international tax lawyers

2019 Tax Filing Season Will Begin on January 28, 2019 | Tax Lawyer News

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On January 7, 2019, the IRS confirmed that the 2019 tax filing season will begin on January 28, 2019. In other words, the 2019 tax filing season will begin on schedule despite the government shutdown.

2019 Tax Filing Season for 2018 Tax Returns and 2018 FBAR

During the 2019 tax filing season, US taxpayers must file their required 2018 federal income tax returns and 2018 information returns. Let me explain what I mean here.

One way to look at the US federal tax forms is to group them according to their tax collection purpose. The income tax returns are the tax forms used to calculate a taxpayer’s federal tax liability. The common example of this type of form is Form 1040 for individual taxpayers.

The information returns are a group of federal tax forms (and, separately, FBAR) which taxpayers use to disclose certain required information about their assets and activities. These forms are not immediately used to calculate a federal tax liability. A common example of this form is Form 8938. FinCEN Form 114, the Report of Foreign Bank and Financial Account, commonly known as FBAR, also belongs to this category of information returns even though it is not a tax form.

There is a third group of returns that consists of hybrid forms – i.e. forms used for both, income tax calculation and information return, purposes. Form 8621 for PFICs has been a prominent example of this type of a form since tax year 2013.

2019 Tax Filing Season Deadline and Available Extensions for Individual Taxpayers

Individual US taxpayers must file their required income tax and information returns by Monday, April 15, 2019. An interesting exception exists for residents of Maine and Massachusetts. Due to the Patriots’ Day holiday on April 15 in these two states and the Emancipation Day holiday on April 16 in the District of Columbia, the residents of Maine and Massachusetts will have until April 17, 2019 to file their US tax returns.

Taxpayers who reside overseas get an automatic extension until June 17 , 2019, to file their US tax returns.  The reason why the deadline is on June 17 is because June 15 falls on a Saturday. The taxpayers still must pay their estimated tax due by April 15, 2019.

Taxpayers can also apply for an automatic extension until October 15, 2019, to file their federal tax returns. Again, these taxpayers must still pay their estimated tax due by April 15, 2019, in order to avoid additional penalties.

Finally, certain taxpayers who reside overseas may ask the IRS for additional discretionary extension to file their 2018 federal tax return by December 16 (because December 15 is a Sunday this year), 2019. These taxpayers should send their request for the discretionary extension before their automatic extension runs out on October 15, 2019.

2019 Tax Filing Season Refunds

In light of the ongoing government shutdown, one of the chief concerns for US taxpayers is whether they will be able to get their tax refunds during the 2019 Tax Filing Season. The IRS assured everyone that it has the power to issue refunds during the government shutdown.

The IRS has been consistent in its position that, under the 31 U.S.C. 1324, the US Congress provided a permanent and indefinite appropriation for refunds. In 2011, the Office of Management and Budget (“OMB”) disagreed with the IRS and ordered it not to pay any refunds. It appears, however, that the OMB changed its position sometime after 2011.

2017 Tax Reform Seminar | U.S. International Tax Lawyer & Attorney

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On April 19, 2018, Mr. Eugene Sherayzen, an international tax lawyer, co-presented with an attorney from KPMG at a seminar entitled “The 2017 U.S. Tax Reform: Seeking Economic Growth through Tax Policy in Politically Risky Times” (the “2017 Tax Reform Seminar”). This seminar formed part of the 2018 International Business Law Institute organized by the International Business Law Section of the Minnesota State Bar Association.

The 2017 Tax Reform Seminar discussed, in a general manner, the main changes made by the 2017 Tax Cuts and Jobs Act to the U.S. international tax law. Mr. Sherayzen’s part of the presentation focused on two areas: the Subpart F rules and the FDII regime.

Mr. Sherayzen provided a broad overview of the Subpart F rules, the types of income subject to these rules and the main exceptions to the Subpart F regime. He emphasized that the tax reform did not repeal the Subpart F rules, but augmented them with the GILTI regime (the discussion of GILTI was done by the KPMG attorney during the same 2017 Tax Reform Seminar).

