The legal tax team of Sherayzen Law Office, Ltd. wishes a very Happy New Year 2019 to our clients, blog readers and all US taxpayers around the world! May this new year bring you good health, prosperity and happiness! And, of course, full and proper compliance with all US international tax laws.
2019 Will Be a Highly Challenging Year from US Tax Compliance Perspective Due to the 2017 Tax Reform
The coming year is going to be a challenging one for all US taxpayers due to the enormous changes made to the Internal Revenue Code as a result of the 2017 tax reform. Already in 2018, some US taxpayers (especially owners of foreign corporations) had to work through the tax year 2017 transition rules.
The 2017 tax reform will be felt on an even grander scale in 2019 as millions of US taxpayers will struggle with the new rules in order to correctly file their 2018 tax returns. While many of these rules are meant to benefit these taxpayers, the tax compliance associated with them is likely to be complex.
Happy New Year 2019 to Individual US Taxpayers!
After the pain of learning how to comply with the new rules subsides, tens of millions of Americans are likely to call this a Happy New Year 2019 due to lower 2018 individual tax rates, the doubling of the child tax credit and higher standard deduction.
Millions of other, especially the upper middle-class Americans, however, are likely to be greatly hurt by the itemized deductions limitations with respect to state taxes and property taxes. The elimination of personal exemptions will further aggravate this problem. It will not be a Happy New Year 2019 for these taxpayers.
Happy New Year 2019 to Small-Business Owners!
It should still be a Happy New Year 2019 for the majority of the small business owners, including owners of S-corporations, due to the 20% reduction of pass-through income mandated by the tax reform. New depreciation rules are likely to have an overall beneficial impact, even if, in some cases, they may not be very helpful.
Happy New Year 2019 to C-Corporations and Their US & Foreign Owners!
It will be a very Happy New Year 2019 for one class of taxpayers in particular – regular C-corporations. These taxpayers arguably benefitted from the 2017 tax reform more than any type of taxpayers. The reduction in the tax rate from 35% to 21%, introduction of Foreign-Derived Intangible Income (“FDII”) and a whole series of small changes to corporate tax code have already led to the surge to corporate profits; this corporate tax boom is likely to continue to play out this year.
On the other hand, the introduction of the GILTI (Global Intangible Low-Taxed Income) tax, new attribution rules concerning the inclusion of non-US corporations and a myriad of other rules will greatly complicate the tax year 2018 corporate tax compliance. In fact, some corporations that never paid any taxes on their foreign income may now be forced to pay the GILTI tax in the United States.
Happy New Year 2019 to US Taxpayers Who Are Trying to Remedy Past Tax Noncompliance Through an Offshore Voluntary Disclosure!
The taxpayers with undisclosed foreign bank accounts and other assets will face increasing challenges in the year 2019 due to two unwelcome trends that came into existence after FATCA was fully implemented but became apparent to most professionals only in 2018. First, the IRS is narrowing the voluntary disclosure options, especially for willful taxpayers. As I just mentioned, this trend began already in 2017, but it could be clearly observed in the closure of the flagship 2014 OVDP on September 28, 2018. While it does not appear that the Streamlined Compliance Procedures will be targeted by the IRS any time soon, there is always a danger that the IRS may modify the terms of this voluntary disclosure option.
The November 20, 2018 modification of the Traditional Voluntary Disclosure (which greatly narrowed the utility of this option) is another manifestation of this trend. In fact, this modification poses a direct danger of forcing taxpayers into either Streamlined Compliance Procedures or the Traditional Voluntary Disclosure Program at the expense of Reasonable Cause disclosures.
The second trend complements the first trend: the loss of interest in offshore voluntary disclosures directly coincided with an increasingly aggressive IRS tax enforcement. The IRS audits, especially international tax audits, are on the rise as the IRS is taking advantage of the huge pile of information it has accumulated as a result of the previous voluntary disclosure programs, Swiss bank program and FATCA compliance.
The taxpayers will need professional help from an international tax attorney to successfully navigate around the legal challenges posed by these two negative trends in US international tax enforcement.
Taxpayers Will Need the Professional Help of Sherayzen Law Office For Proper Tax Compliance and Offshore Voluntary Disclosures of Foreign Assets in 2019
Overall, the new year 2019 promises to be a very interesting but highly complex year from the perspective of US international tax compliance. US taxpayers without adequate legal help are likely to either fail to take full benefit of the 2017 tax reform, suffer excessively from the negative aspects of the reform and/or even face the dreaded IRS penalties for international tax noncompliance.
At the same time, the narrower post-OVDP offshore voluntary disclosure options and the rising intensity of IRS audits will also present additional challenges to the already difficult situation of many taxpayers who wish to voluntarily resolve their past US international tax noncompliance issues.
Sherayzen Law Office can help you meet all of your 2019 tax challenges, including annual 2018 tax compliance, 2019 offshore voluntary disclosures of foreign assets and foreign income and IRS audit defense. We have helped hundreds of US taxpayers like you, and We can help you!