international tax lawyers

IRS Reorganizes Transfer Pricing Compliance Programs and International Coordination

/in , /by

On July 27, 2011, the IRS announced that it is taking additional steps in its continuing efforts to improve the agency’s international operations. First, the IRS Advance Pricing Agreement (APA) Program, concerned exclusively with reaching pre-filing agreements with taxpayers on transfer pricing, will shift from the office of IRS Chief Counsel to an office under the Transfer Pricing Director in the Large Business &International division’s international operation. In addition, the IRS Mutual Agreement Program (MAP), concerned primarily with the bilateral resolution of transfer pricing disputes with U.S. treaty partners, will shift to the same office.

The resulting “Advance Pricing and Mutual Agreement program” will be under the direction of a single executive and the IRS will increase staffing available to the two program areas. The combined office will allow the IRS to reduce the time needed to complete advance pricing agreements and to resolve transfer pricing disputes with its treaty partners. The Office of Chief Counsel will remain a vital partner in the analysis and resolution of legal issues.

Second, to facilitate IRS coordination with treaty partners in an increasingly global environment, the IRS will adjust its competent authority and international coordination functions under an Assistant Deputy Commissioner (International) who will:

  • coordinate international activities across all IRS operating divisions,
  • oversee the IRS Exchange of Information program and IRS participation in the Joint International Tax Shelter Information Centre (JITSIC),
  • manage the activities of the IRS Tax Attaches in the agency’s foreign posts of duty,
  • coordinate IRS participation at the Organisation for Economic Cooperation and Development (OECD) and other non-governmental organizations,
  • support the Department of the Treasury in its negotiations of tax treaties and tax information exchange agreements, and
  • pursue competent authority agreements with treaty partners on issues other than transfer pricing.

The latest IRS reorganization is meant to improve tax administration in a global economy.

Form 2290: Highway Use Tax Return is Now Due on November 30, 2011

/in , /by

On July 15, 2011, the IRS advised truckers and other owners of heavy highway vehicles that their next federal highway use tax return (which is usually due on August 31) will instead be due on November 30, 2011.  IRS Notice 2011-77 explains that the main reason for the extension of the deadline is to alleviate any confusion and possible multiple filings of Form 2290 that could result if Congress reinstates or modifies the  highway use tax after September 30, 2011.

Generally, the highway use tax of up to $550 per vehicle applies to trucks, truck tractors and buses with a gross taxable weight of 55,000 pounds or more. A variety of special rules apply to vehicles with minimal road use, logging or agricultural vehicles, vehicles transferred during the year and those first used on the road after July. Ordinarily, vans, pick-ups and panel trucks are not taxable because they fall below the 55,000-pound threshold. The tax is currently set to expire on September 30, 2011.  For trucks and other taxable vehicles in use during July, the Form 2290 and payment are, under normal circumstances, due on August 31.

The new November 30 filing deadline for Form 2290 (Heavy Highway Vehicle Use Tax Return) applies to the tax period that begins on July 1, 2011. It covers the vehicles used during July, as well as those first used during August or September. Returns should not be filed and payments should not be made prior to November 1, 2011.

To aid truckers applying for state vehicle registration on or before November 30, 2011, the new regulations require states to accept as proof of payment the stamped Schedule 1 of the Form 2290 issued by the IRS for the prior tax year (the one that ended on June 30, 2011). Under federal law, state governments are required to receive proof of payment of the federal highway use tax as a condition of vehicle registration. Normally, after a taxpayer files the return and pays the tax, the Schedule 1 is stamped by the IRS and returned to filers for this purpose. Prior to the new regulations, a state normally would accept a prior year’s stamped Schedule 1 as a substitute proof of payment only through September 30.

For those acquiring and registering a new or used vehicle during the July – November period, the new regulations require a state to register the vehicle, without proof that the highway use tax was paid, if the person registering the vehicle presents a copy of the bill of sale or similar document showing that the owner purchased the vehicle within the previous 150 days.

IRS Increases Mileage Rate to 55.5 Cents per Mile

/in , /by

On June 23, 2011, the IRS announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

In recognition of recent rise in the price of gasoline, the IRS increased the rate to 55.5 cents a mile for all business miles driven from July 1, 2011, through December 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.  This is a special adjustment for the final months of 2011; normally, the IRS updates the mileage rates only once a year in the fall for the next calendar year.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Eugene Sherayzen re-appointed to the Publications Committee of the MSBA for the year 2011-12

/in , /by

On July 7, 2011, Eugene Sherayzen, Esq., was re-appointed for the third time to the Minnesota State Bar Association Publications Committee. The Committee is responsible for overseeing the budget and publication of the most important Minnesota legal journal, “Bench & Bar”.

Reporting Canadian RRSPs and RRIFs in the United States: Form 8891

/in , , /by

It comes as a surprise to most taxpayers the Canadian Registered Retirements Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) must be reported in the United States.  Yet, any U.S. citizen or resident who is a beneficiary of an RRSP or RRIF must complete Form 8891 and attach it to Form 1040. A U.S. citizen or resident who is an annuitant of an RRSP or RRIF must file the form for any year in which he receives a distribution from the RRSP or RRIF.

A separate Form 8891 should be completed and filed for each RRSP or RRIF. This requirement includes spouses who have RRSPs or RRIFs.

There are three types of financial information that U.S. citizens and residents must report to the IRS using Form 8891: (i) contributions to RRSPs and RRIFs; (ii) undistributed earnings in RRSPs and RRIFs; and (iii) distributions received from RRSPs and RRIFs. The taxpayers must comply with this reporting requirement even if their earnings from these retirement plans are not considered as taxable income in Canada. Remember, income accrued in the RRSP and RRIF is subject to U.S. taxation unless a treaty choice is made to the contrary (see below).

The chief reason for the existence of Form 8891 is the fact that, prior to year 2003, the IRS maintained that RRSPs and RRIFs are foreign trusts and the annuitants and beneficiaries of these plans must annually file Form 3520 with the IRS. See IRS Announcement 2003-25. IRS was authorized to impose heavy penalties for failure to file Form 3520. 26 U.S.C. §6677.

In 2003, however, the IRS adopted a new simplified reporting regime where U.S. citizens and resident aliens who hold interests in RRSPs and RRIFs only need to file the new Form 8891 in lieu of the burdensome Form 3520 required earlier. See IRS Announcement 2003-75. Furthermore, Form 8891 allows the filers to make the election under Article XVIII(7) of the U.S.-Canada income tax convention to defer U.S. income taxation of income accrued in the RRSP or RRIF. Id. The filers are still required to maintain supporting documentation relating to information required by Form 8891 (such as Canadian Forms T4RSP, T4RIF, or NR4, and periodic or annual statements issued by the custodian of the RRSP or RRIF). Id. Nevertheless, the new simplified reporting regime substantially reduces the reporting burden of taxpayers who hold interests in RRSPs and RRIFs.

A word of caution: taxpayers who need to file Form 8891 are likely to be subject to FBAR (Report on Foreign Bank and Financial Accounts) reporting requirements. Generally, the FBAR is required to be filed by any U.S. person who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. Since RRSPs are considered to be financial accounts, it is important to verify whether a taxpayer needs to file an FBAR.

Contact Sherayzen Law Office NOW For International Tax Help

Note: This requirement may no longer be required; if you believe that you may be subject to Form 8891 requirements, contact Sherayzen Law Office for confirmation on this tax form. Our experienced international tax firm will guide you through the complex maze of international tax reporting requirements, including any voluntary disclosure issues.

Remember, it does not matter whether you are located in another state or outside of the United States – we can help!