Then, Mr. Sherayzen turned to the second part of his presentation during the 2017 Tax Reform Seminar – the Foreign Derived Intangible Income or FDII. After reviewing the history of several tax regimes prior to the FDII, the tax attorney concluded that the nature of the current FDII regime is one of subsidy. In essence, FDII allows a US corporation to reduce its corporate income by 37.5% of the qualified “foreign derived” income (after the year 2025, the percentage will go down to 21.875%). Mr. Sherayzen explained that, in certain cases, there is an additional limitation on the FDII deduction.

Qualifying income includes: sales to a foreign person for foreign use, dispositions of property to foreign persons for foreign use, leases and licenses to foreign persons for foreign use and services provided to a foreign person. There are also a number exceptions to qualifying income.

Mr. Sherayzen concluded his presentation at the 2017 Tax Reform Seminar with a discussion of the reaction that FDII produced in other countries. In general this reaction was not favorable; China and the EU even threatened to sue the United States over what they believed to be an illegal subsidy to US corporations.

EU Market Entry Seminar | US International Tax Lawyer & Attorney

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On February 8, 2018, Mr. Eugene Sherayzen, an international tax lawyer, co-presented with three other attorneys in a seminar titled “EU Market Entry: Business and Tax Considerations” (the “EU Market Entry” seminar). The EU Market Entry Seminar was co-sponsored by the Business Law Section and International Business Law Section of the Minnesota State Bar Association. The three other speakers were a business lawyer from Germany, a tax lawyer from Lithuania and a business lawyer from the United States.

Mr. Sherayzen began his part of the EU Market Entry Seminar with the explanation of the main purpose of tax planning. He asserted that tax planning should not be done only to reduce costs, but to maximize the real profits of a business transaction.

Then, the tax attorney proceeded with the explanation of the main international tax planning strategies with respect to outbound business transactions. In particular, he discussed in detail the following strategies: (1) overseas profit tax reduction; (2) U.S. tax deferral; and (3) Prevention of double-taxation. Each of these strategies was accompanied by three to four relevant tactics. The tax attorney focused especially on U.S. tax deferral as the “heart” of the U.S. tax planning.

The next part of the EU Market Entry Seminar was devoted to the classification of international business transactions. Mr. Sherayzen grouped different types of international business transactions into three categories: (1) Export of Goods and Services; (2) Licensing & Technology Transfers; and (3) Foreign Investment Transactions (including Foreign Direct Investment and Foreign Portfolio Investment).

The final part of the EU Market Entry Seminar consisted of applying the aforementioned tax strategies to each of the three groups of international business transactions and determining which strategies were likely to perform better than others with respect to a particular group of international business transactions. For example, Mr. Sherayzen stated that overseas profit tax reduction and prevention of double-taxation were easier to implement for international business transactions that involved export of goods or services; the U.S. tax deferral would be much more difficult to implement in this context and it would require extensive tax planning.

Mr. Sherayzen concluded the EU Market Entry Seminar with an introduction to the audience the concepts of GILTI (Global Intangible Low-Tax Income), BEPS (Base Erosion and Profit Shifting) rules, CbC (country-by-country) reporting and FDII (Foreign Derived Intangibles Income). These concepts were integrated within the discussion of the effectiveness of certain tax strategies with respect to the second and third categories of international business transactions. For example, the tax attorney discussed how the new GILTI rules affect the ability to achieve U.S. tax deferral.

FACC Seminar (French-American Chamber of Commerce Seminar) | News

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On October 19, 2017, Mr. Eugene Sherayzen, an owner of Sherayzen Law Office and a highly experienced international tax attorney, conducted a seminar titled “Introduction to U.S. International Tax Compliance for U.S. Owners of Foreign Businesses” at the French-American Chamber of Commerce in Minneapolis, Minnesota (the “FACC Seminar”). The audience of the FACC Seminar consisted of business lawyers and business owners.

