taxation law services

Tax Year 2013 Changes to the Itemized Deduction for Medical and Dental Expenses

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US taxpayers who itemize their deductions on Schedule A of Form 1040 should be aware that new IRS rules are in effect for 2013 tax returns to be filed in 2014. Under the new rules, the threshold for unreimbursed medical and dental expenses paid by taxpayers for themselves, spouses or dependents have increased for most individuals.

This article will briefly explain the change in the rules; it is not intended to convey tax or legal advice. Please consult a tax attorney if you have further questions. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs.

Taxpayers under the Age of 65 in 2014

For married couples, with both spouses under the age of 65, unreimbursed medical and dental expenses will now only be deductible provided that they exceed 10 percent of the couple’s adjusted gross income (AGI) from Form 1040, line 38.

Taxpayers over the Age of 65 in 2014

For taxpayers over the age of 65, or a married couple with one spouse over the age of 65, the existing 7.5 percent threshold is still in effect for tax year 2013. Note however, that the exemption will only apply to tax years beginning after December 31, 2012, and ending before January 1, 2017, if a spouse attained age 65 during or before the tax year.

Taxpayers Turning 65 in 2014

For taxpayers who turn 65 in the year 2014, (assuming they are not married to a spouse who is already 65), the 10 percent threshold should be used for calculating allowable medical and dental expenses for their 2013 tax returns. When such taxpayers turn 65 years old in 2014, the 7.5 percent threshold may then be used for filing the next year’s tax return. (Further, as noted above, beginning with the tax year 2017 return and years following, the 10 percent threshold must be used).

Taking the Medical and Dental Expenses Deduction

Generally, taxpayers may deduct medical and dental expenses paid for themselves, their spouses and their dependents. (See IRS Publication 502, “Medical and Dental Expenses” for more information). Taxpayers should keep sufficient records for each medical expense consisting of amount and date of each payment, and the name and address of each medical care provider that received payment. Also, taxpayers are advised to keep statements and/or invoices showing who received medical treatment for the claimed expense, a description of the type of medical care received, and the nature and purpose of all medical expenses.

According to the IRS, “Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness.” Such expenses generally include, “[P]ayments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.” Accordingly, expenses that are “merely beneficial to general health, such as vitamins or a vacation” (as well as expenses such as teeth whitening, health club dues, and cosmetic surgery) are not deductible.

Contact Sherayzen Law Office for Help With Your Tax and Estate Planning

As the new tax law changes are being implemented in 2013 and subsequent years, the necessity for proper tax planning will only increase with each year. Such planning should be conducted by an experienced tax attorney. This is why you are advised to contact the experienced tax law firm of Sherayzen Law Office to help you create a thorough tax plan aimed at taking advantages of the various provisions of the U.S. tax code.

IRS Tax Attorney Perspective on the Top 3 International Tax Enforcement Trends in 2014

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As an IRS tax attorney, I foresee that 2014 is likely to be a continuation of the global tax enforcement trends that started in the earlier years. Specifically, I believe the following three moves by the IRS will form the core of the US international tax enforcement efforts in 2014.

IRS Tax Attorney Top Trend #1: FATCA IGAs

I believe we will see a continuous efforts by the U.S. government to expand the enforcement scope of the Foreign Account Tax Compliance Act by increasing the number of Intergovernmental Agreements (“IGAs”). Through the IGAs, the IRS hopes to increase FATCA compliance to the most important tax jurisdictions in the world.

Of course, expanding FATCA compliance to such countries as China, Russia and even India, will continue to present a formidable challenge to the IRS. If IGAs are actually enforced in these countries, it would be a major victory for U.S. enforcement efforts given the sheer number of non-compliant U.S. taxpayers from these countries and their stubborn belief (less so in India than in other countries) that the IRS will not be able to expand FATCA to these countries.

IRS Tax Attorney Top Trend #2: US DOJ Program for Swiss Banks

Undoubtedly, the latest initiative by the US government in the form of the Department of Justice Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) will occupy the central stage if the attention of any IRS tax attorney who practices in the area of international tax compliance. The Program is a unique, unprecedented effort to apply the lessons from the individual IRS Offshore Voluntary Disclosure Program (“OVDP” now closed) that has been running in the United States since 2012 in its current form (and since 2003 in other variations) to foreign banks located in foreign jurisdictions.

As I predicted earlier, it is likely that the Program, if successful, will become the template for similar programs throughout the world. Potentially, it could become a permanent feature in the current arsenal of tax enforcement tools.

IRS Tax Attorney Top Trend #3: OVDP for Non-Compliant US Taxpayers

The latest version of the IRS Offshore Voluntary Disclosure Program was launched in 2012 on the heels of the success of 2011 Offshore Voluntary Disclosure Initiative. I anticipate that this trend will continue into 2014. In combination with the Program, it is likely that an ever increasing number of non-compliant U.S. taxpayers will join the OVDP, especially since they are urged to do so by the Swiss banks without the benefit of analyzing their voluntary disclosure options (something that should be done by an IRS tax attorney who specializes in international tax compliance such as at Sherayzen Law Office).

