international tax lawyer-minnesota-minneapolis

Foreign Partnership Tax Attorneys: Filing Form 8865 Schedule O (Part I)

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Foreign Partnership Tax Attorneys should point out to their clients that Form 8865 should be used by US taxpayers to report the information required under IRC section 6038 (reporting regarding controlled foreign partnerships), section 6038B (reporting of transfers made to foreign partnerships), and/or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests).

This article will explain the basics of Part I (“Transfers Reportable Under Section 6038B”) for Schedule O– “Transfer of Property to a Foreign Partnership”, an additional form submitted with Form 8865 that must be completed by certain categories of taxpayers. This article is not intended to convey tax or legal advice. US-International partnership taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.

Foreign Partnership Tax Attorneys: Who Must File Schedule O?

Schedule O is typically required to be filed by Category 3 filers under the Form 8865 instructions. In general, Category 3 filers are US persons who contributed property during their tax year to a foreign partnership in exchange for a partnership interest in the partnership (a section 721 transfer), if such persons either owned (directly or constructively) at least a 10% interest in the foreign partnership immediately after the contribution, or if value of the property contributed, when added to the value of any other property contributed to the partnership by such persons (including related persons), during the 12-month period ending on the date of the contribution is greater than $100,000.

Note, this is a general summary of Category 3 filers, and does not include all possibilities. It is very important to consult a foreign partnership tax attorney for help. Please see the instructions or contact Sherayzen Law Office for further details.

Foreign Partnership Tax Attorneys: Schedule O, Part I (“Transfers Reportable Under Section 6038B”)

Part I of Schedule O is used to report the contribution of property to a foreign partnership. In column (a), taxpayers must fill out the date of the property transfer (and if the transfer consisted of multiple transactions over a number of dates, the date the transfer was completed, would be entered). In Column (b), taxpayers list the number of items of property contributed, and in column (c), the fair market value of the property transferred, as of the date of the transfer, must be specified. Column (d) needs to be completed to detail the contributed property’s adjusted basis as of the date of transfer.

If appreciated property was contributed by a taxpayer, column (e) must be filled out, and the method (traditional, traditional with curative allocations, or remedial) used by the foreign partnership to make section 704(c) allocations with respect to each item of property must be specified (see Regulations section 1.704-3(b), (c), and (d) for more information). Also note that the instructions require that if appreciated property or intangible property is contributed, taxpayers must, “[P]rovide the information required in columns (a) through (g) separately with respect to each item of property transferred (except to the extent you are allowed to aggregate the property under Regulations sections 1.704-3(e)(2), (3), and (4)).” If gain was recognized by the taxpayer on the contribution of property, then column (f) must be completed. In Column (g), taxpayers need to state their percentage interest in the foreign partnership immediately after the property transfer (see the instructions for further information about specific types of percentage interest).

Finally, taxpayers may need to provide supplemental information, if required. Further, if property was contributed to a foreign partnership as part of a broader transaction, information about the transaction should be described.

Contact Sherayzen Law Office for Help With Foreign Partnership Compliance

If you have an ownership interest in a foreign partnership, please contact Sherayzen Law Office for help. Our experienced foreign partnership tax law firm will thoroughly review the facts and circumstances of your case, properly prepare all of the required tax compliance documents and offer further planning with respect to U.S. taxes.

2014 Foreign Earned Income Exclusion

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On November 18, 2013, the IRS announced that the foreign earned income exclusion amount under §911(b)(2)(D)(i) is going to be $99,200 for tax year 2014. This up from $97,600 in 2013 and $95,100 in 2012.

Generally, if a qualified individual meets certain requirements of I.R.C. §911, he may exclude part or all of his foreign earned income from taxable gross income for the U.S. income tax purposes. This income may still be subject to U.S. Social Security taxes.

Remember, if your overseas earnings are above $99,200 for the tax year 2013, then you may be subject to U.S. income taxation on the excess amount (i.e. amount exceeding the 2014 foreign earned income exclusion).

It is also important to note, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion). For most U.S. expatriates, this means that the tax bracket is likely to start at 25% or higher. If you are self-employed, however, your situation may differ from this description.

Furthermore, it is worth noting that additional amount of earnings may also be excluded under the foreign housing exclusion.

Contact Sherayzen Law Office For Foreign Earned Income Exclusion Legal Help

If you are a U.S. taxpayer living abroad or you are planning to accept a job overseas, contact us to discuss your tax situation. Our experienced tax law office will guide you through the complex maze of U.S. tax reporting requirements, help you make sure that you are in full compliance with U.S. tax laws, and help you take advantage of the relevant provisions of the Internal Revenue Code to make sure that you do not over-pay your taxes in the United States.

San Francisco International Tax Lawyer: Influence of Location

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While looking for a San Francisco international tax lawyer, one of the important issues that clients face is whether it is better to retain an international tax attorney in San Francisco or in Minneapolis if you live in San Francisco? If you were to search “San Francisco international tax lawyer”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in San Francisco. The question is: should the geographical proximity of an attorney play a role in the retainer decision?

The answer depends on many factors. On the one extreme, if you are looking for a sales tax lawyer, then you may not have a choice but to find a local lawyer. This is because local law and procedure would govern in this case, and an lawyer familiar with local sales tax issues would be the best choice for handling a sales tax case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside lawyer are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.

One the other end of the spectrum, if you are searching for a San Francisco international tax lawyer because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of a lawyer in his area of practice (i.e. international tax law) will become the overriding factors in retaining a San Francisco international tax lawyer.