The FACC Seminar commenced with the breakdown of the title of the seminar into various parts. Mr. Sherayzen first analyzed the tax definition of “owner” and contrasted it with the legal definition of owner. Then, he identified who is considered to be a “U.S. owner” under the U.S. international tax law.

During the second part of the FACC Seminar, Mr. Sherayzen discussed the definition of “foreign” (i.e. foreign business) and the definition of the concept of “business”, contrasting it with a foreign trust. At this point, the tax attorney also acquainted the attendees with the differences between the common-law and the civil-law definitions of partnership.

Then, the focus of the FACC Seminar shifted to the discussion of the U.S. international tax requirements. The tax attorney stated that he would discuss four major categories of U.S. international tax requirements: (1) U.S. tax reporting requirements related to ownership of a foreign business; (2) U.S. owner’s tax reporting requirements related to assets owned by a foreign business; (3) U.S. tax reporting requirements related to transactions between a foreign business and its U.S. owners; and (4) income recognition as a result of anti-deferral regimes.

Mr. Sherayzen first discussed the U.S. tax reporting requirement related to the ownership of a foreign business. In particular, he covered Forms 5471, 8865 and 8858. The tax attorney also introduced the catch-all Form 8938. In this context, he also explained the second category of U.S. international tax requirements concerning the assets owned by a foreign business.

The next part of the FACC Seminar was devoted to the U.S. tax reporting requirements concerning transactions between a foreign business and its U.S. owners. Mr. Sherayzen explained in detail Form 926 and Schedule O of Form 8865, including the noncompliance penalties associated with these forms. The tax attorney also quickly reviewed Form 8886 for participating in transactions related to tax shelters. The discussion of the complex penalty system of Form 8886 surprised the audience.

The last part of the FACC Seminar was devoted to the income tax recognition and other U.S. tax reporting requirements that arise by the operation of anti-deferral regimes. Both, the Subpart F and the PFIC regimes were covered by the tax attorney.

Minsk Seminar Conducted by US International Tax Lawyer & Attorney

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On June 9, 2017, Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, was the keynote speaker at a seminar “Introduction to U.S. Tax Compliance for U.S. Citizens and Green Card Holders Residing and Doing Business in Belarus” in Minsk, Republic of Belarus (the “Minsk Seminar”). The attorney conducted the entire Minsk Seminar in Russian, because he speaks this language fluently.

The Minsk Seminar was presented before the Minsk City Lawyer’s Association. It was a historic event, because it appears that this was the very first time that a practicing US international tax attorney conducted a seminar on this topic in Minsk. The Minsk Seminar was well-attended by close to 25-30 persons (despite the fact that it was conducted on a Friday afternoon); it appears that virtually all attendees were practicing lawyers in Minsk.

Mr. Sherayzen decided to make his presentation as broad as possible, but attended to details only as necessary. As a result, this more than two-hour presentation covered the main topics concerning US international tax reporting requirements of a U.S. citizen living and/or doing business in Belarus.

The tax attorney started the Minsk Seminar with the definition of a U.S. tax resident, emphasizing that a U.S. citizen and a U.S. Permanent Resident who reside in Belarus should be considered U.S. tax residents. Then, Mr. Sherayzen discussed the worldwide income reporting requirement and broadly covered various topics concerning specific income recognition.

The tax attorney continued the Minsk Seminar with an overview of the U.S. international information returns concerning individuals who have foreign assets, including an ownership interest in a foreign business. The severe FBAR penalties caused consternation among the attendees. As part of this discussion, he also explained the common-law concept of a “trust”.

The last part of the Minsk Seminar was devoted to the discussion of the U.S. anti-deferral regimes, such as Subpart F and PFIC rules. Mr. Sherayzen explained the potential tax consequences of income recognition under both of these regimes.

Throughout the Minsk Seminar, the Belarussian attorneys asked many questions and readily engaged in a lively comparison of the Belarussian tax rules to the U.S. tax rules. Overall, it was a very friendly seminar. Mr. Sherayzen looks forward to future presentations on this and other U.S. international tax topics in Eastern Europe.