Contact Sherayzen Law Office for Help with International Tax Compliance

So far, I provided just the top three trends that every IRS tax attorney who practices in the area of international tax law should know. However, even this simplistic overview makes it abundantly clear that international tax compliance is real and you should be worried about it if you have undisclosed foreign assets or income.

Given the complexity of the international tax law and the draconian penalties in case of non-compliance or incorrect compliance, it is very important to choose the right firm to represent your interests. This is why you should contact the IRS tax practice of Sherayzen Law Office who has built a wide range of expertise in the area of international tax compliance.

We offer specialized services for international tax matters to individuals and businesses with foreign income and/or assets. If you are currently in violation of US tax laws, we can help you bring your tax affairs into full compliance in a responsible manner.

US-Switzerland Bank Program: Migros Bank, Bank Coop, Linth Bank, Berner Kantonalbank and Vontobel Holding

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Several weeks ago, in another article, I detailed some of the recent developments in the US-Switzerland Bank Program, officially called The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “US-Switzerland Bank Program”) between the U.S. Department of Justice (“DOJ”) and the government of Switzerland, and noted that Valiant Holdings AG had officially entered the Program. Since December 9th, the deadline imposed by Swiss Financial Market Supervisory Authority (“FINMA”) for Swiss banks to notify that authority whether they intended to enroll in the Program or not, more Swiss banks have announced that they will participate: Linth Bank, Migros Bank, Bank Coop, Berner Kantonalbank, and Vontobel Holding AG are among them.

Most Swiss banks are not listed on the stock exchange, so they not obliged to publicly disclose their intentions regarding the Program. This article will detail the further developments involving Swiss banks that have chosen to enter the US-Switzerland Bank Program, and is not intended to convey legal or tax advice. U.S. taxpayers holding Swiss accounts in any of the banks involved should pay close attention to these developments and seek the advice of professional, competent tax attorneys in these matters. The international tax expertise of Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.

Migros Bank, Bank Coop, Linth Bank, and Berner Kantonalbank

According to various news sources, Migros Bank announced it would most likely enter the Program in Category 2. Migros Bank noted that just a small portion of its 800,000 customers are U.S. persons (and most of the U.S. persons either have dual U.S.-Switzerland citizenship or have U.S. residence permits). Because of the compliance difficulties in knowing whether such persons have paid all of their U.S. taxes (a requirement), they have decided to enter the US-Switzerland Bank Program. Migros Bank also noted that it might be approved under Category 4. The bank also claimed that it never actively sought out U.S. clients.

Bank Coop (majority-owned by Basler Kantonalbank, a bank that is already under investigation by the U.S.) also stated that it would enter the US-Switzerland Bank Program in Category 2. Bank Coop noted that accounts held by U.S. persons amounted to less than 0.3% of its total managed-accounts. Like Bank Migros, Bank Coop also claimed that it did not actively seek U.S. clients.

Linth Bank also announced it was entering the US-Switzerland Bank Program to attempt to bring a swift resolution the US-Switzerland dispute.

Like Migros Bank and Bank Coop, Berner Kantonalbank AG will enter the US-Switzerland Bank Program in Category 2. Berner Kantonalbank noted that a small portion (0.2%) of its managed accounts was held by U.S. persons. Its CEO, Hanspeter Ruefenacht, was quoted in one news report stating that the bank, “never sought to do business with American clients”.

Vontobel Holding AG

Vontobel Holding AG will also enroll in the US-Switzerland Bank Program, but under a different rational than the banks mentioned above. Vontobel Holding announced it will enter the US-Switzerland Bank Program under the DOJ’s category for Swiss banks that have not committed U.S. tax-related offenses (i.e. a Category 3 bank), and are thereby exempt from penalties under the Program. The bank stated that in 2008 it proactively instituted various measures to transfer its U.S. clients to its Swiss Wealth Advisors unit (which is registered with the Securities and Exchange Commission). American clients who decided not to move their assets to the advisors unit were made to leave the bank.

Impact on US Taxpayers

U.S. taxpayers who either hold or previously held undisclosed bank accounts at any of the Swiss banks eligible for the US-Switzerland Bank Program are advised to seek competent and experienced legal assistance. U.S. taxpayers will likely face substantial civil and potential criminal penalties if they continue to hold undisclosed accounts or if their cases are not handled properly.

Contact Sherayzen Law Office for Help With Undisclosed Swiss Accounts

The experienced international tax law firm of Sherayzen Law Office, Ltd. can help with your all of your voluntary disclosure issues, including undisclosed accounts and other assets in Switzerland.