What if you have an international tax lawyer in San Francisco, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax lawyers differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax lawyer in Minneapolis even if there is a lawyer in San Francisco.

Second, in addition to differences in personal qualities, the experience of the international tax lawyer in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the lawyer and should override the lawyer’s particular geography.

What is a fairly unique feature about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most San Francisco international tax lawyers in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The approach adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.

So, the next time you search for a San Francisco international tax lawyer, keep these issues in mind while retaining a lawyer from Minneapolis or any other city.

Contact Sherayzen Law Office for Help With International Tax Issues

If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact Eugene Sherayzen, an experienced tax attorney of Sherayzen Law Office for comprehensive legal and tax help.

Form 114(a): Authorization to Efile FBARs

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In response to numerous requests made by the international tax attorneys and individual FBAR filers of the Reports of Foreign Bank and Financial Accounts (FBARs) jointly with spouses, or wish to submit them via third-party preparers, the Financial Crimes Enforcement Network (FinCEN) introduced FinCEN Form 114(a), Record of Authorization to Electronically File FBARs. A copy of this form would be maintained by the filer and the account owner, but not submitted to FinCEN. The form would be made available upon request by FinCEN or the Internal Revenue Service (IRS).

New Version of the FBAR

Note, that Form 114(a) came out just ahead of the new version of the FBAR which was tested in October of 2013.

FBARs are used by U.S. taxpayers to disclose foreign financial accounts and they were due on June 30; the filing deadlines now coincide with tax return deadlines (April and October) for each preceding calendar year. There is an automatic extension to October if you cannot file your FBAR by April 15th. Failure to file FBARs on time can lead to severe penalties and even criminal prosecution.

Modified Voluntary Disclosure Based on Reasonable Cause

It is important to emphasize that Form 114(a) should be provided to your international tax attorney if he is filing FBARs on your behalf. This is irrespective of whether you are filing your FBARs a few days late or whether your international tax attorney is e-filing the FBARs as part of your modified voluntary disclosure based on reasonable cause. Note that, starting October 1, 2013, the OVDP/OVDI participants are also required to e-file the FBARs ; special reference to the OVDP/OVDI program should also be submitted – contact Sherayzen Law Office for details.

Contact Sherayzen Law Office for Help with E-filing FBARs for Undisclosed Accounts

If you have foreign bank accounts and need help with e-filing late FBARs for undisclosed accounts, contact Sherayzen Law Office for legal and tax help. Our law firm consists of highly experienced international tax professionals who will thoroughly review your case, identify available options and prepare all of the legal documents and tax forms necessary for your voluntary disclosure process.

Form 1042-S and Tax Withholdings

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IRS Form 1042-S (“Foreign Person’s U.S. Source Income Subject to Withholding”) is used to report various items of income, amounts withheld under Chapter 3 of the Internal Revenue Code, and distributions of effectively connected income by a publicly traded partnership or nominee. The items subject to reporting on Form 1042-S involve amounts paid to foreign persons, including presumed foreign persons, that are subject to withholding, even if no amount was actually deducted and withheld from the payment (such as, because of a treaty or IRC exception), or if any withheld amount was repaid to the payee.

This article will explain the basics of Form 1042-S, especially the amounts subject, and not subject to reporting on the form. (Please also note that the IRS has issued a recent draft version of Form 1042-S that may entail future changes). US laws concerning international taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.

What Amounts are Subject to Reporting on Form 1042-S?

According to the IRS, “Amounts subject to withholding are amounts from sources within the United States that constitute (a) fixed or determinable annual or periodical (FDAP) income; (b) certain gains from the disposal of timber, coal, or domestic iron ore with a retained economic interest; and (c) gains relating to contingent payments received from the sale or exchange of patents, copyrights, and similar intangible property. Amounts subject to withholding also include distributions of effectively connected income by a publicly traded partnership.” (See the instructions to Form 1042-S for further details).

The specific amounts subject to Form 1042-S reporting include, among others, the following U.S. source items: interest on deposits, the entire amount of corporate distributions, interest (including the part of a notional principal contract payment that is characterized as interest), rents, royalties, compensation for independent personal services performed in the U.S., compensation for dependent personal services performed in the U.S. (only if the beneficial owner is claiming treaty benefits, however), annuities, pension distributions and other deferred income, most types of gambling winnings, cancellation of indebtedness, effectively connected income (ECI), notional principal contract income, guarantee of indebtedness, and amounts paid to foreign governments, foreign controlled banks of issue, and international organizations (even if they are exempt under section 892 or 895).

What Amounts are Not Subject to Reporting on Form 1042-S?

There are numerous amounts that are not subject to reporting on Form 1042-S. Some of these amounts include the following: Interest and OID from short-term obligations (generally payable within 183 days or less), interest on a registered obligation that is targeted to foreign markets qualifying as portfolio interest under certain circumstances, bearer obligations targeted to foreign markets if a Form W-8 is not required, notional principal contract payments that are not ECI, and accrued interest and OID (generally, interest paid “on obligations sold between interest payment dates and the part of the purchase price of an OID obligation that is sold or exchanged in a transaction other than a redemption”), among others.

When Must Form 1042-S be Filed?

Regardless of Forms 1042-S is filed on paper or electronically, it must be filed with the IRS by March 15th and there is an additional requirement that the submitted Form 1042-S also be furnished to the recipient of the income by that same date.