taxation law services
On June 30, 2010, Eugene Sherayzen, Esq., was re-appointed for the second 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”.
Under the Homebuyer Assistance and Improvement Act of 2010 (enacted on July 2, 2010), eligible homebuyers who entered into a binding purchase contract on or before April 30 to purchase a principal residence can now close on a home by September 30, 2010 in order to qualify for the First-Time Homebuyer Credit. Thus, under the new law the closing deadline for eligible homebuyers is extended from June 30, 2010 to September 30, 2010.
Here are some useful definitions and facts:
*First-Time Homebuyer: the homebuyer and his spouse (if he is married) must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
*Long-Time Resident Homebuyer: the settlement date must be after November 6, 2009 and the homebuyer and his spouse (if he is married) must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.
*Maximum Credit for a First-Time Homebuyer: $8,000.
*Maximum Credit for Long-Term Resident Homebuyer: $6,500.
*Claiming Credit – Method: must be done on paper return and using Form 5405, along with all required documentation, including a copy of the binding contract.
*Claiming Credit – 2010 qualifying purchase: If a 2009 return has not yet been filed, claim it on Form 1040 for tax-year 2009 (the returns must be printed out and sent to the IRS, along with all required documentation). If a 2009 tax return has already been filed, claim it on an amended return using Form 1040X. Whether or not a 2009 return has been filed, wait until next year and claim it on a 2010 Form 1040.
In this article, I will discuss five most important issues that you need to know before you sign a fee agreement with international tax lawyers in Minneapolis.
* How is the international tax lawyer’s fee paid? There are three main models of payment that lawyers use: hourly fee, contingency fee, and flat fee. The hourly fee is the most common form of a Minneapolis international tax lawyer compensation and it is fairly simple – the international tax attorney is paid only based on the time he spends on the case. If you’re paying your international tax lawyer by the hour, the agreement should set out the hourly rates of the tax attorney and anyone else in this attorney’s office who might work on the case. The contingency fee arrangement, where the international tax attorney takes a percentage of the amount the client wins at the end of the case, is almost never used by international tax lawyers in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the international tax lawyer deducts the costs and expenses from the amount won before or after you pay the lawyer’s percentage. Obviously, you will pay more in attorney fees if your international tax lawyer deducts the litigation costs based on the latter scenario (i.e. after you pay the lawyer’s fee). Finally, in a flat fee arrangement, you pay an agreed-upon amount of money for a project. For example, you pay $3,000 to your tax attorney to file delinquent FBARs (Reports on Foreign Bank and Financial Accounts) for the past five years. While a flat fee arrangement is possible in a small project, it is generally disliked by international tax lawyers in Minneapolis because it often lacks the necessary flexibility to account for the client’s individual legal situation. Usually, some sort of an additional payment arrangement is built into such fee agreements to make sure that the balance between the client’s legal needs and the tax attorney’s fees is maintained. Remember, usually, you will have to pay out-of-pocket expenses (e.g. long-distance calls, mailing costs, photocopying fees, lodging, etc.) and litigation costs (such as court filing fees) in addition to your lawyer’s fees.
* Does the agreement include the amount of the retainer? Most international tax lawyers in Minneapolis require their client to pay a retainer. Retainer can mean two different fee arrangements. First, retainer may be the amount of money a client pays to guarantee a tax attorney’s commitment to the case. Under this arrangement, the retainer is not a form of an advance payment for future work, but a non-refundable deposit to secure the lawyer’s availability. Second, a retainer is simply the amount of money an international tax attorney asks his client to pay in advance. In this scenario, the international tax lawyer usually deposits the retainer in a client trust account and withdraws money from it for the work completed according to the fee agreement. The fee agreement should specify the amount of the retainer and when the lawyer can withdraw money form the client trust account (usually, on a monthly basis).
* How often will you be billed? Most international tax attorneys in Minneapolis bill their clients on a monthly basis. Sometimes, however, when the project is not large, the fee agreement will specify that you will be billed upon completion of the case. In a flat-fee scenario, it is likely that the client will be obligated to pay either a half or even the whole amount immediately as a retainer. It is wise for a client to insist in paying some part of the fee upon completion of the case to retain a degree of control over the case completion.
* What is the scope of the tax attorney’s representation? Most international tax lawyers in Minneapolis will insist on defining their obligations in the fee agreement. The most important issue here is to state what the international tax attorney is hired for, without defining it either too narrowly or too broadly. Usually, a fee agreement should specify that a new contract should be signed if you decide to hire this international tax lawyer to handle other legal matters.
If you are hiring a large or a mid-size law firm, beware that the partners in a law firm often delegate some or all of their obligations to their associates or even their staff. While the partners retain full responsibility for the case, there is a danger that important parts of it may be delegated to far less experienced associates. Besides the potential quality issues, there is also a concern that you would be paying a large hourly fee for a first-year associate’s work. It is important to insist that the fee agreement specifies what, if any, type of work is being delegated to the associates, the corresponding billing rate of each associate involved, and who carries the responsibility for the whole case.
* Who controls what decisions? Whether this information should be included in the fee agreement really depends on a case and on an attorney. Generally, international tax attorneys in Minneapolis let their clients make the important decisions that affect the outcome of the case (such as: acceptance or rejection of the IRS settlement offer, commencement of a lawsuit, business decisions, et cetera). All of the decisions with respect to the legal issues (such as: where to file a lawsuit, what motions should be filed, what negotiation tactics should be employed, how to structure a business transaction from a tax perspective, etc.) are usually taken by the international tax lawyers. If there are any changes to this arrangement (for example, you want your lawyer to make certain decisions with the respect to the outcome of the case), you should insist that these modifications be reflected in the fee agreement.
Generally, before you sign the fee agreement, international tax lawyers in Minneapolis will discuss with you many more topics than what is covered in this article. The five issues explained here, however, are crucial to your understanding of how the tax relationship with your tax attorney will work. Before you sign the fee agreement with your international tax lawyer, you should ask at least these five questions and make sure that the answers are complete and to your satisfaction.
Pursuant to the Bank Secrecy Act, 31 U.S.C. §5311 et seq., the Department of Treasury (the “DOT”) has established certain recordkeeping and filing requirements for United States persons with financial interests in or signature authority (and other comparable authority) over financial accounts maintained with financial institutions in foreign countries. If the aggregate balances of such foreign accounts exceed $10,000 at any time during the relevant year, FinCEN Form 114 formerly Form TD F 90-22.1 (the FBAR) must be filed with the DOT.
The FBAR must be filed by June 30 of each relevant year, including this year (2010).
U.S. citizens and resident aliens (for U.S. tax purposes) who have financial interest in Canadian Registered Retirements Savings Plans RRSPs)and/or Registered Retirement Income Funds (RRIFs) must report their RRSP and RRIF income to the IRS by using Form 8891. The taxpayers (even if resident aliens from Canada) must comply with this reporting requirement even if their earnings from these retirement plans are not considered as taxable income in Canada.
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 which is still the current law. Under the new rules, 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. Moreover, in the new form, the filers are able 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.
If you have any questions with respect to your RRSP and/or RRIF income, or if you failed to disclose this income during the prior years, CALL Sherayzen Law Office to discuss your case NOW!
