short-term rate for July of 2019 to determine the 2019 Fourth Quarter IRS interest rates The IRS interest is compounded on a daily basis.

2019 Fourth Quarter IRS interest rates are important for many reasons. These are the rates that the IRS uses to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an IRS audit or an amendment of his US tax return. The IRS also utilizes these rates with respect to the calculation of PFIC interest on Section 1291 tax.

As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment interest rates on a regular basis. We often amend our client’s tax returns as part of an offshore voluntary disclosure process. For example, both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures require that a taxpayer amends his prior US tax returns, determines the additional tax liability and calculates the interest on this liability.

Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology. This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.

Finally, it is important to point out that the IRS will use the 2019 Fourth Quarter IRS overpayment interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. Surprisingly, we often see this scenario arise in the context of offshore voluntary disclosures.